Form 51-102F4
Business Acquisition Report
Item 1 Identity of Company
1.1 Name and Address of Company
The full corporate name of the Company is Energy Metals Corporation. The head office of the Company is at Suite 1238, 200 Granville Street, Vancouver, British Columbia, V6C 1S4. The registered and records office of the Company is located at Suite 1200, 750 West Pender Street, Vancouver, British Columbia, V6C 2T8.
1.2 Executive Officer
Christine Thomson is the Corporate Secretary of the Company and is knowledgeable about the significant acquisition and the Report and may be contacted by telephone at (604) 684-9007 or by fax at (604) 408-4799.
Item 2 Nature of Business Acquired
2.1 On January 19, 2007, the Company completed the acquisition of High Plains Uranium, Inc. (“HPU”). Details of the acquisition and the business of HPU are disclosed in the HPU Information Circular filed on SEDAR by HPU on December 13, 2006 and subsequently by the Company on April 4, 2007 (the “Information Circular”), and which is incorporated herein by reference. SEDAR filings can be viewed at www.sedar.com.
2.2 Date of Acquisition
The date of acquisition used for accounting purposes was January 19, 2007.
2.3 Consideration
For accounting purposes, the consideration paid for the shares of HPU was recorded by the Company at $46,464,051 and was paid by the issuance of 8,749,767 shares of the Company. For accounting purposes, the consideration paid by the Company for the acquisition of the HPU options and warrants was recorded at $3,989,731, and was paid by the issuances of 379,319 options and 500,000 warrants.
2.4 Effect on Financial Position
The Company intends to explore and further develop the resource properties acquired pursuant to its acquisition of HPU. Details of the Company’s proposed exploration and development programs are disclosed in the Information Circular and other continuous disclosure filings of the Company available at www.sedar.com.
2.5 Prior Valuations
No valuation opinion has been obtained within the last 12 months by the Company or HPU, nor was a valuation opinion required by securities legislation or a Canadian exchange or market to support the consideration paid by the Company for HPU.
2.6 Parties to Transaction
The transaction pursuant to which the Company acquired HPU was not with an informed person, associate or affiliate of the Corporation.
2.7 Date of Report
April 4, 2007
Item 3 Financial Statements
The following financial statements are included with the Business Acquisition Report:
| 1. | audited consolidated financial statements of High Plains Uranium, Inc. for the year ended March 31, 2006 and period from incorporation on April 6, 2004 to March 31, 2005; | |
| 2. | unaudited interim consolidated financial statements of High Plains Uranium, Inc. for the six months ended September 30, 2006 and September 30, 2005; and | |
| 3. | pro forma consolidated financial statements of the Company as at September 30, 2006. |
The Company’s auditors have not given their consent to include their audit reports in this Business Acquisition Report.
Interim Consolidated Financial Statements of
HIGH PLAINS URANIUM, INC.
(A DEVELOPMENT STAGE ENTITY)
Six Months Ended September 30, 2006 and 2005
(Unaudited)
1
HIGH PLAINS URANIUM, INC.
(A DEVELOPMENT STAGE ENTITY)
Interim Consolidated Balance Sheets
(Expressed in U.S. dollars, unless otherwise indicated)
| September, | March 31, | |||||
| 2006 | 2006 | |||||
| (Unaudited) | ||||||
| Assets | ||||||
| Current assets: | ||||||
| Cash and cash equivalents | $ | 7,239,626 | $ | 4,549,786 | ||
| Marketable securities (market value $2,174,600; | ||||||
| March 31, 2006 - $2,136,670) (note 7) | 2,072,306 | 2,088,004 | ||||
| Accounts receivable | 65,886 | 47,118 | ||||
| Prepaid expenses | 4,867 | 992 | ||||
| 9,382,685 | 6,685,900 | |||||
| Due from Sundance Diamonds Corporation | 27,438 | 27,438 | ||||
| Mineral properties and deferred exploration costs (note 2) | 6,148,406 | 3,472,279 | ||||
| Reclamation deposits | 159,607 | 160,591 | ||||
| Capital assets (note 3) | 125,346 | 119,295 | ||||
| $ | 15,843,482 | $ | 10,465,503 | |||
| Liabilities and Shareholders' Equity | ||||||
| Current liabilities: | ||||||
| Accounts payable and accrued liabilities | $ | 856,979 | $ | 346,762 | ||
| Convertible debenture (note 4) | 5,256,017 | – | ||||
| 6,112,996 | 346,762 | |||||
| Provision for reclamation liabilities | 170,983 | 167,200 | ||||
| Shareholders' equity: | ||||||
| Capital stock (note 5(a)) | 11,350,334 | 11,204,446 | ||||
| Warrants (note 5(b)) | 1,927,467 | 2,036,847 | ||||
| Stock options (note 5(c)) | 973,320 | 653,101 | ||||
| Contributed surplus | 51,242 | 24,600 | ||||
| Convertible option (note 4) | 2,047,312 | – | ||||
| Deficit | (6,790,172 | ) | (3,967,453 | ) | ||
| 9,559,503 | 9,951,541 | |||||
| Going concern (note 1) | ||||||
| Subsequent events (note 8) | ||||||
| $ | 15,843,482 | $ | 10,465,503 |
See accompanying notes to interim consolidated financial statements.
2
HIGH PLAINS URANIUM, INC.
(A DEVELOPMENT STAGE ENTITY)
Interim Consolidated Statements of Operations and Deficit
(Expressed in U.S. dollars, unless otherwise indicated)
(Unaudited)
| Three months | Six months | |||||||||||
| ended | ended | |||||||||||
| September 30, | September 30, | |||||||||||
| 2006 | 2005 | 2006 | 2005 | |||||||||
| Revenue: | ||||||||||||
| Interest income | $ | 27,309 | $ | 51,700 $ | 71,486 | $ | 66,080 | |||||
| Expenses: | ||||||||||||
| Consulting | 427,149 | 65,181 | 564,289 | 434,310 | ||||||||
| Payroll and payroll burden | 219,011 | 110,456 | 442,151 | 143,671 | ||||||||
| Stock option compensation | 237,883 | 46,808 | 346,861 | 174,408 | ||||||||
| General and administration | 202,488 | 38,131 | 414,238 | 222,888 | ||||||||
| Professional fees | 625,811 | – | 893,334 | 226,281 | ||||||||
| Interest | 23,615 | – | 23,615 | 17,042 | ||||||||
| Write-down of marketable securities | 12,774 | 39,562 | 13,726 | 112,562 | ||||||||
| Accretion of convertible debentures | 150,212 | – | 150,212 | 9,294 | ||||||||
| Accretion of asset retirement obligation | 1,902 | – | 3,783 | – | ||||||||
| Amortization | 6,764 | 2,255 | 13,528 | 3,490 | ||||||||
| Loss from operations | (1,880,300 | ) | (250,599 | ) | (2,794,251 | ) | (1,277,866 | ) | ||||
| Dividend income | 635 | 90 | 1,205 | 137 | ||||||||
| Foreign exchange loss | (29,117 | ) | – | (29,117 | ) | – | ||||||
| Loss on disposal of assets | (1,543 | ) | – | (1,543 | ) | – | ||||||
| Gain/(loss) on sale of investments | 478 | (47 | ) | 987 | (47 | ) | ||||||
| Loss for the period | (1,909,847 | ) | (250,556 | ) | (2,822,719 | ) | (1,277,776 | ) | ||||
| Deficit, beginning of period | (4,880,325 | ) | (1,997,196 | ) | (3,967,453 | ) | (969,976 | ) | ||||
| Deficit, end of period | $ | (6,790,172 | ) | $ | (2,247,752 | ) | $ | (6,790,172 | ) | $ | (2,247,752 | ) |
| Weighted average number of common | ||||||||||||
| shares outstanding | 46,703,049 | 12,449,757 | 46,302,965 | 12,449,757 | ||||||||
| Loss per share: | ||||||||||||
| Basic and diluted | $ | (0.04 | ) | $ | (0.02 | ) $ | (0.06 | ) | $ | (0.10 | ) |
See accompanying notes to interim consolidated financial statements.
