ITEM 1. BUSINESS
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements that relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled "Risk Factors" that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
Our financial statements are stated in United States dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.
In this annual report, unless otherwise specified, all dollar amounts are expressed in United States dollars. All references to "common shares" refer to the shares of our common stock.
As used in this annual report, the terms "we", "us", "our", and "Yellowcake" mean Yellowcake Mining Inc., unless the context clearly requires otherwise.
CORPORATE OVERVIEW AND DESCRIPTION OF OUR BUSINESS
OVERVIEW
We were incorporated in the state of Nevada on March 23, 2006 under the name Hoopsoft Development Corp. On January 9, 2007, we entered into an agreement and plan of merger 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 agreement and plan of merger, 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."
Currently, we have no agreements to explore, develop or mine any properties. Due to the downturn of the world economy, financing availability and our inability to raise adequate financing, we have put all exploration projects on hold.
CURRENT BUSINESS
We have ceased our previous operations and are currently seeking new business opportunities with established business entities for a merger with or acquisition of a target business. In certain instances, a target business may wish to become our subsidiary or may wish to contribute assets to us rather than merge. We have not yet begun negotiations or entered into any definitive agreements for potential new business opportunities and there can be no assurance that we will be able to enter into any definitive agreements. Any new acquisition or business opportunities that we may acquire will require additional financing. There can be no assurance, however, that we will be able to acquire the financing necessary to enable us to pursue our plan of operation. If our company requires additional financing and we are unable to acquire such funds, our business may fail.
Management of our company believes that there are benefits to being a reporting company with a class of securities quoted on the OTC BB. These are commonly thought to include:
(i) the ability to use registered securities to acquire assets or businesses; (ii) increased visibility in the financial community; (iii) the facilitation of borrowing from financial institutions; (iv) potentially improved trading efficiency; (v) potential stockholder liquidity; (vi) potentially greater ease in raising capital subsequent to an acquisition; (vii) potential compensation of key employees through stock options; (viii) potentially enhanced corporate image; and (ix) a presence in the United States capital market.
We may seek a business opportunity with entities that have recently commenced operations, or entities who wish to utilize the public marketplace in order to raise additional capital in order to expand business development activities, to develop a new product or service, or for other corporate purposes. We may acquire assets and establish wholly-owned subsidiaries in various businesses or acquire existing businesses as subsidiaries.
In implementing a structure for a particular business acquisition or opportunity, we may become a party to a merger, consolidation, reorganization, joint venture, or licensing agreement with another corporation or entity. We may also acquire stock or assets of an existing business. Upon the consummation of a transaction, it is likely that our present management will no longer be in control of our company. In addition, it is likely that our sole director and officer will, as part of the terms of the acquisition transaction, resign and be replaced by one or more new officers and directors.
As of the date hereof, we have not entered into any formal written agreements for a business combination or opportunity. When any such agreement is reached, we intend to disclose such an agreement by filing a current report on Form 8-K with the Securities and Exchange Commission.
We anticipate that the selection of a business opportunity in which to participate will be complex and without certainty of success. We believe that there are numerous firms in various industries seeking the perceived benefits of being a publicly registered corporation. Business opportunities may be available in many different industries and at various stages of development, all of which will make the task of comparative investigation and analysis of such business opportunities extremely difficult and complex. Business opportunities that we believe are in the best interests of our company may be scarce or we may be unable to obtain the ones that we want. We can provide no assurance that we will be able to locate compatible business opportunities.
We currently do not have a source of revenue. We have not been able to fund our cash requirements through our current operations. Historically, we have been able to raise a limited amount of capital through private placements of our equity stock, but we are uncertain about our continued ability to raise funds privately. Further, we believe that our company may have difficulties raising capital until we locate a prospective property through which we can pursue our plan of operation. If we are unable to secure adequate capital to continue our acquisition efforts, our shareholders may lose some or all of their investment and our business may fail.
CURRENT STATUS OF EXPLORATION PROJECTS
Due to the current market price of uranium, the down-turn of the world economy, financing availability and our inability to raise adequate financing, we have put all of our exploration projects on hold. We will continue to monitor the uranium market financing possibilities and other commercially feasible mining opportunities.
COMPETITIVE BUSINESS CONDITIONS
We are, and will continue to be, an insignificant participant in the number of companies seeking a suitable business opportunity or business combination. A large number of established and well-financed entities, including venture capital firms, are actively seeking suitable business opportunities or business combinations which may also be desirable target candidates for us. Virtually all such entities have significantly greater financial resources, technical expertise and managerial capabilities than we do. We are, consequently, at a
competitive disadvantage in identifying possible business opportunities and successfully completing a business combination. We will also compete with numerous other small public companies seeking suitable business opportunities or business combinations. If we are unable to obtain a business opportunity that we believe is in the best interests of our company, we may never recommence operations and will go out of business.
RESEARCH AND DEVELOPMENT
To date, we have not undertaken any research and development.
EMPLOYEES
As of October 29, 2010, we do not have any employees other than our sole officer and director, Lisa Lopomo. 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.
SUBSIDIARIES
We do not have any subsidiaries.
INTELLECTUAL PROPERTY
We do not own, either legally or beneficially, any patent or trademark.
GOVERNMENTAL APPROVAL AND EFFECT OF EXISTING OR PROBABLE GOVERNMENTAL REGULATIONS ON THE BUSINESS
There are currently no costs and effects of governmental approval or government regulations.
COSTS AND EFFECT OF COMPLIANCE WITH ENVIRONMENTAL LAW
There are currently no costs and effects of compliance with environmental law.
RESIDENT AGENT
Our resident agent is the Nevada Agency and Transfer Company, located at 50 West Liberty Street, Suite 880, Reno, Nevada 89501, Telephone (775) 322-0626, Fax (775) 322-5623, e-mail: corpserve@natco.org.
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 annual report 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 ASSOCIATED WITH OUR COMPANY
BUSINESS OPPORTUNITIES THAT WE BELIEVE ARE IN THE BEST INTERESTS OF OUR COMPANY MAY BE SCARCE OR WE MAY BE UNABLE TO OBTAIN THE ONES THAT WE WANT. IF WE ARE UNABLE TO OBTAIN A BUSINESS OPPORTUNITY THAT WE BELIEVE IS IN THE BEST INTERESTS OF OUR COMPANY, WE MAY NEVER RECOMMENCE OPERATIONS AND WILL GO OUT OF BUSINESS. IF WE GO OUT OF BUSINESS, INVESTORS WILL LOSE THEIR ENTIRE INVESTMENT IN OUR COMPANY.
We are, and will continue to be, an insignificant participant in the number of companies seeking a suitable business opportunity or business combination. A large number of established and well-financed entities, including venture capital firms, are actively seeking suitable business opportunities or business combinations which may also be desirable target candidates for us. Virtually all such entities have significantly greater financial resources, technical expertise and managerial capabilities than we do. We are, consequently, at a competitive disadvantage in identifying possible business opportunities and successfully completing a business combination. We will also compete with numerous other small public companies seeking suitable business opportunities or
business combinations. If we are unable to obtain a business opportunity that we believe is in the best interests of our company, we may never recommence operations and will go out of business. If we go out of business, investors will lose their entire investment in our company.
THE WORLDWIDE ECONOMIC DOWNTURN MAY REDUCE OUR ABILITY TO OBTAIN THE FINANCING NECESSARY TO CONTINUE OUR BUSINESS AND MAY REDUCE THE NUMBER OF VIABLE BUSINESSES THAT WE MAY WISH TO ACQUIRE. IF WE CANNOT RAISE THE FUNDS THAT WE NEED OR FIND A SUITABLE BUSINESS TO ACQUIRE, WE WILL GO OUT OF BUSINESS AND INVESTORS WILL LOSE THEIR ENTIRE INVESTMENT IN OUR COMPANY.
Since 2008, there has been a downturn in general worldwide economic conditions due to many factors, including the effects of the subprime lending and general credit market crises, slower economic activity, decreased consumer confidence, reduced corporate profits and capital spending, adverse business conditions, increased unemployment and liquidity concerns. In addition, these economic effects, including the resulting recession in various countries and slowing of the global economy, will likely result in fewer business opportunities as companies face increased financial hardship. Tightening credit and liquidity issues will also result in increased difficulties for our company to raise capital for our continued operations. We may not be able to raise money through the sale of our equity securities or through borrowing funds on terms we find acceptable. If we cannot raise the funds that we need or find a suitable product or business to acquire, we will go out of business. If we go out of business, investors will lose their entire investment in our company.
