mega uranium ltd. final.pdf · 2018. 12. 19. · redport by issuing 19,205,604 common shares to...

Consolidated Financial Statements of

Mega Uranium Ltd. December 31, 2007 (Unaudited)

Contents

Consolidated Financial Statements Consolidated Balance Sheets 2 Consolidated Statements of Operations and Deficit 3 Consolidated Statements of Cash Flows 4 Notes to Consolidated Financial Statements 5 - 29

Consolidated statement of operations and deficit and consolidated statement of cash for the three ending December 31, 2006 have not been reviewed by our auditors.

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(Unaudited - in thousands of dollars, except for securities and per share amounts)

Assets

CurrentCash and cash equivalents (note 5) $ 64,252 $ 48,830 Marketable securities (note 6) 21,205 65,172 Prepaid expenses and receivables 6,526 4,689 Income taxes receivable 263 -

92,246 118,691 Mineral properties and related expenditures (notes 3 and 4) 484,114 466,857 Investments in public companies (note 7) 8,216 5,750 Restricted cash (note 8) 375 375 Capital assets, net 2,495 1,217

$ 587,446 $ 592,890

Liabilities and Shareholders' Equity

CurrentAccounts payable and accrued liabilities $ 6,467 $ 11,054 Income taxes payable - 586

6,467 11,640

Future tax liabilities 129,804 134,445

136,271 146,085

Shareholders' equityShare capital (note 10) 418,506 417,070 Warrants (note 10(d)) 37,558 41,768 Contributed surplus (note 10(e)) 35,597 26,550 Deficit (40,486) (38,583)

451,175 446,805

$ 587,446 $ 592,890

MEGA URANIUM LTD.

As at December 31 and September 30, 2007

See accompanying notes to the consolidated financial statements.

Consolidated Balance Sheets

December 31,2007

September 30,2007

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,

Consolidated Statements of Operations and Deficit


2007 2006

RevenueInterest income $ 1,075 $ 548 Gain on disposal of investments in public companies 117 - Unrealized gains (losses) on investments in public companies, net (1,397) 6,195 Unrealized gains on marketable securities 188 41 Other income - 25

(17) 6,809

ExpensesOperating, general and administrative 2,106 2,012 Stock-based compensation (note 10(g)) 5,359 2,669 Foreign exchange (gain) loss (760) 2,978 Write-off of mineral properties and related expenditures - 10 Amortization 101 15

6,806 7,684

Loss before income taxes (6,823) (875)

Recovery of income taxes (4,920) -

Net loss and comprehensive loss for the period (1,903) (875)

Deficit, beginning of period (38,583) (22,395)

Deficit, end of period $ (40,486) $ (23,270)

Loss per common share Basic and diluted $ (0.01) $ (0.01)

Weighted average number of common shares outstandingBasic and diluted 179,318,645 117,826,227

MEGA URANIUM LTD.


For the three months ended December 31,

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2007 2006

Cash flows from operating activitiesNet loss for the period $ (1,903) $ (875) Items not affecting cash:

Gain on disposal of investments in public companies (117) - Unrealized losses (gains) on investments in public companies, net 1,397 (6,195) Unrealized gains on marketable securities (188) (41) Write-off of mineral properties and related expenditures - 10 Amortization 101 15 Stock-based compensation 5,359 2,669 Future tax recovery (5,065) - Foreign exchange (gain) loss (760) 2,978

(1,176) (1,439) Changes in non-cash working capital balances

Prepaid expenses and receivables (1,367) 60 Accounts payable and accrued liabilities (3,953) (620) Income taxes receivable/payable net (849) -

(7,345) (1,999)

Cash flows from financing activitiesProceeds from issue of share capital pursuant

to private placements, net - 11,077 Proceeds pursuant to exercise of options and warrants 326 4,082 Due to brokers - (9,213)

326 5,946

Cash flows from investing activitiesExpenditures on mineral properties and related exploration (16,116) (2,350) Acquisition of Redport - 7,072 Proceeds from sale of marketable securities 43,499 20,072 Amortization of premium on purchase of marketable securities 183 184 Proceeds from sale of investments in public companies 712 - Purchase of investments in public companies (4,458) - Purchase of capital assets (1,379) (89)

22,441 24,889

Increase in cash and cash equivalents 15,422 28,836

Cash and cash equivalents, beginning of period 48,830 1,163

Cash and cash equivalents, end of period $ 64,252 $ 29,999

Supplemental Cash Flow InformationCash paid for interest $ 2 $ - Cash paid for taxes 1,100 - Non-cash investing and financing activities

Issue of share capital pursuant to acquisition of subsidiaries (notes 3 (a)) - 88,070 Issue of share capital pursuant to acquisitions of properties (note 4 (a) and (b)) 152 -

MEGA URANIUM LTD. Consolidated Statements of Cash Flows


For the three months ended December 31,

Mega Uranium Ltd. Notes to the Consolidated Financial Statements December 31, 2007 (Unaudited – in thousands of dollars, except for securities and per share amounts)

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1. Basis of preparation:

Mega Uranium Ltd. (“Mega” or the “Company”) is a development stage mineral resources company with a focus on uranium properties in Australia, Argentina, Colombia, Bolivia, Mongolia, Cameroon and Canada. Mega also has precious and base metal interests in Africa, Mexico, Brazil and Canada. Mega is in the process of exploring its mineral properties and has not as yet determined whether these properties contain reserves that are economically recoverable. The recoverability of the amounts shown for mineral properties and related expenditures is dependent upon: the selling price of uranium at the time the Company intents to mine its properties; the existence of economically recoverable reserves; the ability of the Company to obtain the necessary financing to complete exploration and development; government policies and regulations; and future profitable production or proceeds from disposition of such properties. Mega’s Australian uranium properties, including without limitation the Ben Lomond, Lake Maitland and Maureen properties are subject to state policies which presently prohibit the mining of uranium. In late April of 2007, the Federal Labor Party abolished its anti-uranium mining policy and the current Labor Government of South Australia has announced that it supports new uranium mine development. These consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles (“GAAP”) and include the significant accounting policies listed below. All references are in Canadian dollars unless otherwise noted.