3
HIGH PLAINS URANIUM, INC
(A DEVELOPMENT STAGE ENTITY)
Interim Consolidated Statements of Cash Flows
(Expressed in U.S. dollars, unless otherwise indicated)
(Unaudited)
| Three months | Six months | |||||||||||
| ended | ended | |||||||||||
| September 30, | September 30, | |||||||||||
| 2006 | 2005 | 2006 | 2005 | |||||||||
| Cash provided by (used in): | ||||||||||||
| Operating activities: | ||||||||||||
| Loss for the period | $ | (1,909,847 | ) | $ | (250,556 | ) | $ | (2,822,719 | ) | $ | (1,277,776 | ) |
| Items not involving cash: | ||||||||||||
| Amortization of deferred financing costs | – | – | – | 16,667 | ||||||||
| Amortization | 6,764 | 2,255 | 13,528 | 3,490 | ||||||||
| Accretion of debentures | 150,212 | – | 150,212 | 9,294 | ||||||||
| Accretion of reclamation | 1,902 | – | 3,783 | – | ||||||||
| Stock option compensation | 237,883 | 46,808 | 346,861 | 174,408 | ||||||||
| Write-down of marketable securities | 12,774 | 39,562 | 13,726 | 112,562 | ||||||||
| Loss on disposal of assets | 1,543 | – | 1,543 | – | ||||||||
| Foreign exchange (gain)/loss | (56,039 | ) | – | (56,039 | ) | – | ||||||
| Loss on sale of investments | – | 47 | – | 47 | ||||||||
| Change in non-cash operating working capital: | ||||||||||||
| Accounts receivable | (41,241 | ) | – | (18,768 | ) | – | ||||||
| Prepaid expenses | (2,000 | ) | 4,000 | (3,875 | ) | 9,008 | ||||||
| Accounts payable and accrued liabilities | 414,351 | (3,265 | ) | 336,083 | 20,822 | |||||||
| (1,183,698 | ) | (161,149 | ) | (2,035,665 | ) | (931,478 | ) | |||||
| Financing activities: | ||||||||||||
| Warrants to be issued | – | (1,500,000 | ) | – | – | |||||||
| Convertible debentures | 7,209,156 | – | 7,209,156 | (200,000 | ) | |||||||
| Deferred share issuance and financing costs | – | (1,407,130 | ) | – | (1,717,297 | ) | ||||||
| Cash in trust | – | – | – | 6,344,110 | ||||||||
| Net proceeds from issuance of capital stock and | ||||||||||||
| special warrants | – | 1,984,750 | 36,508 | 4,058,203 | ||||||||
| 7,209,156 | (922,380 | ) | 7,245,664 | 8,485,016 | ||||||||
| Investing activities: | ||||||||||||
| Marketable securities | – | 543,228 | 1,972 | (5,494,528 | ) | |||||||
| Reclamation deposits | (693 | ) | (364 | ) | 984 | (160,364 | ) | |||||
| Purchase of capital assets | (10,000 | ) | (16,358 | ) | (11,122 | ) | (16,358 | ) | ||||
| Notes receivable | – | (1,685 | ) | – | (1,685 | ) | ||||||
| Expenditures on mineral properties | (1,940,424 | ) | (836,633 | ) | (2,511,993 | ) | (1,420,466 | ) | ||||
| (1,951,117 | ) | (311,812 | ) | (2,520,159 | ) | (7,093,401 | ) | |||||
| Increase / (Decrease) in cash and cash equivalents | 4,074,341 | (1,395,341 | ) | 2,689,840 | 460,137 | |||||||
| Cash and cash equivalents, beginning of period | 3,165,285 | 2,365,964 | 4,549,786 | 510,486 | ||||||||
| Cash and cash equivalents, end of period | $ | 7,239,626 | $ | 970,623 | $ | 7,239,626 | $ | 970,623 | ||||
| Supplemental cash flow information: | ||||||||||||
| Interest paid | $ | 23,615 | $ | – | $ | 23,615 | $ | 17,049 | ||||
| Supplemental disclosures relating to non-cash | ||||||||||||
| financing and investing activities: | ||||||||||||
| Marketable securities acquired for common shares | – | – | – | 40,000 | ||||||||
| Provision for unpaid amounts included | ||||||||||||
| in mineral properties and deferred | ||||||||||||
| exploration costs | 213,452 | 93,204 | 213,452 | 146,805 |
See accompanying notes to interim consolidated financial statements.
4
HIGH PLAINS URANIUM, INC.
(A DEVELOPMENT STAGE ENTITY)
Notes to Consolidated Financial Statements
(Expressed in U.S. dollars, unless otherwise indicated)
Six months ended September 30, 2006 and 2005
(Unaudited)
The unaudited interim consolidated financial statements have been prepared by High Plains Uranium, Inc. (the “Company”) in accordance with Canadian generally accepted accounting principles (“GAAP”). The preparation of the financial data is based on accounting policies and practices consistent with those used in the preparation of the audited annual consolidated financial statements. The unaudited interim consolidated financial statements, in the opinion of management, contain all adjustments (consisting solely of normal recurring adjustments) necessary to present fairly the financial information for such unaudited periods. These interim consolidated financial statements do not include all disclosures required by GAAP for annual financial statements and should be read in conjunction with our most recently prepared annual financial statements for the year ended March 31, 2006.
| 1. | Nature of operations: |
The Company is engaged in the acquisition, exploration and development of uranium properties using the in-situ leaching process. To date, the Company has not earned significant revenue and is considered to be in the development stage. The Company has currently leased or otherwise acquired, properties in the United States of America in the states of Wyoming and Texas, but could explore further opportunities in the United States, Canada and other foreign countries. The ability of the Company to carry out its business plan rests with its ability to secure equity and other financing. | |
| 2. | Mineral properties and deferred exploration costs: |
The mineral properties are recorded at cost and are comprised as follows: |
| Opening | Acquisition | Exploration | |||||||||||
| September 30, 2006 (unaudited) | balance | costs | costs | Total | |||||||||
| Arizona | $ | 110,721 | 49,184 | 450 | $ | 160,355 | |||||||
| Texas: | |||||||||||||
| Swinney Switch | 607,706 | 7,399 | 120 | 615,225 | |||||||||
| Cadena Project | 359,087 | 136,147 | 151,505 | 646,739 | |||||||||
| Other | 311,989 | 152,904 | 7,761 | 472,654 | |||||||||
| Wyoming: | |||||||||||||
| Allemand-Ross | 840,955 | 292,686 | 616,670 | 1,750,311 | |||||||||
| North Platte | 277,103 | 1,062,257 | 1,371 | 1,340,731 | |||||||||
| Red Desert | 258,561 | 70,358 | – | 328,919 | |||||||||
| Other | 706,157 | 100,821 | 26,494 | 833,472 | |||||||||
| $ | 3,472,279 | 1,871,756 | 804,371 | $ | 6,148,406 |
5
HIGH PLAINS URANIUM, INC.