WE HAVE HAD NEGATIVE CASH FLOWS FROM OPERATIONS AND IF WE ARE NOT ABLE TO OBTAIN FURTHER FINANCING, OUR BUSINESS OPERATIONS MAY FAIL.
We had cash in the amount of $5,307 and a working capital deficit of $266,943 as of July 31, 2010. We anticipate that we will require additional financing while we are seeking a suitable business opportunity or business combination. Further, we anticipate that we will not have sufficient capital to fund our ongoing operations for the next twelve months. We may be required to raise additional financing for a particular business combination or business opportunity. We would likely secure any additional financing necessary through a private placement of our common shares.
There can be no assurance that, if required, any such financing will be available upon terms and conditions acceptable to us, if at all. Our inability to obtain additional financing in a sufficient amount when needed, and upon terms and conditions acceptable to us, could have a material adverse effect upon our company. We will require further funds to finance the development of any business opportunity that we acquire. There can be no assurance that such funds will be available or available on terms satisfactory to us. If additional funds are raised by issuing equity securities, further dilution to existing or future shareholders is likely to result. If adequate funds are not available on acceptable terms when needed, we may be required to delay, scale back or eliminate the development of any business opportunity that we acquire. Inadequate funding could also impair our ability to compete in the marketplace, which may result in the dissolution of our company.
A DECLINE IN THE PRICE OF OUR COMMON SHARES COULD AFFECT OUR ABILITY TO RAISE FURTHER WORKING CAPITAL AND ADVERSELY IMPACT OUR OPERATIONS. IF WE CANNOT RAISE THE FUNDS THAT WE REQUIRE, WE WILL GO OUT OF BUSINESS AND INVESTORS WILL LOSE THEIR ENTIRE INVESTMENT IN OUR COMPANY.
A prolonged decline in the price of our common shares could result in a reduction in the liquidity of our common shares and a reduction in our ability to raise capital. Because our operations have been primarily financed through the sale of equity securities, a decline in the price of our common shares could be especially detrimental to our liquidity and our continued operations. Any reduction in our ability to raise equity capital in the future would force us to reallocate funds from other planned uses and would have a significant negative effect on our business plans and operations, including our ability to develop new products and continue our current operations. If our stock price declines, we may not be able to raise additional capital or generate funds from operations sufficient to meet our obligations.
WE HAVE A LIMITED OPERATING HISTORY AND IF WE ARE NOT SUCCESSFUL IN CONTINUING TO GROW OUR BUSINESS, THEN WE MAY HAVE TO SCALE BACK OR EVEN CEASE OUR ONGOING BUSINESS OPERATIONS.
We have a limited operating history on which to base an evaluation of our business and prospects. Our prospects must be considered in light of the risks, uncertainties, expenses and difficulties frequently encountered by companies seeking to acquire or establish a new business opportunity. Some of these risks and uncertainties relate to our ability to identify, secure and complete an acquisition of a suitable business opportunity.
We cannot be sure that we will be successful in addressing these risks and uncertainties and our failure to do so could have a materially adverse effect on our financial condition. In addition, our operating results are dependent to a large degree upon factors outside of our control. There are no assurances that we will be successful in addressing these risks, and failure to do so may adversely affect our business.
It is unlikely that we will generate any or significant revenues while we seek a suitable business opportunity. Our short and long-term prospects depend upon our ability to select and secure a suitable business opportunity. In order for us to make a profit, we will need to successfully acquire a new business opportunity in order to generate revenues in an amount sufficient to cover any and all future costs and expenses in connection with any such business opportunity. Even if we become profitable, we may not sustain or increase our profits on a quarterly or annual basis in the future.
We will, in all likelihood, sustain operating expenses without corresponding revenues, at least until we complete a business combination or acquire a business opportunity. This may result in our company incurring a net operating loss which will increase continuously until we complete a business combination or acquire a business opportunity that can generate revenues that result in a net profit to us. There is no assurance that we will identify a suitable business opportunity or complete a business combination.
WE HAVE NO AGREEMENT FOR BUSINESS COMBINATION OR OTHER TRANSACTION AND WE HAVE NO STANDARDS FOR BUSINESS COMBINATIONS. WE MAY NEVER ENTER INTO A BUSINESS COMBINATION OR MAY ENTER INTO AN UNSUCCESSFUL BUSINESS COMBINATION, EITHER OF WHICH WOULD LIKELY CAUSE US TO GO OUT OF BUSINESS AND OUR INVESTORS TO LOSE ALL OF THEIR INVESTMENT IN OUR COMPANY.
We have no arrangement, agreement, or understanding with respect to acquiring a business opportunity or engaging in a business combination with any private entity. There can be no assurance that we will successfully identify and evaluate suitable business opportunities or conclude a business combination. There is no assurance that we will be able to negotiate the acquisition of a business opportunity or a business combination on terms favorable to us. We have not established a specific length of operating history or a specified level of earnings, assets, net worth or other criteria which we will require a target business opportunity to have achieved, and without which we would not consider a business combination in any form with such business opportunity. Accordingly, we may enter into a business combination with a business opportunity having no significant operating history, losses, limited or no potential for earnings, limited assets, negative net worth or other negative characteristics. We many never enter into a Business Combination or we may enter into an unsuccessful on, either of which would likely cause us to go out of business and our investors to lose all of their investment in our company.
RISKS ASSOCIATED WITH OUR COMMON SHARES
TRADING ON THE OTC BULLETIN BOARD MAY BE VOLATILE AND SPORADIC, WHICH COULD DEPRESS THE MARKET PRICE OF OUR COMMON SHARES AND MAKE IT DIFFICULT FOR OUR SHAREHOLDERS TO RESELL THEIR SHARES.
Our common shares are 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 shares 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 shares.
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 shares, 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.
ITEM 2.
ITEM 2. PROPERTIES
EXECUTIVE OFFICES
Our executive and head office is located at Suite 219, 7 Ashland Road, Caldwell, New Jersey 07006. The premises are provided to us at no charge by our sole director and officer.
MINERAL PROPERTIES
We do not currently own any mineral properties.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.
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 shares are 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 shares as an indication of its future price performance.
Quarter Ended Bid High Bid Low ------------- -------- ------- July 31, 2010 $0.035 $0.016 April 30, 2010 $0.04 $0.024 January 31, 2010 $0.045 $0.015 October 31, 2009 $0.055 $0.02 July 31, 2009 $0.06 $0.04 April 30, 2009 $0.08 $0.04 January 31, 2009 $0.08 $0.03 October 31, 2008 $0.19 $0.03
TRANSFER AGENT
Our transfer agent for our common shares is Rough Stock Transfer Inc. at 5700 West Plan Parkway, Suite 100, Plano, Texas 75096. Telephone (972) 381-2782.
HOLDERS OF COMMON SHARES
As of October 29, 2010, there were 99 holders of record of our common shares. As of such date, 55,335,576 shares were issued and 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 shares in the foreseeable future.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
EQUITY COMPENSATION PLAN INFORMATION
On May 10, 2007, our board of directors approved the 2007 Stock Option Plan. Under the terms of the 2007 Plan, options to purchase up to 5,000,000 shares of our common shares may be granted to our officers, directors, employees and permitted consultants of our company. The 2007 Plan provides that exercise price be:
(i) not less than fair market value per Common Share at the Date of Grant, if the Optionee is an employee; (ii) not be less than 110% of the fair market value per Common Share at the Date of Grant if the Optionee is a greater than 10% stockholder; and (iii) equal to the exercise price for the substituted option of the other corporation, if the Options are being granted in substitution for outstanding options of another corporation.