2. Significant accounting policies:

Management has prepared the interim consolidated financial statements of Mega in Canadian dollars and in accordance with Canadian generally accepted accounting principles for interim financial reporting. Accordingly, they do not include all of the information and notes required by Canadian generally accepted accounting principles for annual financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation, have been included. These interim consolidated financial statements should be read in conjunction with the annual consolidated financial statements and notes thereto as at September 30, 2007. Accounting policies followed in the preparation of the annual consolidated financial statements are consistent with those used in the preparation of the December 31, 2007 interim consolidated financial statements except for the following: Effective October 1, 2007, the Company adopted the following accounting pronouncements: CICA Handbook Section 1535, Capital Disclosures, requires that a company disclose information that enables users of its financial statements to evaluate its objectives, policies and procedures for managing capital including disclosures of any externally imposed capital requirements and the consequences for non-compliance, see note 12.


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2. Significant accounting policies (continued): CICA Handbook Section 3862, Financial Instruments – Disclosure, requires disclosure of information related to the significance of financial instruments to a Company’s financial position and performance. A company is also required to disclose information related to the risks of its use of financial instruments and how those risks are managed, see note 13. CICA Handbook Section 3863, Financial Instruments – Presentation, establishes standards for presentation of financial instruments. It deals with the presentation of financial instruments and the circumstances in which financial assets and financial liabilities are offset. The initial adoption of this standard did not have an effect on the consolidated financial statements. Recent Accounting Pronouncements: CICA Handbook Section 3064, Goodwill and Intangible Assets (“CICA 3064”), and results in withdrawal of CICA 3450, Research and Developmental Costs, and amendments to Accounting Guideline (AcG) 11, Enterprises in the Development Stage and CICA 1000, Financial Statement Concepts. The standard intends to reduce the differences with IFRS in the accounting for intangible assets and results. Under current Canadian standards, more items are recognized as assets than under IFRS. The objectives of CICA 3064 are to reinforce the principle-based approach to the recognition of assets only in accordance with the definition of an asset and the criteria for asset recognition; and to clarify the application of the concept of matching revenues and expenses such that the current practice of recognizing asset items that do not meet the definition and recognition criteria is eliminated. The new standard also provides guidance for the recognition of internally developed intangible assets (including research and development activities), ensuring consistent treatment of all intangible assets. The new standard takes effect for fiscal years ending on or after October 1, 2008, with early adoption encouraged. Mega is evaluating the effects of adopting this standard.

3. Basis of consolidation:

These consolidated financial statements include the accounts of Mega and its wholly-owned subsidiaries: Maple Resources Inc.; Maple Minerals Exploration and Development Inc.; Uranium Mineral Ventures Inc. (“UMVI”); Mega Georgetown Pty Ltd. and its wholly-owned subsidiary Future Metals and Energy Limited (“FME”); Mega Hindmarsh Pty Ltd. (“Hindmarsh”); Mega Redport Pty Ltd. (“Redport”); Mega Uranium Argentina S.A.; Twenty-Seven Capital Corp. (“TSC”); Monster Copper Corporation (“Monster”); Nu Energy Uranium Corporation (“Nu Energy”); and Northern Lorena Resources Ltd. (“Lorena”). All significant inter-company accounts and transactions have been eliminated on consolidation. In the fiscal year ended September 30, 2007, the Company purchased several of its subsidiaries as follows: (a) In July 2006, the Company acquired 15.6% of Redport, a public company listed on the

Australian Stock Exchange (“ASX”) under the symbol “RPT”. The total cost to Mega for


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3. Basis of consolidation (continued):

this transaction was $10,485 (AUD12,787). As of September 30, 2007 and through a series of transactions, the Company acquired the remainder of the ordinary shares of Redport by issuing 19,205,604 common shares to Redport shareholders valued at $88,922 for a 100% ownership of Redport. Included in transaction costs, Mega assumed liability for Australian stamp duty of $2,000. The acquisition was accounted for using the purchase method. The results of operations are included in the accounts from the effective date of acquisition. Details of the acquisition of Report are as follows: As at October 23, 2006 Purchase price Original investment in Redport, at cost $ 10,485 Issuance of 19,205,604 Mega shares 88,922 Assumed Redport options (i) 2,212 Transaction costs 2,478 104,097Fair value of Redport’s net assets acquired Current assets $ 8,959 Mineral properties and related expenditures 131,570 Capital assets, net 91 140,620 Less: current liabilities (989) Less: future tax liabilities (35,534)Fair value of net assets assumed $ 104,097 (i) An aggregate of 401,962 common shares are issuable to former shareholders of

Redport pursuant to the exercise of the Redport options which have been assumed by Mega in connection with the acquisition and are included in the purchase price.

(b) Effective February 12, 2007, the Company acquired 100% of Twenty-Seven Capital

Corp. (“TSC”) and issued common shares and warrants to the former shareholders of TSC. An aggregate of 6,785,373 common shares valued at $42,749 and 3,392,188 Mega warrants valued at $14,145 were issued by Mega to the former shareholders of TSC. The Mega warrants commenced trading on the TSX on February 13, 2007 under the symbol “MGA.WT”. The acquisition was accounted for using the purchase method. The results of operations of TSC are included in the accounts from the effective date of acquisition.