(A DEVELOPMENT STAGE ENTITY)
Notes to Consolidated Financial Statements (continued)
(Expressed in U.S. dollars, unless otherwise indicated)
Six months ended September 30, 2006 and 2005
(Unaudited)
| 3. | Capital assets: |
| Accumulated | Net book | |||||||||
| September 30, 2006 (unaudited) | Cost | amortization | value | |||||||
| Office equipment | $ | 37,701 | $ | 7,429 | $ | 30,272 | ||||
| Field equipment | 23,230 | 808 | 2,422 | |||||||
| Vehicles | 92,140 | 19,489 | 72,651 | |||||||
| $ | 153,071 | $ | 27,726 | $ | 125,346 |
| 4. | Convertible debenture: |
On September 6, 2006, the Company issued a convertible debenture in the amount of C$8,000,000. The convertible debenture matures on September 6, 2009 and bears interest at the rate of 5% per annum for the first six month period and at a floating rate of prime plus 3% thereafter. The holders of the debentures have the ability to convert the entire amount outstanding into common shares of the Company at any time on or after March 6, 2007 or when there is a change in control of the Company at a conversion rate of $0.93 per common share. The holders of the debentures also have the ability to redeem for cash the convertible debentures at their face value any time on or after September 6, 2007. | |
Upon issuance of the convertible debentures, the net proceeds received were allocated between the liability and equity components of the convertible debenture. The value of the equity component of $2,047,312 was determined using the Black-Scholes pricing model, with the difference allocated to the convertible debenture. The difference between the face value of the convertible debenture and the amount allocated for accounting purposes is being accreted using an effective interest method to the earliest date that the holder can require the redemption of the convertible debentures, being September 6, 2007. The Company recorded accretion expense of $150,212 for the period from September 6, 2006 to September 30, 2006. |
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| 5. | Shareholders' equity: |
| (a) | Capital stock: | |
Authorized: | ||
Unlimited Class A preferred shares | ||
Issued and outstanding: |
| Number | Amount | ||||||
| Balance, March 31, 2005 | 12,249,757 | $ | 866,535 | ||||
| Common shares issued in connection with: | |||||||
| Share subscription | 200,000 | 50,000 | |||||
| Balance, September 30, 2005 | 12,449,757 | 916,535 | |||||
| Common shares issued in connection with: | |||||||
| Conversion of special warrants | 28,393,800 | 9,560,176 | |||||
| Initial public offering | 5,000,000 | 1,327,735 | |||||
| Warrant valuation (note 5(b)) | – | (600,000 | ) | ||||
| Balance, March 31, 2006 | 45,843,557 | 11,204,446 | |||||
| Exercise of options (note 5(c)) | 58,334 | 34,833 | |||||
| Exercise of warrants (note 5(b)) | 2,209,664 | 111,055 | |||||
| Balance, September 30, 2006 | 48,111,555 | $ | 11,350,334 |
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| 5. | Shareholders' equity (continued): | |
| (b) | Warrants: | |
At September 30, 2006, the Company had the following share purchase warrants outstanding, each exercisable into one common share: | ||
| Weighted | |||||
| Number of | average | ||||
| Grant date | warrants | price | Amount | Expiry | |
| Balance, March 31, 2005 | 4,634,200 | 0.34 | 554,918 | ||
| Broker warrants | 483,000 | 0.50 | 130,893 | May 26, 2007 | |
| Balance, June 30, 2005 | 5,117,200 | 0.35 | 685,811 | ||
| Broker warrants | 350,000 | 0.50 | 94,850 | September 1, 2007 | |
| Broker warrants (20% penalty) | 467,440 | 0.00 | 104,936 | September 1, 2007 | |
| Broker warrants | 1,250,000 | 1.00 | 551,250 | December 15, 2007 | |
| Warrants in connection | |||||
| with IPO issue | 2,500,000 | Cdn1.50 | 600,000 | December 15, 2006 | |
| Balance, March 31, 2006 | 9,684,640 | 0.72 | 2,036,847 | ||
| Exercise of warrants | (1,250) | Cdn1.50 | (300) | December 15, 2006 | |
| Exercise of warrants | (3,030,000) | 0.25 | (109,080) | September 13, 2009 | |
| Balance, September 30, 2006 | 6,653,390 | 0.89 | $ 1,927,467 |
For the three month period ended September 30, 2006, on an aggregate basis, 3,030,000 warrants were exercised on a cashless basis resulting in the issuance of 2,208,414 common shares. | ||
| (c) | Stock options: | |
Under the Company's long-term incentive plan, the Board of Directors may, at its discretion, grant options to purchase common shares, which are exercisable over a period of a maximum of five years, to directors, officers, employees or consultants of the Company or its affiliates. All options have variable vesting periods ranging from two to three years from date of grant. Stock appreciation rights may also be granted. The maximum number of shares which may be issued under the program shall not exceed 10% of the issued and outstanding shares, subject to adjustments. |
8
| 5. | Shareholders' equity (continued): |
A summary of the changes in the outstanding stock options for the six months ended September 30 and for the year ended March 31, 2006 are as follows:
| Weighted | |||||||
| average | |||||||
| Number of | exercise | ||||||
| June 30, 2006 | options | price | |||||
| Balance, March 31, 2006 | 3,200,000 | 0.55 | |||||
| Exercised | (58,334 | ) | 0.60 | ||||
| Cancelled | (100,000 | ) | 0.50 | ||||
| Granted August 1, 2006 | 50,000 | Cdn1.00 | |||||
| Granted September 26, 2006 | 40,000 | Cdn1.25 | |||||
| Granted September 26, 2006 | 150,000 | Cdn1.02 | |||||
| Balance, September 30, 2006 | 3,281,666 | 0.58 |
As at September 30, 2006, the following options are exercisable:
| Total | Number of | ||||
| Exercise | options | options | |||
| Grant date | Expiry date | price | granted | exercisable | |
| January 19, 2005 | January 19, 2008 | $ 0.25 | 200,000 | 200,000 | |
| May 20, 2005 | May 20, 2010 | 0.50 | 450,000 | 333,333 | |
| June 24, 2005 | June 24, 2010 | 0.50 | 250,000 | 250,000 | |
| September 12, 2005 | September 12, 2010 | 0.50 | 50,000 | 50,000 | |
| March 1, 2006 | March 1, 2011 | 0.59 | 83,333 | 16,667 | |
| March 21, 2006 | March 21, 2011 | 0.61 | 1,000,000 | 400,000 | |
| March 22, 2006 | March 22, 2011 | 0.60 | 1,008,333 | 308,332 | |
| August 1, 2006 | August 1, 2009 | Cdn1.00 | 50,000 | 50,000 | |
| September 26, 2006 | September 26, 2013 | Cdn1.25 | 40,000 | 40,000 | |
| September 26, 2006 | September 26, 2011 | Cdn1.02 | 150,000 | 50,000 | |
| 3,281,666 | 1,698,332 |
| 6. | Related party balances and transactions: | |
| (a) | For the three months ended September 30, 2006: | |
The Company paid consulting fees to directors and officers of the Company in the amount of $21,510. Included in accounts payable and accrued liabilities is an amount due to the directors of the Company of $20,567, which is unsecured and payable on demand. | ||
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| 6. | Related party balances and transactions (continued): | |
| (b) | For the three months ended September 30, 2005: | |
The Company paid consulting fees to directors and officers of the Company in the amount of $7,000. | ||
Included in accounts payable and accrued liabilities is an amount due to the directors of the Company of $27,979, which is unsecured and payable on demand. | ||
These transactions are in the normal course of operations and are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties. | |
| 7. | Marketable securities: |
On July 18, 2006, the Company executed a letter of credit for an increase of $316,541 on the Company’s drilling (reclamation) bond. The amount is being secured by the marketable securities. | |
| 8. | Subsequent events: |
Subsequent to September 30, 2006, on an aggregate basis, there were 1,000,800 warrants exercised by one party for total consideration of $417,000. | |
Subsequent to September 30, 2006, on an aggregate basis, there were 250,000 stock options exercised by various parties for total consideration of $140,000. | |