The following table sets forth certain information concerning all equity compensation plans previously approved by Shareholders and all previous equity compensation plans not previously approved by Shareholders, as of the fiscal year ended July 31, 2010:
RECENT SALES OF UNREGISTERED SECURITIES; USE OF PROCEEDS FROM REGISTERED SECURITIES
On August 20, 2009, we issued 4,037,657 shares of our common shares to three creditors in settlement of the amounts owing by us to our creditors. The amounts owing were approximately $208,800, of which approximately $56,000 was owed to a consultant and $152,500 was owed to two of our directors. The consultant agreed to convert the amount owing to 1,609,086 common shares. Subsequent to the issuance it was discovered that the number of shares issued to the consultant was miscalculated and the 1,609,086 shares were returned to the treasury and 1,493,237 were issued to the consultant, resulting in 3,921,808 shares being issued instead of 4,037,657. The 1,493,237 common shares were issued to one non-U.S. person (as that term is defined in Regulation S of the SECURITIES ACT OF 1933, AS AMENDED) in an offshore transaction in which we relied on the registration exemption provided for in Regulation S and/or Section 4(2) of the SECURITIES ACT OF 1933, AS AMENDED. The directors agreed to forgive the amounts of $67,500, which has been credited to paid-in capital, and agreed to convert the remaining $85,000 to 2,428,571 common shares. The 2,428,571common shares were issued to two U.S. persons pursuant to Rule 506 of Regulation D and/or Section 4(2) of the SECURITIES ACT OF 1933, as amended.
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
We did not purchase any of our common shares or other securities during our fiscal year ended July 31, 2010.
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.
Our assets consist of cash and cash equivalents, prepaid expenses and nominal equipment. 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 down-turn of the world economy, financing availability and our inability to raise adequate financing, we have put all exploration projects on hold. We have ceased our previous operations and are currently seeking new business opportunities with established business entities for the merger with or acquisition of a target business. In certain instances, a target business may wish to become our subsidiary or may wish to contribute assets to us rather than merge. We have not yet begun negotiations or entered into any definitive agreements for potential new business opportunities and there can be no assurance that we will be able to enter into any definitive agreements.
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, 2010.
REVENUES
We have not earned any revenues to date and do not anticipate earning revenues, if ever, until such time as we enter into a new business opportunity with an established business.
EXPENSES
Our expenses for the year ended July 31, 2010 and 2009 were as follows:
Year Ended July 31, 2010 2009 ---------- ----------
Consulting fees $ 11,793 $ 98,266 General and administrative 50,896 126,209 Impairment of mineral interests -- 1,324,417 Investor relations and communications 756 1,129 Management fees 193,343 790,062 Mineral property interests (11,105) 308,601 Professional fees 100,700 212,417
---------- ---------- TOTAL EXPENSES $ 346,383 $2,861,101 ========== ==========
CONSULTING FEES AND MANAGEMENT FEES
Consulting and management fees represent fees paid for services provided by company officers and directors as well as consultants and the fair values of stock option expenses. The decrease in consulting fees the fiscal year ended July 31, 2010 was due to the fact that we no longer needed the financial consultant that was hired in August 2008. A decrease in management fee during the year was primarily due to the departure of directors during the year, therefore the stock options related to these individuals were forfeited and cancelled and the related expense was not recorded since their departure date.
GENERAL AND ADMINISTRATIVE EXPENSE
General and administrative expense which includes office rent and supplies, office services and travel, decreased by 60% in the fiscal year ended July 31, 2010 when compared to prior year due to us occupying office space that is provided free by the director.
IMPAIRMENT OF MINERAL INTERESTS EXPENSES
We currently do not have sufficient cash on hand to continue with exploration programs and to meet the cash payments requirement on the properties. We do not believe that we would be able to raise the money that we require on acceptable terms. In the fiscal year ended July 31, 2009, we recognized an impairment of $1,324,417 in respect of one of our mineral properties. We did not recognize any impairment in the fiscal year ended July 31, 2010.
MINERAL PROPERTY INTERESTS
During the fiscal year ended July 31, 2010, our expenses associated with mineral property interests decreased compared to prior year because of the suspension of exploration activities.
PROFESSIONAL FEES
Professional fees include legal, accounting and audit expenses associated with keeping our company in good standing with regulatory authorities. In the fiscal year ended July 31, 2010, we incurred 52% less expense for the fiscal year ended July 31, 2009. The decrease in the periods is primarily due to the fact that we did not have any acquisition activity during the year and therefore reduced legal costs.
LIQUIDITY AND CAPITAL RESOURCES
Our financial condition for the12 months ended July 31, 2010 and 2009 and the changes between those periods for the respective items are summarized as follows:
WORKING CAPITAL
July 31, 2010 July 31, 2009 ------------- -------------
Current Assets $ 5,307 $ 48,020 Current Liabilities 272,250 306,587 --------- --------- Working Capital (deficiency) $(266,943) $(258,567) ========= =========
The decrease in our working capital deficiency was primarily the result of meeting our obligations to pay for our operating expenses during the year ended July 31, 2010.
CASH FLOWS
12 months ended 12 months ended July 31, 2010 July 31, 2009 ------------- -------------
Cash flow used in operating activities $(166,825) $(794,002) Cash provided by investing activities 162 174,305 --------- --------- Cash provided by financing activities 140,214 -- --------- --------- Net decrease in cash $ (26,449) $(619,697) ========= =========
CASH USED IN OPERATING ACTIVITIES
During the year ended July 31, 2010 we used net cash in operating activities in the amount of $166,825 compared to $794,002 for the year ended July 31, 2009. The cash used in the year ended July 31, 2010 is primarily represented by mineral property expenditures, general administrative expenses such fees paid to consultants, as well as professional fees paid in legal and audit. The decrease is primarily the result of us not incurring any mineral property expenditures and decreasing our stock-based compensation in the fiscal year ended July 31, 2010.
CASH USED IN INVESTING ACTIVITIES
During the year ended July 31, 2010 the net cash provided in investing activities was $162 compared to $174,305 net cash provided for the same period in 2009. The decrease was due to suspension of exploration activities.
CASH PROVIDED BY FINANCING ACTIVITIES
During the years ended July 31, 2010 and 2009, the net cash provided by financing activities was $140,214 and $Nil, respectively. The increase was primarily due to us receiving a demand loan of $125,000 in the fiscal year ended July 31, 2010.
CASH REQUIREMENTS
We estimate our operating expenses and working capital requirements for the year ended July 31, 2011 to be as follows:
Expense Amount ------- ------
General and administrative 7,500 Investor relations and communications 1,000 Professional fees 35,000 ------- TOTAL EXPENSES $43,500 =======
There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, if and when it is needed, we will be forced to scale down or perhaps even cease the operation of our business.
CURRENT STATUS OF EXPLORATION PROJECTS
Due to the current market price of uranium, the down-turn of the world economy, financing availability and our inability to raise adequate financing, we have put all of our exploration projects on hold. We will continue to monitor the uranium market financing possibilities and other commercially feasible mining opportunities.
TERMINATION OF INTERESTS
We held four lode mining claims comprising approximately 60 acres in Colorado. However; due to the lack of funding we have allowed the claims to lapse because of regulatory non-compliance.
TERMINATION OF LETTER OF INTENT FOR OPTION AGREEMENT - TRINITY SILVER PROJECT
On September 1, 2009 we announced the signing of a letter of intent to enter into an Exploration Earn-in Agreement with AuEx Ventures, Inc. for the Trinity Silver property, located in Pershing County, Nevada. The property consists of 59 unpatented mining claims and 5,040 acres of fee land, about 5,800 acres in total. It is located about 25 miles northwest of the Rochester Silver Mine, one of the largest silver mines in the US and about 10 miles southeast of the Seven Troughs gold district.
The Earn-in Agreement was scheduled to be executed by November 1, 2009, but we were unable to provide the cash payment we were required to make because of our inability to raise financing. Due to our inability to provide the funding, the letter of intent with AuEx Ventures Inc. was formally terminated on December 31, 2009.
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.
GOING CONCERN
Our audited financial statements have been prepared on a going concern basis, which implies that we will continue to realize our assets and discharge our liabilities and commitments in the normal course of business. We have not generated revenues since inception, have never paid any dividends and are unlikely to pay dividends or generate earnings in the immediate or foreseeable future. We have historically incurred losses and have incurred an accumulated deficit of $20,346,453 as of July 31, 2010. Because of these historical losses, we will require additional working capital to develop our business operations. We intend to raise additional working capital through private placements, public offerings, bank financing and/or advances from related parties or shareholder loans.