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3. Basis of consolidation (continued): The allocation of the purchase price related to the TSC transaction is preliminary and will be refined as information relating to the valuation of the fair value of net assets and the determinant of certain tax values of those net assets are finalized. The preliminary fair values of the assets and liabilities and the preliminary allocation of the purchase consideration are as follows: As at Feb 12, 2007 Purchase price Issuance of 6,785,373 Mega shares $ 42,749 Issuance of 3,392,188 Mega warrants 14,145 Transaction costs 1,021 57,915Preliminary fair value of TSC’s net assets acquired Current assets $ 6,582 Mineral properties and related expenditures (i) 76,728 83,310 Less: current liabilities (608) Less: future tax liabilities (24,787)Fair value of net assets assumed $ 57,915 (i) The amount previously allocated to the Mexico properties has now been reallocated

to the Yukon Properties based on a re-evaluation of information that was obtained at the time of acquisition.

(c) In April 2007, in connection with, but after the acquisition of TSC, Mega issued 33,333

common shares for a total consideration of $240 to the Dodson Group, towards the earning of a 100% interest in certain mineral concessions in the State of Sonora, Mexico. These concessions are included in TSC’s Mexico properties in the detailed list of the Company’s mineral properties (see note 5).

(d) In March 2007, the Company’s wholly-owned subsidiary, Mega Georgetown Pty Ltd.,

acquired from a publicly-listed Australian company, Glengarry Resources Ltd. (“Glengarry”), uranium interests located in Queensland, Australia, approximately midway between Mega’s Ben Lomond and Georgetown Projects. The Company issued 750,000 common shares to Glengarry for a total consideration of $4,590. In addition, Glengarry will receive a 1% net smelter royalty (“NSR”) on any uranium production from the ground.


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3. Basis of consolidation (continued): (e) In June 2007, the Company acquired 100% of Monster Copper Corporation (“Monster”)

in exchange for an aggregate of 6,836,834 common shares valued at $41,773 and 3,418,416 Mega warrants valued at $8,786 which were issued to the former shareholders of Monster. In addition, Mega assumed Monster common share purchase warrants (the “Monster Warrants”) valued at $6,068. The Mega warrants commenced trading on the TSX on June 13, 2007 under the symbol “MGA.WT.A”. The acquisition was accounted for using the purchase method. The results of operations of Monster are included in the accounts from the effective date of acquisition. The allocation of the purchase price related to the Monster transaction is preliminary and will be refined as information relating to the valuation of the fair value of net assets and the determinant of certain tax values of those assets are finalized. The preliminary fair values of the assets and liabilities and the preliminary allocation of the purchase consideration are as follows: As at June 6, 2007 Purchase price Issuance of 6,836,834 Mega shares $ 41,773 Issuance of 3,418,416 Mega warrants 8,786 Assumed Monster purchase warrants (i) 6,068 Transaction costs 123 56,750Preliminary fair value of Monster’s net assets acquired Current assets $ 5,465 Mineral properties and related expenditures (ii) 74,732

Capital assets, net 22 Investment in public companies 196 80,415 Less: current liabilities (276) Less: future tax liabilities (23,389)Fair value of net assets assumed $ 56,750

(i) An aggregate of 1,104,712 Mega common shares and 552,356 Mega common share purchase warrants are issuable to former shareholders of Monster pursuant to the exercise of the Monster Warrants which have been assumed by Mega in connection with the acquisition and are included in the purchase price.

The amount previously allocated to the Brazil and Yukon properties has now been reallocated to the Labrador properties based on a re-evaluation of information that was obtained at the time of acquisition.


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(f) In August 2007, the Company acquired 100% of Nu Energy Uranium Corporation (TSXV: “NU”) (“Nu Energy”) and issued 23,819,128 common shares to Nu Energy’s shareholders valued at $83,129. In addition, Mega assumed Nu Energy stock options (the “Nu Energy Options”) and common share purchase warrants (the “Nu Energy Warrants”) valued at $448 and $558 respectively, and exercisable for an aggregate of up to 250,000 common shares of Mega.

Included in transaction costs, Mega issued 100,060 common shares to its financial advisor on the transaction, valued at $436. The acquisition was accounted for using the purchase method. The results of operations are included in the accounts from the effective date of acquisition. The allocation of the purchase price related to the Nu Energy transaction is preliminary and will be refined as information relating to the valuation of the fair value of net assets and the determinant of certain tax values of those assets are finalized. The preliminary fair values of the assets and liabilities and the preliminary allocation of the purchase consideration are as follows: As at August 14, 2007 Purchase price Issuance of 23,819,128 Mega shares $ 83,129 Assumed Nu Energy options (i) 448 Assumed Nu Energy warrants (i) 558 Transaction costs 636 84,771Preliminary fair value of Nu Energy’s net assets acquired Current assets $ 20,513 Mineral properties and related expenditures 104,733 Capital assets, net 223 125,469 Less: current liabilities (1,804) Less: future tax liabilities (38,894)Fair value of net assets assumed $ 84,771

(i) An aggregate of 100,000 Mega share purchase warrants and 150,000 Mega common shares are issuable to former shareholders of Nu Energy pursuant to the exercise of the Nu Energy Options and Nu Energy Warrants which have been assumed by Mega in connection with the acquisition and are included in the purchase price.


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(g) In June 2007, Mega entered into an agreement with Santoy Resources Limited (“Santoy”) (TSXV: “SAN”) to acquire all of Santoy’s right, title and interest in three projects in the Central Mineral Belt, Labrador. Under the agreement, Mega acquired the West Michelin, West Micmac and Gravelly River projects (the “Projects”) from Santoy (subject to a 1% net smelter royalty covering certain claims in favour of a third party) in exchange for 400,000 common shares of Mega for a total consideration of $2,492.