Subsequent to September 30, 2006, 200,000 options were exercised on a cashless basis resulting in the issuance of 145,235 common shares. |
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ENERGY METALS CORPORATION
PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited – See Compilation Report)
SEPTEMBER 30, 2006
| DAVIDSON & COMPANY LLP | A Partnership of Incorporated Professionals | ||
| Chartered Accountants |
COMPILATION REPORT ON
PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS
To the Directors of
Energy Metals Corporation
We have read the accompanying unaudited pro-forma consolidated balance sheet of Energy Metals Corporation (the “Company”) as at September 30, 2006 and the unaudited pro-forma consolidated statements of operations for the three months then ended and for the year ended June 30, 2006 and have performed the following procedures:
| 1. | Compared the figures in the columns captioned “Energy Metals Corporation” to the unaudited consolidated financial statements of the Company as at and for the three months ended September 30, 2006, and to the audited consolidated financial statements of the Company for the year ended June 30, 2006, and found them to be in agreement. | |
| 2. | Compared the figures in the columns captioned “High Plains Uranium, Inc. USD” in Notes 4, 5 and 6 to these pro- forma consolidated financial statements to the unaudited interim consolidated financial statements of High Plains Uranium, Inc. as at and for the three month period ended September 30, 2006 and for the periods ended June 30, 2006 and 2005 and to the audited consolidated financial statements for the year ended March 31, 2006 and found the amounts to be in agreement. Recalculated the figures resulting from adding the figures in the column captioned “High Plains Uranium, Inc. USD Year ended March 31, 2006” to the figures in the column captioned “High Plains Uranium, Inc. USD Three month period ended June 30, 2006” and subtracting the figures in the column captioned “High Plains Uranium, Inc. USD Three month period ended June 30, 2005” in Note 5 to these pro-forma consolidated financial statements and found the amounts in the column captioned “High Plains Uranium, Inc. USD Twelve month period ended June 30, 2006” to be arithmetically correct. | |
| 3. | Compared the figures in the columns captioned “High Plains Uranium, Inc.” as at and for the three month period ended September 30, 2006 and for the year ended June 30, 2006 to the columns captioned “High Plains Uranium, Inc. CAD” in Notes 4, 5 and 6 and found them to be in agreement. | |
| 4. | Compared the figures in the column captioned “Quincy Energy Corp. USD Year ended April 30, 2006” in Note 7 to these pro-forma consolidated financial statements to the audited consolidated financial statements of Quincy Energy Corp. for the year ended April 30, 2006 and found the amounts to be in agreement. Compared the figures in the column captioned “Quincy Energy Corp.” for the year ended June 30, 2006 to the column captioned “Quincy Energy Corp. CAD Year ended April 30, 2006” in Note 7 and found them to be in agreement. | |
| 5. | Made enquiries of certain officials of the Company who have responsibility for financial and accounting matters about: | |
| a) | the basis for determination of the pro-forma adjustments; and | |
| b) | whether the pro-forma consolidated financial statements comply as to form in all material respects with the securities acts of the provinces and territories of Canada (the “Acts”) and the related regulations. | |
The officials: | ||
| a) | described to us the basis for determination of the pro-forma adjustments; and | |
| b) | stated that the pro-forma consolidated financial statements comply as to form in all material respects with the securities acts of the provinces and territories of Canada (the “Acts”) and the related regulations. | |
G-1
| 6. | Read the notes to the pro-forma consolidated financial statements, and found them to be consistent with the basis described to us for determination of the pro-forma adjustments. |
| 7. | Recalculated the application of the pro-forma adjustments to the aggregate of the amounts in the columns captioned “Energy Metals Corporation”, “High Plains Uranium, Inc.” and “Quincy Energy Corp.” as at September 30, 2006 and for the three months then ended and for the year ended June 30, 2006, and found the amounts in the column captioned “Pro-forma consolidated” to be arithmetically correct. |
Pro-forma consolidated financial statements are based on management assumptions and adjustments which are inherently subjective. The foregoing procedures are substantially less than either an audit or a review, the objective of which is the expression of assurance with respect to management’s assumptions, the pro-forma adjustments, and the application of the adjustments to the historical financial information. Accordingly, we express no such assurance. The foregoing procedures would not necessarily reveal matters of significance to the pro-forma consolidated financial statements, and we therefore make no representation about the sufficiency of the procedures for the purposes of a reader of such statements.
| Vancouver, Canada | “Davidson & Company LLP” |
| December 7, 2006 | Chartered Accountants |
| A Member ofSCINTERNATIONAL |
| 1200 - 609 Granville Street, P.O. Box 10372, Pacific Centre, Vancouver, BC, Canada, V7Y 1G6 |
| Telephone (604) 687-0947 Fax (604) 687-6172 |
G-2
ENERGY METALS CORPORATION
PRO-FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2006
(Unaudited – See Compilation Report)
| Energy Metals | High Plains | Pro-forma | Pro-forma | ||||||||||||
| Corporation | Uranium, Inc. | Note 2 | Adjustments | Consolidated | |||||||||||
| ASSETS | |||||||||||||||
| Current | |||||||||||||||
| Cash and cash equivalents | $ | 35,338,598 | $ | 8,074,355 | $ | - | $ | 43,412,953 | |||||||
| Short-term investments | 41,366,680 | 2,311,243 | (a) | 115,204 | 43,793,127 | ||||||||||
| Receivables | 182,100 | 73,483 | - | 255,583 | |||||||||||
| Prepaid expenses and deposits | 445,162 | 5,428 | - | 450,590 | |||||||||||
| 77,332,540 | 10,464,509 | 115,204 | 87,912,253 | ||||||||||||
| Long-term investments | 10,445,936 | 30,602 | (a) | (10,445,936 | ) | 30,602 | |||||||||
| Reclamation deposits | 2,111,523 | 178,010 | - | 2,289,533 | |||||||||||
| Property, plant and equipment | 10,439,095 | 139,798 | - | 10,578,893 | |||||||||||
| Mineral properties | 46,790,358 | 6,857,317 | (a) | 57,853,645 | 111,501,320 | ||||||||||
| $ | 147,119,452 | $ | 17,670,236 | $ | 47,522,913 | $ | 212,312,601 | ||||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||||||||
| Current | |||||||||||||||
| Accounts payable and accrued liabilities | $ | 434,139 | $ | 955,789 | (b) | $ | 1,000,000 | $ | 2,389,928 | ||||||
| Convertible notes | - | 5,862,036 | (a) | (5,862,036 | ) | - | |||||||||
| Asset retirement obligation | 934,966 | 190,697 | - | 1,125,663 | |||||||||||
| Future income tax liability | 10,694,603 | - | (a) | 20,250,000 | 30,944,603 | ||||||||||
| 12,063,708 | 7,008,522 | 15,387,964 | 34,460,194 | ||||||||||||
| Shareholders' equity | |||||||||||||||
| Share capital | 148,340,738 | 12,659,028 | (a) | 24,247,732 | 185,247,498 | ||||||||||
| Contributed surplus | 6,022,182 | 3,292,398 | (a) | 2,597,505 | 11,912,085 | ||||||||||
| Equity portion of convertible notes | - | 2,283,367 | (a) | (2,283,367 | ) | - | |||||||||
| Commitment to issue shares | 1,525,000 | - | - | 1,525,000 | |||||||||||
| Deficit | (20,832,176 | ) | (7,573,079 | ) | (a) | 7,573,079 | (20,832,176 | ) | |||||||
| 135,055,744 | 10,661,714 | 32,134,949 | 177,852,407 | ||||||||||||
| $ | 147,119,452 | $ | 17,670,236 | $ | 47,522,913 | $ | 212,312,601 | ||||||||
| Basis of presentation(Note 1) | |||||||||||||||
| Pro-forma transactions(Note 2) |
The accompanying notes are an integral part of these pro-forma consolidated financial statements.