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 our operating objectives, confirmation of our company's interests in the underlying properties, and the attainment of profitable operations. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current or future stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.
There are no assurances that we will be able to either (i) achieve a level of revenues adequate to generate sufficient cash flow from operations; or (ii) obtain additional financing through either private placements, public offerings and/or bank financing necessary to support our working capital requirements. To the extent that funds generated from operations and any private placements, public offerings and/or bank financing are insufficient, we will have to raise additional working capital. No assurance can be given that additional financing will be available, or if available, will be on terms acceptable to us. If adequate working capital is not available we may not increase our operations.
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, 2010, 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.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 2010, the FASB issued Accounting Standards Update ("ASU") No. 2010-11, which is included in the Codification under ASC 815. This update clarifies the type of embedded credit derivative that is exempt from embedded derivative bifurcation requirements. Only an embedded credit derivative that is related to the subordination of one financial instrument to another qualifies for the exemption. This guidance became effective for our interim and annual reporting periods beginning January 1, 2010. The adoption of this guidance did not have a material impact on our financial statements.
In February 2010, the FASB issued ASU No. 2010-09, which is included in the Codification under ASC 855, Subsequent Events ("ASC 855"). This update removes the requirement for an SEC filer to disclose the date through which subsequent events have been evaluated and became effective for interim and annual reporting periods beginning January 1, 2010. The adoption of this guidance did not have a material impact on our financial statements.
In January 2010, the FASB issued ASU No. 2010-06, which is included in the Codification under ASC 820, Fair Value Measurements and Disclosures ("ASC 820"). This update requires the disclosure of transfers between the observable input categories and activity in the unobservable input category for fair value measurements. The guidance also requires disclosures about the inputs and valuation techniques used to measure fair value and became effective for interim and annual reporting periods beginning January 1, 2010. The adoption of this guidance did not have a material impact on our financial statements.
FASB Accounting Standards Codification -- Effective for interim and annual periods ending after September 15, 2009, the FASB has defined a new hierarchy for U.S. GAAP and established the FASB Accounting Standards Codification (ASC) as the sole source for authoritative guidance to be applied by nongovernmental
entities. The adoption of the ASC changes the manner in which U.S. GAAP guidance is referenced, but it does not have any impact on our financial position or results of operations.
FASB Accounting Standards Codification -- Effective for interim and annual periods ending after September 15, 2009, the FASB has defined a new hierarchy for U.S. GAAP and established the FASB Accounting Standards Codification (ASC) as the sole source for authoritative guidance to be applied by nongovernmental entities. The adoption of the ASC changes the manner in which U.S. GAAP guidance is referenced, but it does not have any impact on our financial position or results of operations
In August 2009, the FASB issued ASU No. 2009-05, "Measuring Liabilities at Fair Value," or ASU 2009-05, which amends ASC 820 to provide clarification of a circumstances in which a quoted price in an active market for an identical liability is not available. A reporting entity is required to measure fair value using one or more of the following methods: 1) a valuation technique that uses a) the quoted price of the identical liability when traded as an asset or b) quoted prices for similar liabilities (or similar liabilities when traded as assets) and/or 2) a valuation technique that is consistent with the principles of ASC 820. ASU 2009-05 also clarifies that when estimating the fair value of a liability, a reporting entity is not required to adjust to include inputs relating to the existence of transfer restrictions on that liability. The adoption of this ASU did not have an impact on our consolidated financial statements.
In May 2009, the FASB issued ASC No. 855 "Subsequent Events". ASC No. 855 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. ASC No. 855 sets forth (1) The period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, (2) The circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements and (3) The disclosures that an entity should make about events or transactions that occurred after the balance sheet date. ASC No. 855 was effective for interim or annual financial periods ending after June 15, 2009. We have evaluated subsequent events through December 21, 2009 which represents the date on which the interim financial statements were issued.
In April 2009, the FASB issued additional disclosure requirements related to fair values, which are included in ASC 820, "Interim Disclosures about Fair Value of Financial Instruments." The provisions require disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in the annual financial statements. The required disclosures were effective for interim reporting periods ending after June 15, 2009. The adoption of the provision did not have a material impact on our statements of financial position, results of operations and cash flows.
APPLICATION OF CRITICAL 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. We regularly evaluate estimates and assumptions related to deferred income tax asset valuations, asset impairment, stock based compensation and loss contingencies. We base our 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 us may differ materially and adversely from our estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
BASIC AND DILUTED LOSS PER SHARE
We compute our net loss per share in accordance with FASB ASC 260-10-45 ("ASC 260-10-45", formerly referred to as SFAS No. 128), "Earnings per Share". ASC 260-10-45 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, 2010, potentially dilutive common shares relating to options and warrants outstanding totalling 100,000 (2009 - 1,600,000) 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.
We also consider 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
We record 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 FASB ASC 410 ("ASC 410", formerly referred to as SFAS 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. At July 31, 2010 and 2009, we have not accrued 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, 2010, we recognized an impairment of nil in respect of one of our mineral properties (2009 - $1,324,417).
FOREIGN CURRENCY TRANSLATION
Our functional and reporting currency is the United States dollar. Monetary assets and liabilities denominated in foreign currencies are translated in accordance with FASB ASC 830 ("ASC 830", formerly referred to as 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. We have not, to the date of our financials statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.
INCOME TAXES
We follow 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, we established a valuation allowance. On August 1, 2007, we adopted
FASB ASC 740 ("ASC 740", formerly referred to as FIN 48), regarding accounting for uncertainty in tax positions. We remain subject to examination of income tax filings in the United States and various state jurisdictions for periods since its inception in 2006. We have also determined that we are subject to examination in Canada for all prior periods due to our continued loss position in such jurisdictions. Material tax positions were examined under the more-likely-than-not guidance provided by ASC 740. If interest and penalties were to be assessed, we would charge interest to interest expense, and penalties to general and administrative expense.
As a result of the ASC 740 assessment, we concluded that it has not taken any uncertain tax positions on any of its open tax returns that would materially distort our financial statements. There was no material cumulative effect of adopting ASC 740 on our financial statements as of August 1, 2007.
STOCK-BASED COMPENSATION
We records stock-based compensation in accordance with FASB ASC 718 ("ASC 718", formerly referred to as SFAS No. 123R), "Accounting for Stock-based Compensation", and applied the recommendations of this standard using the modified prospective method. Under this application, we are 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 ASC 718, we did not issue any compensation awards.
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.
ITEM 7A
ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Registered Public Accounting firms Balance Sheets Statements of Operations Statements of Changes in Stockholders' Deficiency Statements of Cash Flows Notes to the Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors of and Shareholders' of Yellowcake Mining Inc.
We have audited the accompanying balance sheet of Yellowcake Mining Inc. ("the Company") an exploration stage company, as of July 31, 2010 and the related statements of operations, changes in stockholders' deficiency, and cash flows for the year ended July 31, 2010 and the period from March 23, 2006 (inception) to July 31, 2010. 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 audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit 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. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provide a reasonable basis for our opinion.
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of July 31, 2010 and the results of its operations and its cash flows for the year ended July 31, 2010 and the period from March 23, 2006 (inception) to July 31, 2010, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1, the Company has incurred significant losses from operations since its inception and has a working capital deficiency. 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 described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Bernstein & Pinchuk LLP - ----------------------------------- New York, New York October 22, 2010
BDO Tel: 604 688 5421 BDO Canada LLP Fax: 604 688 5132 600 Cathedral Place WWW.BDO.CA 925 West Georgia Street Vancouver BC V6C 3L2 Canada
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 sheet of Yellowcake Mining Inc. (An Exploration Stage Company) as of July 31, 2009, and the related statements of operations, cash flows and changes in stockholders' deficiency for the year then ended. 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 audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit 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 audit provides a reasonable basis for our opinion.