(h) On July 30, 2007, Mega entered into an agreement to acquire Northern Lorena

Resources Ltd. (“Lorena”), a private company based in Nova Scotia, Canada, which holds options on seven mineral properties in Labrador, for a total consideration of 500,000 common shares of Mega. Effective September 28, 2007, Mega acquired Lorena for an aggregate of 500,000 common shares of Mega valued at $2,165 and Lorena became a wholly-owned subsidiary of Mega. Under the terms of the acquisition, Mega assumed Lorena’s obligations under the option agreements with the original optionors.

The allocation of the purchase price related to the Lorena transaction is preliminary and will be refined as information relating to the valuation of the fair value of net assets and the determinant of certain tax values of those assets are finalized. The preliminary fair values of the assets and liabilities and the preliminary allocation of the purchase consideration are as follows: As at September 28, 2007Purchase price Issuance of 500,000 Mega shares $ 2,165 Transaction costs 50 2,215Preliminary fair value of Lorena’s net assets acquired Current assets $ 5 Mineral properties and related expenditures 3,136 Other long term assets 2 3,143 Less: current liabilities (27) Less: future tax liabilities (901)Fair value of net assets assumed $ 2,215

(i) In September 2007, Mega completed an option agreement with Geomode Minerals Exploration Ltd. (“Geomode”) to acquire a 100% interest in certain mineral claims and other rights to properties located in Saskatchewan, Canada. The option will be exercisable by Mega if Mega makes certain cash payments totaling $1,000 and issues an aggregate of 125,000 common shares to Geomode over a period of three years from the date of the agreement. Twenty-five thousand common shares have been issued pursuant to the agreement valued at $92.


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3. Basis of consolidation (continued): (j) In September 2007, Mega entered into an agreement with Forum Uranium Corp.

(“Forum”) (TSX-V: “FDC”) in respect of Forum’s 100% owned Maurice Point property, which is located close to Cameco Corporation’s Maurice Bay uranium deposit in the Athabasca Basin of northern Saskatchewan, Canada. Mega can earn a 55% interest in the Maurice Point project by spending $8,000 over three years and by issuing 100,000 Mega common shares to Forum. Mega has a $2,000 expenditure commitment in the first year of the option and Forum will initially operate the project. Mega can earn a further 15% interest (for a total 70% interest) by delivering a positive feasibility study and arranging project financing. Forum has the option to convert its remaining 30% interest to a 2% NSR at its election.

4. Mineral properties and related expenditures:

The Company enters into exploration agreements with other companies whereby it may earn an interest in certain mineral properties by issuing common shares and/or making option payments and/or incurring expenditures in varying amounts by varying dates. Failure by a party to meet such requirements in certain circumstances can result in a reduction or loss of the ownership interest.


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4. Mineral properties and related expenditures (continued):

Following is a detailed list of the Company’s mineral properties:

September 30,2007

Net Book Value

Net Expenditures/ (Recoveries) Write-off

Net Book Value

AUSTRALIA - QueenslandBen Lomond Property

Acquisition 5,722$ -$ -$ 5,722$ Exploration expenditures 478 586 - 1,064

6,200 586 - 6,786

Future Metals and Energy PropertiesAcquisition 13,502 - - 13,502 Exploration expenditures 318 475 793

13,820 475 - 14,295

Georgetown PropertiesAcquisition 6,413 - - 6,413 Exploration expenditures 2,546 747 3,293

8,959 747 - 9,706

Glengarry PropertiesAcquisition 4,590 - - 4,590 Exploration expenditures 450 330 - 780

5,040 330 - 5,370

Tabletop joint ventureAcquisition - - - - Exploration expenditures 46 32 - 78

46 32 - 78

Total Queensland properties 34,065 2,170 - 36,235

December 31, 2007


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September 30,2007

Net Book Value


Net Book Value

AUSTRALIA - South Australia & Northern TerritoryHindmarsh PropertyWestern South Australia

Acquisition 8,394$ -$ -$ 8,394$ Exploration expenditures 701 - - 701

9,095 - - 9,095

Central South AustraliaAcquisition 6,774 - - 6,774 Exploration expenditures 826 545 - 1,371

7,600 545 - 8,145 Eastern South Australia

Acquisition 2,085 - - 2,085 Exploration expenditures 589 322 - 911

2,674 322 - 2,996

Northern TerritoryAcquisition 3,702 - - 3,702 Exploration expenditures 334 22 - 356

4,036 22 - 4,058

Total South Australia &Northern Territory properties 23,405 889 - 24,294

AUSTRALIA - Western AustraliaRedport Properties Lake Maitland

Acquisition 102,970 2,286 - 105,256 Exploration expenditures 1,237 752 - 1,989

104,207 3,038 - 107,245

Kintyre RocksAcquisition 25,743 571 - 26,314 Exploration expenditures 756 244 - 1,000

26,499 815 - 27,314

Aura Energy joint ventureAcquisition - - - - Exploration expenditures 188 - - 188

188 - - 188

Total Western Australian properties 130,894 3,853 - 134,747

Total Australian properties 188,364 6,912 - 195,276

December 31, 2007


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September 30,2007

Net Book Value

Net Expenditures/ (Recoveries) Write-off Net Book Value

ARGENTINAChubut/Patagonia Property

Acquisition 147$ -$ -$ 147$ Exploration expenditures 1,045 232 - 1,277

1,192 232 - 1,424

Sierra Pintada District Uranium PropertyAcquisition 76 - - 76 Exploration expenditures 35 - - 35

111 - - 111

Total Argentina properties 1,303 232 - 1,535

BOLIVIAUranium Project (Intrepid Minerals joint venture)