G-3
ENERGY METALS CORPORATION
PRO-FORMA CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2006
(Unaudited – See Compilation Report)
| As Reported | |||||||||||||||
| Energy Metals | High Plains | Pro-forma | Pro-forma | ||||||||||||
| Corporation | Uranium, Inc. | Note 2 | Adjustments | Consolidated | |||||||||||
| EXPENSES | |||||||||||||||
| Advertising and promotion | $ | 105,833 | $ | 465 | $ | - | $ | 106,298 | |||||||
| Amortization | 66,341 | 7,584 | - | 73,925 | |||||||||||
| Automobile | 4,645 | - | - | 4,645 | |||||||||||
| Bank charges and interest | 6,311 | 30,426 | (a) | (26,477 | ) | 10,260 | |||||||||
| Consulting fees | 453,032 | 478,919 | - | 931,951 | |||||||||||
| Filing and regulatory fees | 17,085 | 14,414 | - | 31,499 | |||||||||||
| Insurance | 58,135 | 46,041 | - | 104,176 | |||||||||||
| Management fees | 52,500 | 18,790 | - | 71,290 | |||||||||||
| Office and miscellaneous | 86,593 | 60,282 | - | 146,875 | |||||||||||
| Professional fees | 356,797 | 701,659 | - | 1,058,456 | |||||||||||
| Rent | 69,359 | 12,642 | - | 82,001 | |||||||||||
| Repairs and maintenance | 27,840 | 413 | - | 28,253 | |||||||||||
| Salaries and benefits | 527,867 | 245,555 | - | 773,422 | |||||||||||
| Scanning and maps | 79,636 | 854 | - | 80,490 | |||||||||||
| Stock-based compensation | 1,586,253 | 266,714 | - | 1,852,967 | |||||||||||
| Telephone | 17,107 | 8,124 | - | 25,231 | |||||||||||
| Transfer agent | 13,817 | 8,306 | - | 22,123 | |||||||||||
| Travel | 105,363 | 52,749 | - | 158,112 | |||||||||||
| Loss before other items | (3,634,514 | ) | (1,953,937 | ) | 26,477 | (5,561,974 | ) | ||||||||
| OTHER ITEMS | |||||||||||||||
| Accretion of convertible debentures | - | (168,418 | ) | (a) | 168,418 | - | |||||||||
| Accretion of reclamation obligation | (19,557 | ) | (2,133 | ) | - | (21,690 | ) | ||||||||
| Allowance for decline on marketable | |||||||||||||||
| securities | - | (14,322 | ) | - | (14,322 | ) | |||||||||
| Dividend income | - | 712 | - | 712 | |||||||||||
| Foreign exchange loss | (65,682 | ) | (32,646 | ) | - | (98,328 | ) | ||||||||
| Gain on sale of marketable securities | 513,979 | 536 | - | 514,515 | |||||||||||
| Loss on sale of fixed assets | - | (1,730 | ) | - | (1,730 | ) | |||||||||
| Interest income | 788,800 | 30,619 | (a) | (26,477 | ) | 792,942 | |||||||||
| 1,217,540 | (187,382 | ) | 141,941 | 1,172,099 | |||||||||||
| LOSS FOR THE PERIOD | $ | (2,416,974 | ) | $ | (2,141,319 | ) | $ | 168,418 | $ | (4,389,875 | ) | ||||
| Basic and diluted loss per share | $ | (0.04 | ) | $ | (0.06 | ) | |||||||||
| Weighted average number of common | |||||||||||||||
| shares(Note 3) | 64,695,587 | 72,744,870 | |||||||||||||
The accompanying notes are an integral part of these pro-forma consolidated financial statements.
G-4
ENERGY METALS CORPORATION
PRO-FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 2006
(Unaudited – See Compilation Report)
| As Reported | |||||||||||||||||
| Energy Metals | High Plains | Quincy Energy | Pro-forma | Pro-forma | |||||||||||||
| Corporation | Uranium, Inc. | Corp. | Note 2 | Adjustments | Consolidated | ||||||||||||
| EXPENSES | |||||||||||||||||
| Advertising and promotion | $ | 182,309 | $ | 47,777 | $ | 133,116 | $ | - | $ | 363,202 | |||||||
| Amortization | 115,204 | 20,855 | - | - | 136,059 | ||||||||||||
| Bank charges and interest | 28,829 | 7,577 | - | - | 36,406 | ||||||||||||
| Consulting fees | 1,019,274 | 532,069 | 753,477 | - | 2,304,820 | ||||||||||||
| Exploration expenditures | - | - | 7,466,975 | (c) | (7,466,975 | ) | - | ||||||||||
| Filing and regulatory fees | 213,888 | 108,222 | - | - | 322,110 | ||||||||||||
| Insurance | 23,117 | 51,287 | - | - | 74,404 | ||||||||||||
| Management fees | 340,000 | 69,925 | - | - | 409,925 | ||||||||||||
| Office and miscellaneous | 186,918 | 315,442 | 567,747 | - | 1,070,107 | ||||||||||||
| Professional fees | 937,932 | 538,545 | 360,395 | - | 1,836,872 | ||||||||||||
| Rent | 96,390 | 82,117 | - | - | 178,507 | ||||||||||||
| Repairs and maintenance | 15,979 | 5,066 | - | - | 21,045 | ||||||||||||
| Salaries and benefits | 638,108 | 821,861 | - | - | 1,459,969 | ||||||||||||
| Scanning and maps | 63,208 | 33,374 | - | - | 96,582 | ||||||||||||
| Stock-based compensation | 2,479,411 | 649,688 | 421,688 | - | 3,550,787 | ||||||||||||
| Telephone | 46,656 | 34,203 | - | - | 80,859 | ||||||||||||
| Transfer agent | 51,938 | 3,134 | - | - | 55,072 | ||||||||||||
| Travel | 356,409 | 206,408 | - | - | 562,817 | ||||||||||||
| Loss before other items | (6,795,570 | ) | (3,527,550 | ) | (9,703,398 | ) | 7,466,975 | (12,559,543 | ) | ||||||||
| OTHER ITEMS | |||||||||||||||||
| Accretion of reclamation obligation | (24,265 | ) | (10,560 | ) | - | - | (34,825 | ) | |||||||||
| Allowance for decline on marketable | |||||||||||||||||
| securities | (212,138 | ) | (77,056 | ) | - | - | (289,194 | ) | |||||||||
| Dividend income | - | 1,780 | - | - | 1,780 | ||||||||||||
| Foreign exchange gain | 82,816 | - | 712,472 | - | 795,288 | ||||||||||||
| Gain on sale of marketable | |||||||||||||||||
| securities | 33,545 | 11,386 | - | - | 44,931 | ||||||||||||
| Interest income | 1,261,643 | 249,209 | 136,885 | - | 1,647,737 | ||||||||||||
| 1,141,601 | 174,759 | 849,357 | - | 2,165,717 | |||||||||||||
| Loss before income taxes | (5,653,969 | ) | (3,352,791 | ) | (8,854,041 | ) | 7,466,975 | (10,393,826 | ) | ||||||||
| Future income tax recovery | 122,000 | - | - | - | 122,000 | ||||||||||||
| LOSS FOR THE YEAR | $ | (5,531,969 | ) | $ | (3,352,791 | ) | $ | (8,854,041 | ) | $ | 7,466,975 | $ | (10,271,826 | ) | |||
| Basic and diluted loss per share | $ | (0.16 | ) | $ | (0.20 | ) | |||||||||||
| Weighted average number of common | |||||||||||||||||
| Shares(Note 3) | 35,328,561 | 52,278,589 | |||||||||||||||
The accompanying notes are an integral part of these pro-forma consolidated financial statements.