In our opinion, based on our audit, the financial statements referred to above present fairly, in all material respects, the financial position of Yellowcake Mining Inc. at July 31, 2009, and the results of its operations and its cash flows for the year then ended 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 $19,994,488 at July 31, 2009 and incurred a net loss for the year then ended of $2,856,327. 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 Canada LLP - -------------------------------- Chartered Accountants Vancouver, Canada October 28, 2009
YELLOWCAKE MINING INC. (An Exploration Stage Company) BALANCE SHEETS (Expressed in US dollars)
See notes to financial statements
YELLOWCAKE MINING INC. (An Exploration Stage Company) STATEMENTS OF OPERATIONS (Expressed in US dollars)
See notes to 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 7)
See notes to financial statements
YELLOWCAKE MINING INC. (An Exploration Stage Company) STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY For the Period from March 23, 2006 (Date of Inception) to July 31, 2010 (Expressed in US dollars)
See notes to financial statements
YELLOWCAKE MINING INC. (An Exploration Stage Company) NOTES TO THE FINANCIAL STATEMENTS July 31, 2010 (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 FASB ASC 915 ("ASC 915", formerly referred to as Statement of Financial Accounting Standards 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). Currently, the Company has no agreements to explore, develop or mine any properties.
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 however, the Company has not generated revenues and has accumulated losses of $20,346,453 since inception and its current liabilities exceed its current assets by approximately $267,000, 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, 2010 (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 FASB ASC 260-10-45 ("ASC 260-10-45", formerly referred to as SFAS No. 128), "EARNINGS PER SHARE". ASC 260-10-45 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, 2010, potentially dilutive common shares relating to options and warrants outstanding totalling 100,000 (2009 - 1,600,000) 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 advancing 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 FASB ASC 410 ("ASC 410", formerly referred to as SFAS 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. At July 31, 2009, the Company has not accrued 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, 2010, the Company recognized no impairment in respect of one of its mineral properties. In the year ended July 31, 2009, an impairment loss of $1,324,417 was recorded.
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 FASB ASC 830 ("ASC 830", formerly referred to as 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, 2010 (Expressed in US dollars)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INCOME TAXES - CONTINUED
On August 1, 2007, the Company adopted FASB ASC 740 ("ASC 740", formerly referred to as 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 ASC 740. In the unlikely event that 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 ASC 740 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 ASC 740 on the Company's financial statements as of August 1, 2007.
STOCK-BASED COMPENSATION
The Company records stock-based compensation in accordance with FASB ASC 718 ("ASC 718", formerly referred to as SFAS No. 123R), "Accounting for Stock-based Compensation", 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 ASC 718, the Company did not issue any compensation awards.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 2010, the FASB issued Accounting Standards Update ("ASU") No. 2010-11, which is included in the Codification under ASC 815. This update clarifies the type of embedded credit derivative that is exempt from embedded derivative bifurcation requirements. Only an embedded credit derivative that is related to the subordination of one financial instrument to another qualifies for the exemption. This guidance became effective for the Company's interim and annual reporting periods beginning January 1, 2010. The adoption of this guidance did not have a material impact on the Company's financial statements.
In February 2010, the FASB issued ASU No. 2010-09, which is included in the Codification under ASC 855, SUBSEQUENT EVENTS ("ASC 855"). This update removes the requirement for an SEC filer to disclose the date through which subsequent events have been evaluated and became effective for interim and annual reporting periods beginning January 1, 2010. The adoption of this guidance did not have a material impact on the Company's financial statements.
In January 2010, the FASB issued ASU No. 2010-06, which is included in the Codification under ASC 820, FAIR VALUE MEASUREMENTS AND DISCLOSURES ("ASC 820"). This update requires the disclosure of transfers between the observable input categories and activity in the unobservable input category for fair value measurements. The guidance also requires disclosures about the inputs and valuation techniques used to measure fair value and became effective for interim and annual reporting periods beginning January 1, 2010. The adoption of this guidance did not have a material impact on the Company's financial statements. FASB Accounting Standards Codification -- Effective for interim and annual periods ending after September 15, 2009, the FASB has defined a new hierarchy for U.S. GAAP and established the FASB Accounting Standards Codification (ASC) as the sole source for authoritative guidance to be applied by nongovernmental entities. The adoption of the ASC changes the manner in which U.S. GAAP guidance is referenced, but it does not have any impact on our financial position or results of operations
YELLOWCAKE MINING INC. (An Exploration Stage Company) NOTES TO THE FINANCIAL STATEMENTS July 31, 2010 (Expressed in US dollars)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
RECENT ACCOUNTING PRONOUNCEMENTS - CONTINUED
FASB Accounting Standards Codification -- Effective for interim and annual periods ending after September 15, 2009, the FASB has defined a new hierarchy for U.S. GAAP and established the FASB Accounting Standards Codification (ASC) as the sole source for authoritative guidance to be applied by nongovernmental entities. The adoption of the ASC changes the manner in which U.S. GAAP guidance is referenced, but it does not have any impact on our financial position or results of operations
In August 2009, the FASB issued ASU No. 2009-05, "Measuring Liabilities at Fair Value," or ASU 2009-05, which amends ASC 820 to provide clarification of a circumstances in which a quoted price in an active market for an identical liability is not available. A reporting entity is required to measure fair value using one or more of the following methods: 1) a valuation technique that uses a) the quoted price of the identical liability when traded as an asset or b) quoted prices for similar liabilities (or similar liabilities when traded as assets) and/or 2) a valuation technique that is consistent with the principles of ASC 820. ASU 2009-05 also clarifies that when estimating the fair value of a liability, a reporting entity is not required to adjust to include inputs relating to the existence of transfer restrictions on that liability. The adoption of this ASU did not have an impact on the Company's consolidated financial statements.
In May 2009, the FASB issued ASC No. 855 "Subsequent Events". ASC No. 855 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. ASC No. 855 sets forth (1) The period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, (2) The circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements and (3) The disclosures that an entity should make about events or transactions that occurred after the balance sheet date. ASC No. 855 was effective for interim or annual financial periods ending after June 15, 2009. The Company has evaluated subsequent events through December 21, 2009 which represents the date on which the interim financial statements were issued.
In April 2009, the FASB issued additional disclosure requirements related to fair values, which are included in ASC 820, "Interim Disclosures about Fair Value of Financial Instruments." The provisions require disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in the annual financial statements. The required disclosures were effective for interim reporting periods ending after June 15, 2009. The adoption of the provision did not have a material impact on the Company's statements of financial position, results of operations and cash flows.
YELLOWCAKE MINING INC. (An Exploration Stage Company) NOTES TO THE FINANCIAL STATEMENTS July 31, 2010 (Expressed in US dollars)
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 was required to 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 also was required to 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 was to 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.
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 were restructured so that they were jointly owned by a Limited Liability Company ("LLC"). The Company maintained on 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.
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.
In December 2008, the Company formally terminated the option agreement with Strathmore and subsequently the Company has impaired the remaining net book value of the mineral rights.
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 has 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 were required to be met on or before September 29, 2008, with additional expenditures of: $1,250,000 to be expended during the twelve months ended September 29, 2009, $1,500,000 to be expended during the twelve months ended September 29, 2010, $2,000,000 to be expended during the twelve months ended September 29, 2011, $2,000,000 to be expended during the twelve months ended September 29, 2012 and $3,000,000 to be expended during the twelve months ended September 29, 2013. The option agreement was terminated on April 21, 2008.
YELLOWCAKE MINING INC. (An Exploration Stage Company) NOTES TO THE FINANCIAL STATEMENTS July 31, 2010 (Expressed in US dollars)
3. MINERAL RIGHTS - CONTINUED
JUNIPER RIDGE
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 has 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 were required to be met on or before September 29, 2008, with additional expenditures of $2,000,000 to be expended during the twelve months ended September 29, 2009, $2,000,000 to be expended during the twelve months ended September 29, 2010 and $3,000,000 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 $5,968,750 in cash and the issuance of 2,765,625 shares of our common stock, payable over 5 years as follows:
Number of Date Cash Shares ---- ---- ------
October 3, 2007 (stand still payment) $ 125,000 * -- December 15, 2007 (stand still extension) 250,000 * -- December 28, 2007 80,357 * 65,179 * March 31, 2008 321,429 * 260,714 * June 15, 2008 312,407 * 156,250 * December 15, 2008 1,035,714 517,857 December 15, 2009 1,000,000 500,000 December 15, 2010 1,000,000 500,000 December 15, 2011 1,000,000 500,000 December 15, 2012 843,750 265,625 ---------- --------- Total $5,968,657 2,765,625 ========== ========= - ---------- * As of July 31, 2009, the Company had made 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 had the exclusive right to access, explore and develop the properties. All future production from the property was subject to a 3.5% royalty based on the contained metal value of ore after deduction of mining, transport and processing costs.