Acquisition 80 - - 80 Exploration expenditures 328 99 - 427

408 99 - 507

BRAZILMonster Properties

Acquisition 1,636 - - 1,636 Exploration expenditures - - - -

1,636 - - 1,636

COLOMBIAAcquisition 130 - - 130 Exploration expenditures 126 28 - 154

256 28 - 284

MEXICOTwenty-Seven Properties

Acquisition 526 - - 526 Exploration expenditures - - - -

526 - - 526

December 31, 2007


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September 30,2007

Net Book Value


Net Book Value

MONGOLIAUranium Project (Red Hill Energy joint venture)

Acquisition 98$ -$ -$ 98$ Exploration expenditures 1,502 339 - 1,841

1,600 339 - 1,939

GUINEA (WEST AFRICA)Mt. Kakoulima Property

Acquisition 2,793 - - 2,793 Exploration expenditures 811 14 - 825

3,604 14 - 3,618

CAMEROON (AFRICA)Kitongo/Lolodorf Property

Acquisition 104,024 710 - 104,734 Exploration expenditures 150 1,004 - 1,154

104,174 1,714 - 105,888

CANADAOntario Properties (East West Resources joint venture)

Acquisition 325 30 - 355 Exploration expenditures 2,371 1 - 2,372

2,696 31 - 2,727

Quebec PropertiesAcquisition 1 - - 1 Exploration expenditures - - - -

1 - - 1

Central Mineral Belt Properties (Santoy)Acquisition 2,492 20 - 2,512 Exploration expenditures 823 66 - 889

3,315 86 - 3,401

Thelon Basin (Titan Uranium)Acquisition - - - - Exploration expenditures 3,067 433 - 3,500

3,067 433 - 3,500

December 31, 2007


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September 30,2007

Net Book Value

Net Expenditures/ (Recoveries) Write-off Net Book Value

CANADA (continued)Lever Lake Properties (NWT)

Acquisition 96$ -$ -$ 96$ Exploration expenditures 59 35 - 94

155 35 - 190 Lorena Properties

Acquisition 3,136 - - 3,136 Exploration expenditures 350 1,307 - 1,657

3,486 1,307 - 4,793

Geomode Properties - Keefe LakeAcquisition 442 - - 442 Exploration expenditures - 2,205 - 2,205

442 2,205 - 2,647

Maurice Point Properties (Forum Uranium)Acquisition - - - - Exploration expenditures - 1,450 - 1,450

- 1,450 - 1,450 Poplar Properties (CanAlaska Uranium)

Acquisition - 91 - 91 Exploration expenditures - 1,399 - 1,399

- 1,490 - 1,490

Twenty-Seven Yukon PropertiesAcquisition 76,442 61 - 76,503 Exploration expenditures 1,007 238 - 1,245

77,449 299 - 77,748

Monster Labrador PropertiesAcquisition 73,009 57 - 73,066 Exploration expenditures 1,261 478 - 1,739

74,270 535 - 74,805

Monster Yukon & NWT PropertiesAcquisition 30 - - 30 Exploration expenditures 75 48 - 123

105 48 - 153

Total Canadian properties 164,986 7,919 - 172,905

Total mineral properties and 466,857$ 17,257$ -$ 484,114$ related expenditures

December 31, 2007


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4. Mineral properties and related expenditures (continued): The following are the significant acquisitions completed during the three months ended December 31, 2007: (a) In October 2007, Mega entered into an option agreement with CanAlaska Uranium Ltd.

(“CanAlaska”) (TSX:”CVV”) in respect of CanAlaska’s 100% owned Poplar property, which is located on the northern rim of the Athabasca Basin of northern Saskatchewan, Canada. Mega can earn a 50% interest in the Poplar property by spending $6,000 and by issuing 100,000 Mega shares to CanAlaska over three years. Mega has a $2,000 expenditure commitment in the first year of the option and CanAlaska will initially operate the project. Mega can earn a further 5% interest (total 55% interest) by paying CanAlaska $2,000 and issuing an additional 100,000 Mega shares. Twenty-five thousand common shares have been issued pursuant to the agreement with an ascribed value for accounting purposes of $91.

(b) In November 2007, shares were issued to optionors pursuant to an option agreement

entered into by TSC, Cash Minerals Ltd. and the optionors in respect of an option granted to TSC and Cash Minerals Ltd. to acquire a 100% interest in certain mineral claims located in Yukon, Canada. In connection with Mega’s acquisition of TSC, the optionors agreed to accept common shares of Mega in lieu of TSC common shares issuable under the option agreement. The Company issued 16,667 common shares of Mega pursuant to the agreement with an ascribed value for accounting purposes of $61.

5. Cash and cash equivalents:

Cash and cash equivalents consist of the following:

December 31, 2007 September 30, 2007

Cash $ 4,989 $ 8,649Cash equivalents (a) 59,263 40,181

$ 64,252 $ 48,830

(a) Cash equivalents consist of bankers’ acceptances and discounted notes. As at December 31, 2007, all bankers’ acceptances and discounted notes had yields ranging from 4.0% to 4.5% with the weighted average yield being approximately 4.4%, with maturity dates from January 3, 2008 to February 21, 2008.


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6. Marketable securities:

Marketable securities are classified as held-for-trading, are stated at their fair values and consist of the following:


Corporate bonds (a) $ 19,624 $ 63,777Other equity securities 1,581 1,395

$ 21,205 $ 65,172

(a) As at December 31, 2007, all corporate bonds were highly liquid “AA” and “AAA” bonds with yields ranging from 4.27% to 4.48% with the weighted average yield being approximately 4.36% with maturity dates from January 22, 2008 to March 5, 2008.