G-5
| ENERGY METALS CORPORATION |
| NOTES TO THE PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS |
| (Unaudited – See Compilation Report) |
| SEPTEMBER 30, 2006 |
| 1. | BASIS OF PRESENTATION | |
The accompanying unaudited pro-forma consolidated financial statements of Energy Metals Corporation (“Energy” or the “Company”) have been prepared by management in accordance with accounting principles generally accepted in Canada using the same accounting policies as described in Energy’s annual consolidated financial statements. The unaudited pro-forma consolidated financial statements have been prepared for inclusion in an Information Circular dated December 7, 2006 in conjunction with the acquisition of all of the outstanding common shares of High Plains Uranium, Inc. (“High Plains”) in a share for share exchange with Energy. | ||
The acquisition is subject to acceptance by shareholders of High Plains and certain securities regulatory approvals. In the opinion of management, the pro-forma consolidated financial statements include all adjustments necessary for fair presentation of the transactions as described in Note 2. | ||
The unaudited pro-forma consolidated financial statements are not necessarily indicative of the financial position or results of operations which would have resulted if the acquisition had actually occurred as assumed. | ||
The unaudited pro-forma consolidated financial statements have been derived from and should be read in conjunction with the consolidated financial statements of Energy, High Plains and Quincy Energy Corp. (“Quincy”) as follows: | ||
| a) | the audited consolidated financial statements of Energy for the year ended June 30, 2006; | |
| b) | the unaudited consolidated financial statements of Energy as at September 30, 2006 and for the three month period then ended; | |
| c) | the audited consolidated financial statements of High Plains for the year ended March 31, 2006; | |
| d) | the unaudited consolidated financial statements of High Plains as at September 30, 2006 and for the three month period then ended and for the periods ended June 30, 2006 and 2005; | |
| e) | the audited consolidated financial statements of Quincy for the year ended April 30, 2006; | |
The unaudited consolidated financial statements of Energy as at September 30, 2006 and for the three month period then ended include the acquisition of Quincy, which occurred on July 10, 2006. The unaudited pro-forma consolidated balance sheet has been prepared as if the acquisition of High Plains had occurred on September 30, 2006. The unaudited pro-forma consolidated statement of operations have been prepared as if the acquisition of High Plains and Quincy had occurred on July 1, 2005. | ||
G-6
| ENERGY METALS CORPORATION |
| NOTES TO THE PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS |
| (Unaudited – See Compilation Report) |
| SEPTEMBER 30, 2006 |
| 1. | BASIS OF PRESENTATION(cont’d…) |
The pro-forma consolidated balance sheet has been prepared using the current rate method by converting the High Plains balance sheet into Canadian dollars using the September 30, 2006 exchange rate of 1.1153 Canadian dollar to one United States dollar. The pro-forma consolidated statements of operations have been prepared by converting the operations of High Plains for the three months ended September 30, 2006 and the year ended June 30, 2006 into Canadian dollars using the average exchange rates for the periods of 1.1212 and 1.1629 Canadian dollars to one United States dollar, respectively. The pro-forma consolidated statements of operations have been prepared by converting the operations of Quincy for the year ended June 30, 2006 into Canadian dollars using the average exchange rates for the period of 1.1856 Canadian dollars to one United States dollar. | |
The unaudited pro-forma consolidated financial statements have been prepared for illustrative purposes only and may not be indicative of the combined entities’ financial position or operating results that would have occurred if the acquisitions had been in effect at the dates indicated. Furthermore, the pro-forma consolidated statements of operations are not necessarily indicative of the operating results that may be obtained by the Company in the future. In addition, the Company has not completed the process of allocating the costs of the acquisition of High Plains to the fair value of assets acquired and liabilities assumed and expects that once it completes this exercise, there may be material adjustments to the preliminary estimates used in preparing these pro-forma consolidated financial statements. | |
Acquisition of High Plains | |
Energy and High Plains jointly announced on August 15, 2006 their agreement for Energy to acquire all of the outstanding common shares, options and warrants to purchase common shares of High Plains. On November 15, 2006, a definitive agreement was signed. Under the agreement, Energy will exchange one common share of Energy for 4.5 to 6.2 common shares of High Plains, depending upon the volume-weighted average trading price on the 20 trading days prior to the close of the acquisition. For purposes of these Pro-Forma statements, a conversion rate of 6.2 is used because management considers this exchange rate more likely to occur in light of current events. A total of approximately 7,403,732 Energy common shares is assumed to be issued in the exchange of common shares. | |
Immediately following the exchange, assuming that all High Plains options and warrants are exchanged and exercised, approximately 83% of Energy’s outstanding common shares would be held by Energy shareholders and 17% would be held by former High Plains shareholders. Energy’s board of directors and management will continue in their positions after the transaction and one person designated by High Plains will be a director of Energy. The corporate office of the combined company will be the headquarters of Energy. As Energy is the acquirer for purposes of applying purchase accounting, High Plains’ assets and liabilities have been restated in the pro-forma consolidated financial statements to reflect their estimated fair values as of the date of the announcement of the proposed acquisition. |
G-7
| ENERGY METALS CORPORATION |
| NOTES TO THE PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS |
| (Unaudited – See Compilation Report) |
| SEPTEMBER 30, 2006 |
| 2. | PRO-FORMA TRANSACTIONS |
Pro-forma assumptions relating to the acquisition of High Plains |
| a) | Energy issues 7,403,732 common shares to the shareholders of High Plains in exchange for 45,903,141 shares of High Plains. Included in long term investments of the Company as at September 30, 2006 are 2,810,500 common shares of High Plains recorded at $2,445,936. These will be exchanged for 453,306 common shares of Energy and recorded as treasury stock. All of High Plains’ assets and liabilities have been restated where appropriate to reflect estimated fair market values as described in the description of the business combination and basis of presentation using purchase accounting concepts. Fair values of mining properties and the property, plant and equipment are determined based upon management’s estimate. The final allocation of the purchase price and the fair value of High Plains’ assets and liabilities are subject to completion of definitive appraisals which would be carried out following completion of the acquisitions. | |
The cost of the acquisition is based on the fair market value of the consideration given, estimated to be $54,242,599, of which $36,906,760 is accounted for as an increase to share capital, $5,889,903 is recorded as an increase to contributed surplus, $1,000,000 is recorded as the estimated costs of the transaction and $10,445,936 is accounted for as a reduction of long-term investments for Energy’s cost of investment in High Plains as at September 30, 2006. The deficit and contributed surplus of High Plains are eliminated in purchase accounting. | ||