The Company decided to terminate the agreements related to the Beck project because it currently does not have sufficient cash on hand to continue the exploration program and to meet the cash payments requirement on the property. The Company does not believe that it would be able to raise the money that it requires on acceptable terms. The Company also believes that any potential uranium deposits that might be discovered on the property would not be commercially feasible to develop further at this time because of low market prices for uranium, and the potential of discovering enough uranium to recoup the investment in the property is low.
YELLOWCAKE MINING INC. (An Exploration Stage Company) NOTES TO THE FINANCIAL STATEMENTS July 31, 2010 (Expressed in US dollars)
3. MINERAL RIGHTS - CONTINUED
BECK - CONTINUED
Management of the Company has used its best effort to re-negotiate the terms and conditions of the option agreements with American Nuclear Fuels but the efforts to restructure were unsuccessful. On May 15, 2009, the Company formally terminated its master option agreement with American Nuclear Fuels as well as six lease and option agreements with individual claimholders regarding the Beck Project. Consequently, the carrying value of the mineral interests has been fully impaired as at July 31, 2009. The Company has no further financial obligations pursuant to the terminated master agreement and six lease and option agreements related to the Beck properties.
Mineral properties expenditures are summarized as follows:
YELLOWCAKE MINING INC. (An Exploration Stage Company) NOTES TO THE FINANCIAL STATEMENTS July 31, 2010 (Expressed in US dollars)
4. 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 3). 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 3). 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 3). The fair value was based on the quoted market price on the date of issuance.
On August 20, 2009 the Company issued a total of 3,921,808 common shares with a fair value of $0.035 per share pursuant to agreements to convert certain debts to shares. The fair value was based on the quoted market price at the date of issuance.
YELLOWCAKE MINING INC. (An Exploration Stage Company) NOTES TO THE FINANCIAL STATEMENTS July 31, 2010 (Expressed in US dollars)
4. COMMON STOCK
SHARE PURCHASE WARRANTS
Share purchase warrant transactions are summarized as follows:
Weighted Average Number of Share Exercise Price --------------- --------------
Balance at July 31, 2008 and 2007 2,955,000 $ 1.50 Expired (2,955,000) 1.50 ---------- -------- Balance July 31, 2009 -- $ -- ========== ========
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.
The Company adopted ASC 718 commencing on August 1, 2006. Effective with the adoption of ASC 718, 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, ASC 718 requires companies to utilize an estimated forfeiture rate when calculating the expense for the reporting period.
Stock option transactions are summarized as follows:
Number of Weighted Average Options Exercise Price ------- --------------
Balance at July 31, 2008 2,100,000 2.00 Cancelled/forfeited (500,000) 1.20 ---------- -------- Balance at July 31, 2009 1,600,000 2.25 Cancelled/forfeited (1,500,000) 2.20 ---------- -------- Balance at July 31, 2010 100,000 $ 3.05 ========== ========
YELLOWCAKE MINING INC. (An Exploration Stage Company) NOTES TO THE FINANCIAL STATEMENTS July 31, 2010 (Expressed in US dollars)
4. COMMON STOCK (Continued)
STOCK OPTIONS (CONTINUED)
At July 31, 2010, the following stock options were outstanding and exercisable:
Number of Aggregate Number of Aggregate Options Exercise Intrinsic Options Intrinsic Outstanding Price Value Expiry Date Exercisable Value - ----------- ----- ----- ----------- ----------- -----
100,000 $ 3.05 $ -- April 13, 2012 100,000 $ -- ======= ====== ====== ============== ======= ======
The aggregate intrinsic value in the preceding table represents the total intrinsic value, based on the Company's closing stock price of $0.04 per share as of July 31, 2009, 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, 2009 was $Nil. As of July 31, 2009, 1,075,000 outstanding options were vested and exercisable and the weighted average exercise price was $2. The total intrinsic value of options exercised during the years ended July 31, 2010 and 2009 was $Nil.
The following table summarizes information regarding the non-vested stock purchase options outstanding as of July 31, 2010.
Weighted Average Number of Grant-Date Options Fair Value ------- ----------
Non-vested options at July 31, 2008 1,300,000 $ 1.51 Vested (525,000) $ 1.48 Cancelled/forfeited (250,000) $ 0.60 ---------- -------- Non-vested options at July 31, 2009 525,000 $ 1.48 Vested (25,000) Cancelled/forfeited (500,000) ---------- Non-vested options at July 31, 2010 Nil ==========
YELLOWCAKE MINING INC. (An Exploration Stage Company) NOTES TO THE FINANCIAL STATEMENTS July 31, 2010 (Expressed in US dollars)
4. COMMON STOCK (Continued)
STOCK OPTIONS (CONTINUED)
STOCK-BASED COMPENSATION
Total stock based compensation recognized during the year ended July 31, 2010 in respect of options granted in prior periods was $138,644 (2009 - $540,722) which has been recorded in the Statements of Operations with corresponding additional paid-in capital recorded in stockholders' equity as follows:
The following weighted average assumptions were used for the Black-Scholes valuation of stock options granted:
Year Ended July 31, 2010 -------------
Risk-free interest rate 1.31% - 4.59% Expected life of options (years) 1.89 - 2.6 Expected volatility 119% - 234% ----------- Dividend rate 0% ===========
5. RELATED PARTY TRANSACTIONS
The Company paid or accrued management fees of $54,500 to two former directors of the Company (2009 - $240,000) during the year ended July 31, 2010. At July 31, 2010, included in accounts payable and accrued liabilities was $54,500 owed to directors for management fees (2009 - $152,500). 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, 2010 (Expressed in US dollars)
6. FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash and cash equivalents, short-term loans, accounts payable and accrued liabilities. 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.
7. SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS
In August 2009, the Company issued 3,921,808 common shares to settle an aggregate debt of $204,763 of which $152,500 was with two former officers and directors of the Company and the remaining 52,263 was with a consultant. The amounts have been excluded from cash flows from financing activities.
For the year ended July 31, 2009, the Company did not have non-cash transactions in investing and financing activities.
8. RECLAMATION BONDS
On May 7, 2009 the Company remitted $62,400 to the State of Colorado Department of Mined Land Reclamation and Safety, in order to replace $130,400 of existing reclamation bonds received by the Company. The Company confirmed with the State that the approved remediation process had been completed on some of the Company's site exploration activities. The process will result in the Company receiving $130,400 from the State and will hold $62,400 in reclamation bonds over existing properties in Colorado. The State has inspected the properties to insure that the Company has completed all of the required remediation on site exploration and the Company has made an application for the return of these funds. In February 2010 the Company assigned its interest in these Bonds to two directors and a consultant in respect of certain amounts owed to them.
9. DEMAND LOAN
On February 18, 2010, a lender unrelated to the Company loaned the Company a total of $125,000 pursuant to a promissory note requiring interest at 10% per annum and payable on demand.
YELLOWCAKE MINING INC. (An Exploration Stage Company) NOTES TO THE FINANCIAL STATEMENTS July 31, 2010 (Expressed in US dollars)
10. INCOME TAXES
The significant components of the Company's future income tax assets are as follows:
July 31, 2010 July 31, 2009 ------------- ------------- Deferred income tax assets: Non-capital loss carry forwards $ 690,400 $ 614,200 Resource expenditures 4,681,000 4,685,000 Valuation allowance (5,371,400) (5,299,200) ----------- ----------- Net deferred income tax assets $ -- $ -- =========== ===========
A reconciliation of income taxes at statutory rates with the reported taxes is as follows:
Year Ended Year Ended July 31, 2010 July 31, 2009 ------------- -------------
Loss for the year $ (352,000) $(2,856,000) Statutory rate 34.0% 34.0% ----------- ----------- Expected tax recovery (120,000) (971,000) Permanent difference 139,000 183,800 Increase (decrease) in valuation allowance (19,000) 787,200 ----------- ----------- Income taxes expense $ -- $ -- =========== ===========
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, 2010 and July 31, 2009.