7. Investments in public companies:

Investments consisted of the following as at December 31, 2007:

Investments Security Description Cost Fair Value

Northern Uranium Limited 2,260,520 common shares and 1,250,000 options expiring December 12, 2009 $ 406 $ 1,251Scimitar Resources Limited 2,250,000 common shares 1,742 1,268Alberta Star Development

Corporation 449,800 common shares 659 261

Baywater Uranium Corporation 550,000 common shares 787 451CUE Capital Corporation 21,000 common shares 40 33Mawson Resources Limited 391,900 common shares 788 545Greenland Minerals & Energy

Ltd. 4,000,000 common shares 4,458 4,092

RPT Uranium Corporation 500,000 common shares 274 120Silver Spruce Resources Inc. 146,000 common shares 246 99Santoy Resources Limited 200,000 common shares 196 96

Total investments in public companies $ 9,596 $ 8,216


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7. Investments in public companies (continued): Investments consisted of the following as at September 30, 2007:

Investments Security Description Cost Fair Value

Northern Uranium Limited 2,260,520 common shares and 1,250,000 options expiring December 12, 2009 $ 406 $ 1,644Scimitar Resources Limited 2,250,000 common shares 1,742 1,211Alberta Star Development

Corporation 449,800 common shares 659 454

Baywater Uranium Corporation 550,000 common shares 787 523EastAsia Mineral Corporation 117,500 common shares 233 251Mawson Resources Limited 391,900 common shares 788 780RPT Uranium Corporation 500,000 common shares 274 168Silver Spruce Resources Inc. 146,000 common shares 246 197Santoy Resources Limited 200,000 common shares 196 140Xemplar Energy Corporation 150,000 common shares 233 269Other equity investments 131 113

Total investments in public companies $ 5,695 $ 5,750

8. Restricted cash:

On May 6, 2005, the Company pledged approximately $350 (2007 - $350) of cash held in a

Guaranteed Investment Certificate (“GIC”) as collateral for a letter of guarantee issued to the State of Queensland, Australia, related to the mining leases for the Ben Lomond uranium project. The letter of guarantee is automatically renewable annually for an indefinite period of time and, accordingly, the pledged GIC will continue to be renewed annually.

In connection with the acquisition of TSC (see note 3(b)), the Company has $25 of cash held

in a GIC as collateral for a reclamation bond issued to the Province of British Columbia, Canada, related to the mining properties for the Muskwa uranium project. The letter of guarantee is automatically renewable annually for an indefinite period of time and, accordingly, the pledged GIC will continue to be renewed annually.

9. Related party transactions:

All transactions with related parties have occurred in the normal course of operations and are recorded at the exchange amount, which is the amount of consideration established and agreed to by the related parties. Related party transactions were as follows during the three months ended December 31:

Type of service Nature of relationship 2007 2006

Cost sharing arrangement Affiliated company (a) $ 110 $ 100


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9. Related party transactions (continued): (a) The Company has a cost sharing arrangement with Pinetree Capital Ltd. (“Pinetree”)

(TSX:”PNP”) which is also a shareholder of the Company with a common director and officers covering specific operating, general and administrative expenses including office rent and salaries.

10. Share capital:

Authorized: Unlimited number of common shares. Common shares issued and outstanding: # of Shares Amount Balance, September 30, 2006 106,772,208 $ 99,464Issued pursuant to exercise of stock options 2,818,700 6,545Issued pursuant to exercise of share purchase and broker warrants 2,686,976 11,348Issued pursuant to private placement financing, net 7,900,000 33,916Issued for acquisition of subsidiaries 57,246,939 259,357Issued for acquisition of properties 1,233,333 7,508Issued pursuant to acquisition of Hindmarsh 7,364 —Renunciation of flow-through expenditures — (4,097)Issued pursuant to the exercise of Monster warrants 352,083 2,536Issued pursuant to the exercise of Nu Energy warrants 99,999 493Balance, September 30, 2007 179,117,602 $ 417,070Issued pursuant to exercise of share purchase and broker warrants (a) 28,384 175Issued for acquisition of subsidiaries (note 3 (f)) 100,060 436Issued for acquisition of properties (notes 4 (a) and (b)) 41,667 152Issued pursuant to the exercise of Monster warrants (b) 37,590 238Issued pursuant to the exercise of Nu Energy options (c) 83,333 435 Balance, December 31, 2007 179,408,636 $ 418,506 (a) During the three months ended December 31, 2007, 28,384 share purchase and broker

warrants were exercised at a price of $4.25 per share for total proceeds of $121. Pursuant to the exercise of the purchase warrants, amounts in warrants were reallocated to share capital by $54.

(b) During the three months ended December 31, 2007, Mega issued 37,590 common

shares, upon the exercise of 225,540 Monster share purchase warrants which were exercised at prices ranging between $2.10 and $3.60 per share for total proceeds of $80. Pursuant to the exercise of the purchase warrants, amounts in warrants were reallocated to share capital by $158.

(c) During the three months ended December 31, 2007, Mega issued 83,333 common

shares, upon the exercise of 125,090 Nu Energy share options which were exercised at a price of $1.50 per share for total proceeds of $125. Pursuant to the exercise of the options, amounts in contributed surplus were reallocated to share capital by $310.


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10. Share capital (continued):

(d) Warrants:

A summary of the status of the Company’s warrants as at December 31, 2007 and September 30, 2007 and changes during the periods then ended is presented below:

# of Warrants Weighted average

exercise price

Amount

Balance, September 30, 2006 5,385,000 $ 3.49 $ 6,188Issued 10,484,604 6.66 33,235Assumed Monster warrants (note 3(e)) 1,657,068 2.70 6,068Assumed Nu Energy warrants (note 3(f)) 100,000 4.49 448Exercised (2,686,976) (3.39) (2,241)Monster warrants exercised (352,083) (3.00) (1,482)Nu Energy warrants exercised (100,000) (4.49) (448)Balance, September 30, 2007 14,487,613 $ 6.38 $ 41,768Exercised (28,384) (4.25) (54)Monster warrants exercised (37,590) (2.13) (158)Expired warrants (2,734,640) (5.97) (3,998) Balance, December 31, 2007 11,686,999

$ 6.49 $ 37,558

The following table summarizes the warrants outstanding as at December 31, 2007:

(i) If the closing price of Mega’s shares exceeds $8.00 for 20 consecutive days, the

Warrants will expire 30 days following written notice to the holders of the Warrants.