The preliminary allocation of the purchase price is summarized in the table below. This allocation is subject to change. |
| Purchase price: | ||||
| 6,950,426 Energy common shares (net of 453,306 treasury shares) issued in | ||||
| exchange for 43,092,641 High Plains common shares outstanding | ||||
| (net of 2,810,500 shares held in long term investments) | $ | 36,906,760 | ||
| High Plains shares/debentures held by Energy | 10,445,936 | |||
| Estimated value of High Plains outstanding warrants/options | 5,889,903 | |||
| Estimated transaction cost | 1,000,000 | |||
| $ | 54,242,599 | |||
| Purchase price allocation: | ||||
| Cash and cash equivalents | $ | 8,074,355 | ||
| Short-term investments | 2,426,447 | |||
| Receivables | 73,483 | |||
| Prepaid deposits | 5,428 | |||
| Long-term investments | 30,602 | |||
| Reclamation deposits | 178,010 | |||
| Property, plant and equipment | 139,798 | |||
| Mineral properties | 64,710,962 | |||
| Accounts payable and accrued liabilities | (955,789 | ) | ||
| Asset retirement obligation | (190,697 | ) | ||
| Future income tax liability | (20,250,000 | ) | ||
| Total allocation of purchase price | $ | 54,242,599 |
G-8
| ENERGY METALS CORPORATION |
| NOTES TO THE PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS |
| (Unaudited – See Compilation Report) |
| SEPTEMBER 30, 2006 |
| 2. | PRO-FORMA TRANSACTIONS(Cont’d…) | |
| b) | Total transaction costs and fees, including advisors, legal, accounting, exchange fees, regulatory fees, and High Plains’ severance costs are estimated to be approximately $1,000,000. | |
| c) | The pro-forma consolidated statement of operations for the year ended June 30, 2006 incorporates the results of operations of Quincy for the period from May 1, 2005 to April 30, 2006 (Note 7). The acquisition of Quincy, accounted for using the purchase method, was completed on July 10, 2006 pursuant to which the Company issued 9,999,602 common shares. As a result, the pro-forma consolidated balance sheet as at September 30, 2006 and for the pro-forma consolidated statement of operations for the three months then ended included the accounts of Quincy. The operations for the period from July 1, 2006 to July 9, 2006 were not significant. | |
Quincy’s exploration costs for the year ended April 30, 2006 of $7,466,975 had been capitalized as deferred exploration costs to correspond with Energy’s accounting policy. | ||
| d) | No adjustments have been made to reflect expected synergies or cost savings of the proposed merger. | |
| 3. | PRO-FORMA LOSS PER SHARE | |
The pro-forma basic and diluted loss per share has been calculated on the assumption that the 7,403,732 Energy shares issued on acquisition of High Plains and the 9,999,602 Energy shares issued on acquisition of Quincy were issued on the first day of the respective periods. | ||
Three months ended September 30, 2006 | ||
| Issued and outstanding Energy | |||||||
| common shares | Stated value | ||||||
| Weighted average number of Energy common shares | 64,695,587 | $ | 148,340,738 | ||||
| Additional weighted average number of Energy | |||||||
| common | |||||||
| shares assuming acquisition of Quincy on July 1, | |||||||
| 2006 | 1,098,857 | - | |||||
| Number of Energy common shares issued to High | |||||||
| Plains’ | |||||||
| shareholders | 7,403,732 | 39,352,696 | |||||
| Less: treasury stock | (453,306 | ) | (2,445,936 | ) | |||
| Pro-forma weighted average number of shares of | |||||||
| Energy | 72,744,870 | $ | 185,247,498 | ||||
| Pro-forma loss for the period | $ | (4,389,875 | ) | ||||
| Pro-forma basic and diluted loss per share | $ | (0.06 | ) |
G-9
| ENERGY METALS CORPORATION |
| NOTES TO THE PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS |
| (Unaudited – See Compilation Report) |
| SEPTEMBER 30, 2006 |
| 3. | PRO-FORMA LOSS PER SHARE(cont’d…) |
| Year ended June 30, 2006 | |||
| Issued and outstanding | |||
| Energy common shares | |||
| Weighted average number of Energy common shares | 35,328,561 | ||
| Number of Energy common shares issued on | |||
| acquisition of Quincy | 9,999,602 | ||
| Number of Energy common shares issued to High Plains’ | |||
| shareholders | 7,403,732 | ||
| Less: treasury stock | (453,306 | ) | |
| Pro-forma weighted average number of shares of Energy | 52,278,589 | ||
| Pro-forma loss for the year | $ | (10,271,826 | ) |
| Pro-forma basic and diluted loss per share | $ | (0.20 | ) |
G-10
| ENERGY METALS CORPORATION |
| NOTES TO THE PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS |
| (Unaudited – See Compilation Report) |
| SEPTEMBER 30, 2006 |
| 4. | HIGH PLAINS URANIUM, INC. – BALANCE SHEET TRANSLATION TO CANADIAN DOLLARS |
Balance sheet as at September 30, 2006 |
| High Plains | High Plains | |||||||||
| Uranium, Inc. | Uranium, Inc. | |||||||||
| USD | Exchange rate | CAD | ||||||||
| Cash and cash equivalents | $ | 7,239,626 | 1.1153 | $ | 8,074,355 | |||||
| Short-term investments | 2,072,306 | 1.1153 | 2,311,243 | |||||||
| Receivables | 65,886 | 1.1153 | 73,483 | |||||||
| Prepaid expenses and deposits | 4,867 | 1.1153 | 5,428 | |||||||
| Long-term investments – Sundance Diamonds | 27,438 | 1.1153 | 30,602 | |||||||
| Reclamation deposits | 159,607 | 1.1153 | 178,010 | |||||||
| Property, plant and equipment | 125,346 | 1.1153 | 139,798 | |||||||
| Mineral properties | 6,148,406 | 1.1153 | 6,857,317 | |||||||
| $ | 15,843,482 | $ | 17,670,236 | |||||||
| Accounts payable and accrued liabilities | $ | 856,979 | 1.1153 | $ | 955,789 | |||||
| Convertible debentures | 5,256,017 | 1.1153 | 5,862,036 | |||||||
| Asset retirement obligation | 170,983 | 1.1153 | 190,697 | |||||||
| 6,283,979 | 7,008,522 | |||||||||
| Share capital | 11,350,334 | 1.1153 | 12,659,028 | |||||||
| Contributed surplus | 2,952,029 | 1.1153 | 3,292,398 | |||||||
| Convertible option | 2,047,312 | 1.1153 | 2,283,367 | |||||||
| Deficit | (6,790,172 | ) | 1.1153 | (7,573,079 | ) | |||||
| 9,559,503 | 10,661,714 | |||||||||
| $ | 15,843,482 | $ | 17,670,236 |
G-11
| ENERGY METALS CORPORATION |
| NOTES TO THE PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS |
| (Unaudited – See Compilation Report) |
| SEPTEMBER 30, 2006 |
| 5. | HIGH PLAINS URANIUM, INC. – STATEMENT OF OPERATIONS FOR THE TWELVE MONTH PERIOD ENDED JUNE 30, 2006 TRANSLATION TO CANADIAN DOLLARS |
Statement of operations for the year ended June 30, 2006 |
| High Plains | High Plains | |||||||||
| Uranium, Inc. | Uranium, Inc. | |||||||||
| USD | Exchange rate | CAD | ||||||||
| Twelve month | Twelve month | |||||||||
| period ended | period ended | |||||||||
| June 30, 2006 | June 30, 2006 | |||||||||
| EXPENSES | ||||||||||
| Advertising and promotion | $ | 41,084 | 1.1629 | $ | 47,777 | |||||
| Amortization | 17,934 | 1.1629 | 20,855 | |||||||
| Bank charges and interest | 6,516 | 1.1629 | 7,577 | |||||||
| Consulting fees | 457,536 | 1.1629 | 532,069 | |||||||
| Filing and regulatory fees | 93,062 | 1.1629 | 108,222 | |||||||
| Insurance | 44,103 | 1.1629 | 51,287 | |||||||
| Management fees | 60,130 | 1.1629 | 69,925 | |||||||
| Office and miscellaneous | 271,255 | 1.1629 | 315,442 | |||||||
| Professional fees | 463,105 | 1.1629 | 538,545 | |||||||
| Rent | 70,614 | 1.1629 | 82,117 | |||||||
| Repairs and maintenance | 4,356 | 1.1629 | 5,066 | |||||||
| Salaries and benefits | 706,734 | 1.1629 | 821,861 | |||||||
| Scanning and maps | 28,699 | 1.1629 | 33,374 | |||||||
| Stock-based compensation | 558,679 | 1.1629 | 649,688 | |||||||
| Telephone | 29,412 | 1.1629 | 34,203 | |||||||
| Transfer agent | 2,695 | 1.1629 | 3,134 | |||||||
| Travel | 177,494 | 1.1629 | 206,408 | |||||||