The Company has available for deduction against future taxable income non-capital losses of approximately $2,030,000 in the United States. These losses, if not utilized, will expire through 2030.
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, 2010 and 2009 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.
11. SUBSEQUENT EVENTS
The Company has evaluated events subsequent to July 31, 2010 to assess the need for potential recognition or disclosure in this report. Such events were evaluated through the date these financial statements were issued and such items are disclosed herewith as follows;
a) On September 1, 2010 the Company received a loan of $15,000 from the current President of the Company. This loan is not subject to interest or any specific terms of payment.
b) Bond reclamation - $64,235 was received from the State of Colorado (including interest) on September 3, 2010. These funds were distributed in accordance with an assignment agreement executed in February 2010 with two former directors and a former consultant in respect of certain amounts due to them and extinguish all remaining indebtedness. This indebtedness amounting to approximately $24,000 will be reflected in the financial statements for the quarter ended October 31, 2010.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL MATTERS
Effective March 10, 2010, we dismissed BDO Canada LLP ("BDO") as our independent principal accountant and we engaged the accounting firm of Bernstein & Pinchuk LLP, ("B&P") as our new independent registered public accounting firm. The decision to dismiss BDO and to appoint B&P was recommended and approved by our board of directors, which acts as our audit committee.
BDO's reports in our audited financial statements contained in our annual reports on Form 10-K for the fiscal years ended July 31, 2008 and 2009 did not contain any adverse opinions or disclaimers of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles, except that they did contain going concern qualifications.
During the two most recent fiscal years and the subsequent interim period, there were no disagreements with BDO, on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, if not resolved to BDO's satisfaction, would have caused it to make reference to the subject matter of the disagreement in connection with its reports on our financial statements. During the two most recent fiscal years, and in the subsequent interim periods through the date of dismissal of BDO, there were no reportable events (as described in Item 304(a)(1)(v) of Regulation S-K) with BDO.
BDO has furnished us with a letter addressed to the Securities and Exchange Commission stating that it agrees with the above statements.
On March 10, 2010, we engaged B&P as our independent accountant. During the two most recent fiscal years and the subsequent interim periods through the date of appointment, we have not consulted with B&P regarding either the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on our financial statements, nor has B&P provided to us a written report or oral advice that B&P concluded was an important factor considered by us in reaching a decision as to any accounting, auditing or financial reporting issue. In addition, during such periods, we have not consulted with B&P regarding any matter that was either the subject of a disagreement (as defined in Item 304(a)(1)(iv) and the related instructions) or a reportable event (as described in Item 304(a)(1)(v) of Regulation S-K).
We have provided a copy of the disclosures in our report on Form 8-K filed on April 29, 2010 to B&P and offered them the opportunity to furnish a letter to the Commission contemplated by Item 304(a)(2)(ii)(D) of Regulation S-K. B&P has advised that it does not intend to furnish such a letter to the Commission.
ITEM 9A(T).
ITEM 9A(T). CONTROLS AND PROCEDURES
DISCLOSURE CONTROLS AND PROCEDURES
As required by paragraph (b) of Rules 13a-15 or 15d-15 under the Exchange Act, our management, with the participation of our principal executive and principal financial officer evaluated our company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this report on Form 10-K. Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our company's reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our company's reports filed under the Exchange Act is accumulated and communicated to our principal executive officer and our principal accounting officer, as appropriate, to allow timely decisions regarding required disclosure. Based on their evaluation, management concluded that as of the period covered by this Annual Report on Form 10-K, these disclosure controls and procedures were not effective.
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, with the participation of our principal executive and principal financial officer, evaluated the effectiveness of our internal control over financial reporting as of July 31, 2010.
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, 2010, 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.
Based on this evaluation, our management concluded that as of the end of the fiscal year covered by this report on Form 10-K, we have the following material weaknesses in our internal control over financial reporting:
(i) Lack of a sufficient number of independent directors for our board and audit committee. As a publicly-traded company, we should strive to have a majority of our board of directors be independent;
(ii) Insufficient segregation of duties in our finance and accounting functions due to limited personnel. During the fiscal year ended July 31, 2010, we had limited staff at our executive office in Vancouver, British Columbia, prior to the departure of the officers and directors on February 24, 2010, that performed nearly all aspects of our financial reporting process, including, but not limited to, access to the underlying accounting records and systems, the ability to post and record journal entries and responsibility for the preparation of the financial statements. Since February 24, 2010 we have only our sole officer and director who performs all these duties. This creates certain incompatible duties and a lack of review over the financial reporting process that would likely result in a failure to detect errors in spreadsheets, calculations, or assumptions used to compile the financial statements and related disclosures as filed with the SEC. These control deficiencies could result in a material misstatement to our interim or annual financial statements that would not be prevented or detected;
(iii) Our company's management does not have sufficient technical accounting knowledge relating to accounting for options granted to directors and officers, and employees;
(iv) Our company's management does not have sufficient technical accounting knowledge relating to accounting for income taxes;
(v) Our company's management does not have sufficient technical knowledge in the preparation of financial statements; and,
(vi) 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 misunderstandings regarding key decisions affecting our operations and management.
The full list of these weaknesses was discovered by our management during the performance of its evaluation of our disclosure controls and procedures and internal control over financial reporting as described above. Some of these weaknesses were known to our management previously. Our management believes that these weaknesses have existed in our company since our change in control that began on or about January 16, 2007, when we had a change of directors, officers and control persons.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions and that the degree of compliance with the policies or procedures may deteriorate.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
During the fiscal year ended July 31, 2010, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.
PLAN FOR REMEDIATION OF MATERIAL WEAKNESSES
We intend to take appropriate and reasonable steps to make the necessary improvements to remediate our material weaknesses when we are able to do so financially and when the timing is appropriate for our company. We do not know what further measures we will take, when we will take them or how much they will cost.
CERTIFICATIONS
Certifications 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
None
PART III
ITEM 10
ITEM 10 DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
As at October 29, 2010, our directors and executive officers, their age, positions held, and duration of such, are as follows:
CERTAIN SIGNIFICANT EMPLOYEES
We have no employees other than our sole director and officer.
FAMILY RELATIONSHIPS
There are no family relationships between any director or executive officer.
BUSINESS EXPERIENCE
The following is a brief account of the education and business experience of directors, executive officers and significant employees during at least the past five years, indicating their principal occupation during the period, and the name and principal business of the organization by which they were employed.
LISA LOPOMO
Ms. Lisa Lopomo is our President, Chief Financial Officer, Chief Executive Officer, Secretary, Treasurer, and sole Director. She has been an independent business consultant for the past nine years. Her experience includes working
with management of public and privately-held companies to maximize productivity as well as general corporate matters. Ms. Lopomo has experience in various industries including automotive, solar, pet care and resources. Most recently Ms. Lopomo was the founder of publicly traded Purden Lake Resource Corp. ("Purden") Ms. Lopomo was elected as President, Chief Executive Officer, Chief Financial Officer, and a director of Purden on November 30, 2006. On December 30, 2009, Ms. Lopomo resigned as an officer of Purden and on January 14, 2010, she resigned as a director of Purden. Purden is listed on the OTC Bulletin Board under the symbol "CNBI".
We believe Ms. Lopomo is qualified to serve on our board of directors because of her extensive knowledge of our company's history and current operations, which she gained from working for our company as described above, in addition to her business experiences as described above.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
Our director and executive officer has not been involved in any of the following events during the past 10 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 offences);
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;
4. 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;
5. being the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of: (i) any federal or state securities or commodities law or regulation; or (ii) any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease- and-desist order, or removal or prohibition order; or (iii) any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
6. being the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Securities Exchange Act of 1934), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
SECTION 16(a) BENEFICIAL OWNERSHIP COMPLIANCE
Section 16(a) of the Securities Exchange Act requires our executive officers and directors, and persons who own more than 10% of our common stock, to file reports regarding ownership of, and transactions in, our securities with the Securities and Exchange Commission and to provide us with copies of those filings. Based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons, we believe that during fiscal year ended July 31, 2010, all filing requirements applicable to its officers, directors and greater than 10% beneficial owners were complied with.
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 our annual report on Form 10-KSB, filed on November 14, 2007. 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.