Number of warrants Exercise price ($) Expiry date

Warrant value using Black-Scholes valuation ($)

1,250,000 $ 6.00 April 2, 2008 (i) $ 1,35085,000 4.55 October 2, 2008 (i) 139

3,392,188 6.20 February 12, 2012 (iii) 14,14550,000 6.00 February 12, 2012 (iii) 208

1,900,000 7.90 February 22, 2012 (ii) 7,695228,000 6.15 August 22, 2008 60796,000 6.15 September 6, 2008 200

3,418,416 7.00 June 6, 2012 (iv) 8,785552,356 7.00 June 6, 2012 (iv) 1,420715,039 3.61 April 30, 2008 to July 1, 2008 (v) 3,009

11,686,999 $ 37,558


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(ii) If the closing price of Mega’s shares exceeds $12.30 for 20 consecutive days, the Warrants will expire 30 days following written notice to the holders of the Warrants.

(iii) In connection with the acquisition of TSC, these warrants have been fair valued

using the closing quoted bid price of the publicly traded warrants (see note 3(b)).

(iv) In connection with the acquisition of Monster, these warrants have been fair valued using an average of quoted bid prices of the publicly traded warrants (see note 3(e)).

(v) In connection with the acquisition of Monster, these Monster warrants were

valued using the Black-Scholes option pricing model with the following assumptions: expected volatility ranging from 44.4% to 49.8%; dividend yield of 0%; risk-free interest rate of 4.50%; and an expected life varying from seven to 13 months. The value assigned to the Monster warrants was $4,649 (see note 3(e)).

(e) Contributed surplus:

Contributed surplus transactions for the respective periods are as follows:

Amount Balance, September 30, 2006 $ 8,139Stock-based compensation 18,085Exercise of stock options (2,444)Assumed Redport options (i) 2,212Assumed Nu Energy options (ii) 558Balance, September 30, 2007 26,550Stock-based compensation 5,359Exercise of Nu Energy stock options (note 10 (c)) (310)Expired warrants 3,998 Balance, December 31, 2007 $ 35,597

(i) In connection with the acquisition of Redport, these Redport options were valued

using the Black-Scholes option pricing model with the following assumptions: expected volatility ranging from 57.1% to 95.7%; dividend yield of 0%; risk-free interest rate of 4.50%; and an expected life varying from eight to 25 months. The value assigned to the Redport options was $2,212 (see note 3(a)).


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(ii) In connection with the acquisition of Nu Energy, these Nu Energy warrants were valued using the Black-Scholes option pricing model with the following assumptions: expected volatility of 66.9%; dividend yield of 0%; risk-free interest rate of 4.75%; and an expected life of 12 months. The value assigned to the Nu Energy warrants was $558 (see note 3(f)).

(f) Stock option plans:

The Company grants options to directors, officers, employees and consultants under its 2007 Stock Option Plan to enable them to purchase common shares of the Company. The plan is administered by the Board of Directors. Under the plan, the Company is authorized to issue up to that number of common shares of Mega equal to 10% of the number of common shares outstanding from time to time. The term of an option granted under the new plan may not exceed 10 years. Stock option grants have a variety of vesting periods, almost all of which vest in three- month intervals over an 18-month period. There were no options granted during the three months ended December 31, 2007 which have a vesting period other than the aforementioned.

A summary of the status of the Company’s stock options outstanding as at December 31, 2007 and September 30, 2007 and changes during the periods then ended is presented below:


# of Options

Weighted average exercise price

# of Options

Weighted average exercise price

Outstanding, at beginning of period 15,367,840 $ 4.73 10,200,540 $ 2.89Granted (note 10(g)) 720,000 4.11 7,986,000 5.91Exercised — — (2,818,700) (1.45)Outstanding, at end of period 16,087,840 4.51 15,367,840 4.73Exercisable, at end of period 10,382,120 $ 4.24 8,393,636 $ 3.96


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The following table summarizes information about stock options outstanding and exercisable as at December 31, 2007:

Number of options outstanding

Number of options exercisable

Exercise price Expiry date

74,400 74,400 $ 0.38 March 28, 2009 1,700 1,700 0.25 September 22, 2009

10,000 10,000 0.25 September 26, 2009 20,000 20,000 0.25 December 20, 2009 60,000 60,000 0.41 February 14, 2010

100,000 100,000 0.41 February 17, 2010 10,040 10,040 0.75 February 28, 2010 50,000 50,000 0.70 March 16, 2010 16,800 16,800 0.85 September 12, 2010

115,200 115,200 1.38 October 2, 2010 600,000 600,000 1.35 October 10, 2010 50,200 50,200 1.71 November 17, 2010

208,400 208,400 2.50 January 2, 2011 2,000,000 2,000,000 2.95 February 19, 2011

160,000 160,000 3.43 March 15, 2011 270,000 270,000 4.90 April 12, 2011

3,190,000 3,190,000 4.45 April 23, 2011 200,000 200,000 4.00 May 10, 2011 195,100 158,100 3.78 September 18, 2011 50,000 41,600 3.78 September 25, 2011

250,000 124,998 4.66 October 31, 2011 870,000 579,994 5.97 December 27, 2011

2,125,000 1,061,160 6.46 January 15, 2012 70,000 44,900 6.48 February 4, 2012 80,000 39,900 6.60 February 19, 2012