| Loss before other items | (3,033,408 | ) | (3,527,550 | ) | ||||||
| OTHER ITEMS | ||||||||||
| Accretion of reclamation obligation | (9,081 | ) | 1.1629 | (10,560 | ) | |||||
| Allowance for decline on marketable securities | (66,262 | ) | 1.1629 | (77,056 | ) | |||||
| Dividend income | 1,531 | 1.1629 | 1,780 | |||||||
| Gain (loss) on sale of marketable securities | 9,791 | 1.1629 | 11,386 | |||||||
| Interest income | 214,300 | 1.1629 | 249,209 | |||||||
| 150,279 | 174,759 | |||||||||
| LOSS FOR THE YEAR | $ | (2,883,129 | ) | $ | (3,352,791 | ) |
G-12
| ENERGY METALS CORPORATION |
| NOTES TO THE PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS |
| (Unaudited – See Compilation Report) |
| SEPTEMBER 30, 2006 |
| 5. | HIGH PLAINS URANIUM, INC. – STATEMENT OF OPERATIONS FOR THE TWELVE MONTH PERIOD ENDED JUNE 30, 2006 TRANSLATION TO CANADIAN DOLLARS(cont’d…) |
Statement of operations for the twelve month period ended June 30, 2006 in USD |
| (A) | (B) | (C) | (A + B - C) | ||||||||||
| High Plains | High Plains | High Plains | High Plains | ||||||||||
| Uranium, Inc. | Uranium, Inc. | Uranium, Inc. | Uranium, Inc. | ||||||||||
| USD | USD | USD | USD | ||||||||||
| Year ended | Three month | Three month | Twelve month | ||||||||||
| March 31, | period ended | period ended | period ended | ||||||||||
| 2006 | June 30, 2006 | June 30, 2005 | June 30, 2006 | ||||||||||
| EXPENSES | |||||||||||||
| Advertising and promotion | $ | 24,435 | $ | 16,649 | $ | - | $ | 41,084 | |||||
| Amortization | 12,405 | 6,764 | 1,235 | 17,934 | |||||||||
| Bank charges and interest | 23,696 | 772 | 17,952 | 6,516 | |||||||||
| Consulting fees | 689,525 | 137,140 | 369,129 | 457,536 | |||||||||
| Filing and regulatory fees | 83,667 | 13,895 | 4,500 | 93,062 | |||||||||
| Insurance | 40,104 | 10,493 | 6,494 | 44,103 | |||||||||
| Management fees | 44,547 | 15,583 | - | 60,130 | |||||||||
| Office and miscellaneous | 259,556 | 58,750 | 47,051 | 271,255 | |||||||||
| Professional fees | 421,863 | 267,523 | 226,281 | 463,105 | |||||||||
| Rent | 63,298 | 20,946 | 13,630 | 70,614 | |||||||||
| Repairs and maintenance | 4,704 | 757 | 1,105 | 4,356 | |||||||||
| Salaries and benefits | 516,809 | 223,140 | 33,215 | 706,734 | |||||||||
| Scanning and maps | 31,340 | 4,282 | 6,923 | 28,699 | |||||||||
| Stock-based compensation | 577,301 | 108,978 | 127,600 | 558,679 | |||||||||
| Telephone | 31,210 | 6,248 | 8,046 | 29,412 | |||||||||
| Transfer agent | 13,721 | 2,069 | 13,095 | 2,695 | |||||||||
| Travel | 199,238 | 61,306 | 83,050 | 177,494 | |||||||||
| Loss before other items | (3,037,419 | ) | (955,295 | ) | (959,306 | ) | (3,033,408 | ) | |||||
| OTHER ITEMS | |||||||||||||
| Accretion of convertible notes | (9,294 | ) | - | (9,294 | ) | - | |||||||
| Accretion of reclamation obligation | (7,200 | ) | (1,881 | ) | - | (9,081 | ) | ||||||
| Allowance for decline on marketable securities | (138,310 | ) | (952 | ) | (73,000 | ) | (66,262 | ) | |||||
| Dividend income | 1,008 | 570 | 47 | 1,531 | |||||||||
| Gain (loss) on sale of marketable securities | 9,282 | 509 | - | 9,791 | |||||||||
| Interest income | 184,456 | 44,177 | 14,333 | 214,300 | |||||||||
| 39,942 | 42,423 | (67,914 | ) | 150,279 | |||||||||
| LOSS FOR THE PERIOD | $ | (2,997,477 | ) | $ | (912,872 | ) | $ | (1,027,220 | ) | $ | (2,883,129 | ) |
G-13
| ENERGY METALS CORPORATION |
| NOTES TO THE PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS |
| (Unaudited – See Compilation Report) |
| SEPTEMBER 30, 2006 |
| 6. | HIGH PLAINS URANIUM, INC. – STATEMENT OF OPERATIONS FOR THE THREE MONTH PERIOD TRANSLATION TO CANADIAN DOLLARS |
Statement of operations for the three month period ended September 30, 2006: |
| High Plains | High Plains | |||||||||
| Uranium, Inc. | Uranium, Inc. | |||||||||
| USD | Exchange rate | CAD | ||||||||
| Three month | Three month | |||||||||
| period ended | period ended | |||||||||
| September 30, | September 30, | |||||||||
| 2006 | 2006 | |||||||||
| EXPENSES | ||||||||||
| Advertising and promotion | $ | 415 | 1.1212 | $ | 465 | |||||
| Amortization | 6,764 | 1.1212 | 7,584 | |||||||
| Bank charges and interest | 27,137 | 1.1212 | 30,426 | |||||||
| Consulting fees | 427,149 | 1.1212 | 478,919 | |||||||
| Filing and regulatory fees | 12,856 | 1.1212 | 14,414 | |||||||
| Insurance | 41,064 | 1.1212 | 46,041 | |||||||
| Management fees | 16,759 | 1.1212 | 18,790 | |||||||
| Office and miscellaneous | 53,766 | 1.1212 | 60,282 | |||||||
| Professional fees | 625,811 | 1.1212 | 701,659 | |||||||
| Rent | 11,275 | 1.1212 | 12,642 | |||||||
| Repairs and maintenance | 368 | 1.1212 | 413 | |||||||
| Salaries and benefits | 219,011 | 1.1212 | 245,555 | |||||||
| Scanning and maps | 762 | 1.1212 | 854 | |||||||
| Stock-based compensation | 237,883 | 1.1212 | 266,714 | |||||||
| Telephone | 7,246 | 1.1212 | 8,124 | |||||||
| Transfer agent | 7,408 | 1.1212 | 8,306 | |||||||
| Travel | 47,047 | 1.1212 | 52,749 | |||||||
| Loss before other items | (1,742,721 | ) | (1,953,937 | ) | ||||||
| OTHER ITEMS | ||||||||||
| Accretion of convertible notes | (150,212 | ) | 1.1212 | (168,418 | ) | |||||
| Accretion of reclamation obligation | (1,902 | ) | 1.1212 | (2,133 | ) | |||||
| Allowance for decline on marketable securities | (12,774 | ) | 1.1212 | (14,322 | ) | |||||
| Dividend income | 635 | 1.1212 | 712 | |||||||
| Foreign exchange loss | (29,117 | ) | 1.1212 | (32,646 | ) | |||||
| Gain (loss) on sale of marketable securities | 478 | 1.1212 | 536 | |||||||
| �� Gain (loss) on sale of fixed assets | (1,543 | ) | 1.1212 | (1,730 | ) | |||||
| Interest income | 27,309 | 1.1212 | 30,619 | |||||||
| (167,126 | ) | (187,382 | ||||||||
| LOSS FOR THE PERIOD | $ | (1,909,847 | ) | $ | (2,141,319 | ) |
G-14
| ENERGY METALS CORPORATION |
| NOTES TO THE PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS |
| (Unaudited – See Compilation Report) |
| SEPTEMBER 30, 2006 |
| 7. | QUINCY ENERGY CORP. – STATEMENT OF OPERATIONS FOR THE TWELVE MONTH PERIOD TRANSLATION TO CANADIAN DOLLARS |
Statement of operations for the year ended April 30, 2006 |
| Quincy Energy | Quincy Energy | |||||||||
| Corp. | Corp. | |||||||||
| USD | CAD | |||||||||
| Year ended | Year ended | |||||||||
| April 30, 2006 | Exchange rate | April 30, 2006 | ||||||||
| EXPENSES | ||||||||||
| Advertising and promotion | $ | 112,277 | 1.1856 | $ | 133,116 | |||||
| Amortization | - | - | ||||||||
| Bank charges and interest | - | - | ||||||||
| Consulting fees | 635,524 | 1.1856 | 753,477 | |||||||
| Exploration expenditures | 6,298,056 | 1.1856 | 7,466,975 | |||||||
| Filing and regulatory fees | - | - | ||||||||
| Insurance | - | - | ||||||||
| Management fees | - | - | ||||||||
| Office and miscellaneous | 478,869 | 1.1856 | 567,747 | |||||||
| Professional fees | 303,977 | 1.1856 | 360,395 | |||||||
| Rent | - | - | ||||||||
| Repairs and maintenance | - | - | ||||||||
| Salaries and benefits | - | - | ||||||||
| Scanning and maps | - | - | ||||||||
| Stock-based compensation | 355,675 | 1.1856 | 421,688 | |||||||
| Telephone | - | - | ||||||||
| Transfer agent | - | - | ||||||||
| Travel | - | - | ||||||||
| Loss before other items | (8,184,378 | ) | (9,703,398 | ) | ||||||
| OTHER ITEMS | ||||||||||
| Accretion of convertible notes | - | - | ||||||||
| Accretion of reclamation obligation | - | - | ||||||||
| Allowance for decline on marketable securities | - | - | ||||||||
| Dividend income | - | - | ||||||||
| Foreign exchange gain | 600,938 | 1.1856 | 712,472 | |||||||
| Gain on sale of marketable securities | - | - | ||||||||
| Gain on sale of fixed assets | - | - | ||||||||
| Interest income | 115,456 | 1.1856 | 136,885 | |||||||
| 716,394 | 849,357 | |||||||||
| LOSS FOR THE YEAR | $ | (7,467,984 | ) | $ | (8,854,041 | ) |
G-15