NOMINATING COMMITTEE
We have a nominating committee. Our sole director and officer is the only member and is not independent as the term is used in Nasdaq Marketplace Rule 4200(a)(15). A copy of our nominating committee charter is an exhibit to our annual report on Form 10-KSB, filed on November 14, 2007. The purpose of the Committee is to:
1. Identify individuals qualified to become directors on our Board of Directors (the "Board") 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 us.
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 of this Charter.
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 our company and our shareholders. In discharging that responsibility, the Committee should be entitled to rely on the honesty and integrity of our senior executives and our outside advisors and auditors, to the extent we deem necessary or appropriate. The nominating committee did not conduct any meetings during the fiscal year ended July 31, 2010.
NOMINATION OF DIRECTORS BY SHAREHOLDERS
We do 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. We do not currently have any specific or minimum criteria for the election of nominees to the Board and we do not have any specific process or procedure for evaluating such nominees. Our Boardwill 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 may do so by directing a written request addressed to our President, at the address appearing on the first page of this annual report.
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 our sole director and officer is the only member. A copy of our audit committee charter is attached to our annual report on Form 10-KSB, filed on November 14, 2007. The Audit Committee represents our Board in discharging its responsibility relating to our accounting, reporting and financial practices and our subsidiaries, and has general responsibility for oversight of our internal controls, accounting and audit activities and legal compliance. However, the Audit Committee's function is one of oversight only and shall not relieve our management of its responsibilities for preparing financial statements which accurately and fairly present our 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 who is considered as an "audit committee financial expert" as defined in SEC Release No. 33-8 177 SEC. II(A)(4)(c). The audit committee met once during fiscal year ended July 31, 2010.
Since the commencement of our most recently completed fiscal year, we have not required any non-audit services to be provided by our auditor.
CORPORATE GOVERNANCE
We currently act with Lisa Lopomo as our sole director. We have determined that Ms. Lopomo is not an independent director as defined by Nasdaq Marketplace Rule 4200(a)( 1.5 ).
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, 2010, or in any currently proposed transaction, that was considered by our Board in determining whether the director maintained his independence in accordance with Nasdaq Marketplace Rule 4200(a)( 1 5 ).
In consideration for acting as board members, we reimbursed Messrs. Klatt and Malone (our former directors) for out of pocket expenses incurred for attending board meetings. As additional consideration, granted to each of Messrs. Klatt and Malone, stock options to purchase up to 500,000 shares of our common shares 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 our 2007 Stock Option Plan. As Messrs. Klatt and Malone are no longer directors, their stock options have expired.
COMPENSATION COMMITTEE
We do not have a compensation committee, or a committee that performs similar function.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION
The particulars of compensation paid to the following persons:
(a) all individuals who served as our principal executive officer during the fiscal year ended July 31, 2010; and
(b) an additional individual for whom disclosure would have been provided under (a) 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 years ended July 31, 2010 and 2009, are set out in the following summary compensation table:
- ---------- 1. 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. 2. Ms. Lopomo was appointed a director and officer on February 24, 2010. 3. Mr. Tafuri resigned as a director and officer on February 24, 2010, his Option Awards for the year ended 2010 were cancelled at that time.
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.
EMPLOYMENT AGREEMENTS
We are not party to any employment contracts with our director and officer.
OUTSTANDING EQUITY AWARDS FOR EXECUTIVE OFFICERS AT FISCAL YEAR-END
The following table sets forth for each named executive officer certain information concerning the outstanding equity awards as of July 31, 2010.
COMPENSATION OF DIRECTORS
The table below shows the compensation of our directors who are not named executive officers for our last completed fiscal year ended July 31, 2010:
- ---------- 1. Messrs. Tafuri, Klatt and Malone resigned as directors on February 24, 2010.
During the fiscal year ended July 31, 2010, there were no standard or other arrangements pursuant to which any of our directors were compensated for services provided in their capacity as directors.
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.
OUTSTANDING EQUITY AWARDS FOR DIRECTORS AT FISCAL YEAR-END
There were no outstanding equity awards for Directors at July 31, 2010.
LONG-TERM INCENTIVE PLANS
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 our 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 our company (a "Related Company") to acquire and maintain stock ownership in our 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 shares 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 shares 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.
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 shares 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 shares reserved for issuance under the 2007 Plan.
OPTION EXERCISES AND STOCK VESTED TABLE.
None of our directors, officers or employees has exercised their stock options.
REPRICING OF OPTIONS/SARS
We did not reprice any options previously granted during the year ended July 31, 2010.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
In the following tables, 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 shareholders, 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 shares 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.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
SECURITY OWNERSHIP OF MANAGEMENT
- ---------- 1. Based on 55,451,425 shares of common shares issued and outstanding as of October 29, 2010 2. Strathmore Minerals Corp. holds voting and dispositive power over these shares.
CHANGES IN CONTROL
We are unaware of any contract or other arrangement the operation of which may at a subsequent date result in a change of control of our company.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
TRANSACTIONS WITH RELATED PERSONS
No director, executive officer, principal shareholder holding at least 5% of our common shares, or any family member thereof, had any material interest, direct or indirect, in any transaction, or proposed transaction, since the beginning of our fiscal year ended July 31, 2009, or in any currently proposed transaction, in which the amount involved in the transaction exceeded or exceeds the lesser of $120,000 or one percent of the average of our total assets at the year end for the last three completed fiscal years.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
AUDIT FEES
For the period ended July 31, 2010, the aggregate fees billed by Bernstein & Pinchuk LLP ("Bernstein") for professional services rendered for the audit of our financial statements were:
Year Ended Fees July 31, 2010 ---- -------------
Audit Fees $ 5,000 Audit Related Fees -- Tax Fees -- Other Fees 3,000 * ------- Total Fees $ 8,000 =======
- ---------- * Fees related to the review of the quarterly financial statements and the SEC letters.
POLICY ON PRE-APPROVAL BY AUDIT COMMITTEE OF SERVICES PERFORMED BY INDEPENDENT AUDITOR
We do not use Bernstein 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 Bernstein to provide compliance outsourcing services.
Effective May 6, 2003, the Securities and Exchange Commission adopted rules that require that before BDO or Bernstein 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 or Bernstein and believes that the provision of services for activities unrelated to the audit is compatible with maintaining BDO or Bernstein'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) 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) 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
Exhibit Number Description - ------ -----------
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) 10.15 Juniper Ridge Project Termination Agreement dated December 29, 2008 with Strathmore Resources (US) Ltd. (attached as an exhibit to our current report on Form 8-K, filed on January 2, 2009) 10.16 American Nuclear Fuels (Colorado) LLC Standstill Agreement dated March 16, 2009 (attached as an exhibit to our quarterly report on Form 10-Q filed on March 23, 2009) 10.17 Relinquishment and Surrender of Lease and Option with Beckworth Corporation dated May 15, 2009 (attached as an exhibit to our quarterly report on Form 10-Q filed on June 15, 2009) 10.18 Relinquishment and Surrender of Lease and Option with Energy Venture LLC and Uravan Land and Cattle Company LLC dated May 15, 2009 (attached as an exhibit to our quarterly report on Form 10-Q filed on June 15, 2009) 10.19 Relinquishment and Surrender of Lease and Option with Bruce L. Beck dated May 15, 2009 (attached as an exhibit to our quarterly report on Form 10-Q filed on June 15, 2009) 10.20 Relinquishment and Surrender of Lease and Option with Bedrock Development Corp. dated May 15, 2009 (attached as an exhibit to our quarterly report on Form 10-Q filed on June 15, 2009) 10.21 Relinquishment and Surrender of Lease and Option with Eagle Venture Group LLC dated May 15, 2009 (attached as an exhibit to our quarterly report on Form 10-Q filed on June 15, 2009) 10.22 May 15, 2009 letter to American Nuclear Fuels (Colorado) LLC terminating the master agreement (attached as an exhibit to our quarterly report on Form 10-Q filed on June 15, 2009) 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 April 28, 2010 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.
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/ Lisa Lopomo ----------------------------------------------------------- Lisa Lopomo President, Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer and Director (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)
Date: November 12, 2010
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person on behalf of the registrant and in the capacities and on the date indicated.
/s/ Lisa Lopomo - -------------------------------------------------------------- Lisa Lopomo President, Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer and Director (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)
Date: November 12, 2010