2,310,000 769,180 6.87 May 21, 2012 250,000 83,200 6.10 June 6, 2012 25,000 8,320 6.20 June 7, 2012

360,000 59,700 6.05 July 12, 2012 1,646,000 274,328 3.90 September 20, 2012

620,000 Nil 4.30 November 15, 2012 100,000 Nil 2.90 December 17, 2012

16,087,840 10,382,120

(g) Stock options granted during the three months ended December 31, 2007:

Date Granted Options granted Exercise Price Expiry date November 16, 2007 620,000 $ 4.30 November 15, 2012December 18, 2007 100,000 2.90 December 17, 2012Total granted 720,000


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10. Share capital (continued): The fair value of stock options granted during the year was estimated at the date of the grant using the Black-Scholes Option Pricing Model with the following assumptions:

Black-Scholes assumptions

Exercise price

Market price on day of

grant

Expected volatility 85.0% - 91.2% Expected dividend 0.00% Risk-free interest rate 4.25% - 4.75% Expected option life in years 3.5 years Fair value of stock options granted on November 16, 2007 $ 2.68 $ 4.30 $ 4.30

Fair value of stock options granted on December 18, 2007 $ 1.85 $ 2.90 $ 2.90

For the three months ended December 31, 2007, included in the consolidated statement of operations and deficit was stock-based compensation expense of $138 (three months ended December 31, 2006 – $135) relating to the fair value of stock options granted during the period and $5,221 (three months ended December 31, 2006 – $2,534) relating to the fair value of stock options granted during prior years.

11. Segmented information:

The Company’s significant segments include four distinct geographic areas. The Canadian operations, which are mainly in Ontario, Yukon Territory, Saskatchewan and Newfoundland and Labrador and are managed from the Company’s head office in Toronto. The Australian operations are managed from offices in Brisbane, Adelaide and Perth. The South American operations are located in Colombia, Argentina, Bolivia and Brazil and are managed from the Mendoza (Argentina) office, under the overall supervision of the Brisbane office. In Asia, Mega’s joint venture interests in Mongolia are locally managed by the joint venture partner, Red Hill Energy, under the overall supervision of the Brisbane office. In Africa, exploration in Guinea is managed from the Brisbane office, while activities in Cameroon are locally managed from an office in Yaounde under the overall supervision of the Brisbane office.


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11. Segmented information (continued): The following is segmented information as at and for the three months ended December 31, 2007:

Three months ended

December 31, 2007

As at December 31, 2007

Country/Region Total revenue Capital assets Mineral properties and related expenditures

Canada $ (250) $ 38 $ 172,905Australia 205 927 195,276Central and South America — 65 4,488Asia and Africa 28 1,465 111,445

Total $ (17) $ 2,495 $ 484,114

The following is segmented information as at September 30, 2007 and total revenue for the three months ended December 31, 2006:

Three months

ended December 31, 2006

As at September 30, 2007

Country/Region Total revenue Capital assets Mineral properties and related expenditures

Canada $ 6,653 $ 19 $ 159,571Australia 156 547 188,364Central and South America — 61 9,545Asia and Africa — 590 109,377

Total $ 6,809 $ 1,217 $ 466,857

The Company has no inter-segment revenues and does not measure profit or loss by segment.

12. Management of capital: The Company maintains a capital level that enables it to meet its objectives, by:

• Obtaining the necessary financing to complete exploration and development of its properties;

• Realizing proceeds from sale of one or more of its properties; and • Maximizing the income it receives from its investments without significantly

increasing the principle’s risk by placing investments with high credit quality issuers. The Company is not subject to any capital requirements imposed by a regulator.


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13. Financial instruments:

Interest rate risk: In the normal course of business, the Company is exposed to interest rate fluctuations as a result of the significant portion of cash equivalents being invested in interest-bearing instruments. At December 31, 2007, if interest rates at that date had been 0.5% lower with all other variables held constant, after-tax net loss for the quarter would have been $79 higher, arising mainly as a result of lower interest income from its cash equivalents. If interest rates had been 0.5% higher, with all other variables held constant, after-tax net loss would have been $79 lower, arising from higher interest income. Foreign exchange risk: In the normal course of business, the Company is exposed to foreign exchange fluctuations as a result of the large number and value of mineral exploration interests in countries other than Canada, primarily Australia, Argentina and Cameroon. At December 31, 2007, if all foreign currencies (Australian, Cameroon Franc, South African rand, British pound sterling and Euro) weakened 2% against the Canadian dollar with all other variables held constant, after-tax net loss for the quarter would have been $950 higher. If the foreign dollars strengthened 2% against the Canadian dollar with all other variables held constant, after-tax net loss would have been $950 lower. Market risk: In the normal course of business, the Company is exposed to market risks as a result of its investments in publicly-traded companies. At December 31, 2007, if the closing bid prices of the investments held had weakened 15% with all other variables held constant, after-tax net loss for the quarter would have been $1,022 higher. If the closing bid prices of the investments strengthened 15% with all other variables held constant, after-tax net loss would have been $1,022 lower.


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14. Subsequent events:

(a) Subsequent to December 31, 2007, 142,833 common shares of Mega were issued in connection with the exercise of 857,000 Monster warrants at a price of $3.00 per share for total proceeds of $428.

(b) Subsequent to December 31, 2007, Mega issued 20,000 common shares in

connection with a Saskatchewan property acquisition valued at $61.

(c) Subsequent to December 31, 2007, Mega issued 25,000 common shares pursuant to an option agreement valued at $62.

15. Comparative consolidated financial statements:

The comparative consolidated financial statements included herein have been reclassified from statements previously presented to conform to the presentation of the December 31, 2007 consolidated financial statements.

mega uranium ltd. final.pdf · 2018. 12. 19. · redport by issuing 19,205,604 common shares to...

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