Add
UXG to Portfolio
Set Alert
Email to a
Friend
| |||
|
|
Quotes & Info
|
| UXG > SEC Filings for UXG > Form 10-Q on 7-Nov-2008 | All Recent SEC Filings |
7-Nov-2008
Quarterly Report
Overview
The following discussion updates our plan of operation for the foreseeable future. It also analyzes our financial condition at September 30, 2008 and compares it to our financial condition at December 31, 2007. Finally, the discussion summarizes the results of our operations for the three and nine months ended September 30, 2008 and compares those results to the three and nine month periods ended September 30, 2007. We suggest that you read this discussion in connection with the MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION contained in our annual report on Form 10-K for the year ended December 31, 2007.
Plan of Operation
Our plan of operation for the remainder of 2008 is to continue our multi-year exploration and evaluation program at the combined Nevada properties and our Mexico properties. The original company-wide exploration budget for 2008 was approximately $6.7 million. The budget for 2009 is currently under consideration During the second and third quarter of 2008, the Company re-evaluated the exploration budget and increased it to $11.4 million. The US exploration budget for 2008 is approximately $5 million, of which approximately $4.6 million has been spent during the nine months ended September 30, 2008. Priority exploration drilling targets have been identified on the Tonkin, Gold Bar and Gold Pick properties, each on the Cortez Trend, and the Limo property on the Carlin Trend. Additional targets are being developed through the ongoing exploration process. During the fourth quarter, we also expect to conduct drilling at our Utah property. The original exploration budget of $1.7 million for the Mexico properties in and around the Magistral mine has been revised to $6.4 million. Approximately $5.4 million has been spent in Mexico during the nine month period ended September 30, 2008. As a result of encouraging mineralization encountered during drilling in the current year, the Company expects to spend an additional $1 million for Mexican exploration activities for the remainder of the year.
Our only source of capital at present is cash on hand and the possible exercise of options, since the Company has no revenue. Assuming that ongoing operations and exploration activity are consistent with budgeted activity and related cash used in operations, the Company believes that cash on hand is adequate to fund ongoing operations through 2008. The Company anticipates requiring additional capital funding in order to continue our plan of operations in 2009. The Company is currently evaluating strategic alternatives in order to meet these funding requirements, including possible acquisition or disposition of assets, debt or equity financing, or other alternatives to fund operations. Due to the current volatility in the equity markets and uncertainties arising from adverse economic developments, there can be no assurance that the Company can obtain financing.
Liquidity and Capital Resources
As of September 30, 2008, we had working capital of $15,204,556, comprised of current assets of $17,075,858 and current liabilities of $1,871,302. This represents a decrease of approximately $16,550,716 from the working capital of $31,755,270 at fiscal year end December 31, 2007.
Net cash used in operations for the nine months ended September 30, 2008 decreased to $14,552,824 from $24,825,389 for the corresponding period in 2007. Cash paid to suppliers and employees decreased to $14,996,929 during the 2008 period from $26,124,288 during the 2007 period, primarily reflecting reduced exploration expenses and decreased expenses incurred in connection with the acquisition of the Acquired Companies. Cash used in investing activities for the nine months ended September 30, 2008 was $338,133, compared to $1,307,288 in the comparable period of 2007, primarily reflecting a decrease in acquisition costs and decrease in our restrictive investments.
Cash provided by financing activities for the first nine months of 2008 totaled $257,181, which came from the exercise of warrants. This compares to $6,134,251 of cash generated from financing activities in the comparable period of 2007.
Results of Operations
Nine month period ended September 30, 2008 compared to nine month period ended September 30, 2007
For the nine months ended September 30, 2008, the Company recorded a net loss of $124,475,810 or $(1.29) per share, compared to a net loss for the corresponding period of 2007 of $23,148,951 or $(0.30) per share. Excluding goodwill impairment recorded during the third quarter of $107,017,283, the net loss for the nine months ended was $17,458,527 or $(0.18) per share. During the 2008 period, the Company recorded a foreign currency loss of $703,862, reflecting a stronger U.S. dollar against the Canadian dollar and its effect on the net monetary assets that are denominated in Canadian dollars.
General and administrative expense in the nine months ended September 30, 2008 decreased by $1,178,218 compared to the same period of 2007, primarily due to decreases in stock option expense, shareholder communications and legal expenses, partially offset by increases in audit and tax expenses and salaries. The decrease in stock option expense reflects forfeitures during the current year. The increase in salaries is attributable mainly to severances from the closure of our Denver office. There were no expensed acquisition costs for the nine month period ended September 30, 2008, while during the corresponding period of 2007, $451,379 was recorded.
Property holding costs during the 2008 period related to the combined Tonkin project and acquired properties from 2007 increased to $1,627,125 compared to $1,102,521 in 2007, primarily due to the acquired properties from 2007. In 2007, property holding costs incurred for the acquired properties were for only three months since the acquisition were completed in June, as compared to the full nine months of spending in 2008.
Exploration costs in the 2008 period were $10,016,369, reflecting an active drilling program in Mexico and Nevada, while during the same period of 2007, the exploration program for the Tonkin project and the acquired properties had costs of $18,134,966.
Total stock option expense in the 2008 period decreased to $416,452 compared to $1,683,391 for the same nine months of 2007, reflecting an increase in forfeitures in 2008. Stock option expense is split between the general and administrative and exploration costs lines within the income statement.
Accretion of asset retirement obligation at Tonkin and the acquired properties for the nine months ended September 30, 2008 increased to $534,512, compared to $303,002 in the same period of 2007. Interest income in the 2008 period decreased to $543,122 compared to $1,369,620 in 2007, reflecting lower average levels of interest bearing deposits during the 2008 period.
In accordance with its accounting policies, the Company conducts an annual goodwill impairment test during the fourth quarter of each year, or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. Based on a combination of factors, including the current economic environment and a sustained decline in the Company's market capitalization, the Company concluded that there were sufficient indicators to require it to perform the annual goodwill impairment analysis as of September 30, 2008. As a result of that analysis, the Company has concluded that an impairment loss has occurred and accordingly, it has recorded a $107,017,283 non-cash goodwill impairment charge during the third quarter of fiscal 2008 related to all the goodwill recorded in 2007 in connection with the acquisition of the Acquired Properties.
Three month period ended September 30, 2008 compared to three month period ended September 30, 2007
For the three months ended September 30, 2008, the Company recorded a net loss of $114,806,431, or $(1.19) per share, compared to a net loss for the corresponding period of 2007 of $6,023,071 or $(0.06) per share. Excluding
goodwill impairment recorded during the quarter of $107,017,283, the net loss for the three months ended was $7,789,148 or $(0.08) per share. During the three months ended September 30, 2008, the Company recorded a foreign currency loss of $431,840, mainly due to the strengthening U.S. dollar against the Canadian dollar and its effect on the net monetary assets that are denominated in Canadian dollars.
General and administrative expense decreased to $1,237,000 in the three months ended September 30, 2008 compared to $2,423,004 for the same period of 2007, primarily due to decreased staff and salaries, shareholder communications, accounting and audit expenses and legal fees. There were no expensed acquisition costs for the three month periods ended September 30, 2008 or 2007.
Exploration costs in 2008 were $5,707,845, reflecting an active drilling program in Mexico and Nevada, as compared with $4,823,382 for the same period of 2007, reflecting increased activity under the current drilling program in Mexico.
Total stock option expense in the 2008 period decreased to $188,895 as compared to $564,506 recorded for the same period in 2007, primarily due to increased forfeitures in 2008. Stock option expense is split between the general and administrative and exploration costs lines within the income statement.
Accretion of asset retirement obligation at Tonkin and the acquired properties for the three months ended September 30, 2008 increased to $254,540 compared to $110,409 in the same period of 2007. Interest income in the 2008 period decreased to $168,803 compared to $470,821 in 2007, reflecting lower average levels of interest-bearing deposits during the 2008 period.
The Company has concluded that an impairment loss has occurred and accordingly, it has recorded a $107,017,283 non-cash goodwill impairment charge during the third quarter of fiscal 2008.
Recent Accounting Pronouncements
In September 2006, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 157, "Fair Value Measurements". SFAS No. 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. This statement addresses how to calculate fair value measurements required or permitted under other accounting pronouncements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. As of January 1, 2008, we adopted SFAS No. 157. There was no cumulative effect related to the adoption of SFAS No. 157 and the adoption did not have a material impact on our financial position or results of operations.
In September 2006, the FASB issued SFAS No. 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 106, and 132(R)". SFAS No. 158 requires companies to recognize a net liability or asset and an offsetting adjustment to accumulated other comprehensive income to report the funded status of defined benefit pension and other postretirement benefit plans. SFAS No. 158 requires prospective application, recognition and disclosure requirements effective for a company's fiscal year ending December 31, 2007. Additionally, SFAS No. 158 requires companies to measure plan assets and obligations at their year-end balance sheet date. This requirement is effective for a company's fiscal year ending December 31, 2009. We are currently evaluating the impact of the adoption of SFAS No. 158 and do not expect that it will have a material impact on our financial statements.
In December 2007, the FASB issued SFAS Statement No. 141(R), "Business Combinations," which amends SFAS No. 141, and provides revised guidance for recognizing and measuring identifiable assets and goodwill acquired, liabilities assumed, and any noncontrolling interest in the acquiree. It also provides disclosure requirements to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS No. 141(R) is effective for the Company's fiscal year beginning January 1, 2009 and is to be applied prospectively. We are currently evaluating the potential impact of adopting this statement on our consolidated financial position, results of operations or cash flows.
In December 2007, the FASB issued SFAS Statement No. 160, "Noncontrolling Interests in Consolidated Financial Statements- an amendment of ARB No. 51" which establishes accounting and reporting standards pertaining to ownership interests in subsidiaries held by parties other than the parent, the amount of net income attributable to the parent and the noncontrolling interest, changes in the parent's ownership interest, and the valuation of any retained noncontrolling equity investment when a subsidiary is deconsolidated. SFAS No. 160 also establishes disclosure requirements that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. SFAS No. 160 is effective for the Company's fiscal year beginning January 1, 2009. We are currently evaluating the potential impact of adopting this statement on our consolidated financial position, results of operations or cash flows.
In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities - an amendment of FASB Statement No. 133" which provides revised guidance for enhanced disclosures about how and why an entity uses derivative instruments, how derivative instruments and the related hedged items are accounted for under FAS 133, and how derivative instruments and the related hedged items affect an entity's financial position, financial performance and cash flows. SFAS No. 161 is effective for the Company's fiscal year beginning January 1, 2009 and is to be applied prospectively. We are currently evaluating the impact of this standard on our disclosure. Since we currently do not have any derivative instruments, we do not expect any impact upon adoption of this statement.
In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles" which identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with GAAP. SFAS No. 162 is effective 60 days following the Security and Exchange Commission's ("SEC") approval of the Public Company Accounting Oversight Board amendments to AU Section 411, "The Meaning of Present Fairly in Conformity with GAAP." We do not expect the adoption of SFAS No. 162 to have an impact on our consolidated financial position, results of operations or cash flows.
Forward-Looking Statements
This report contains or incorporates by reference "forward-looking statements," as that term is used in federal securities laws, about our financial condition, results of operations and business. These statements include, among others:
† statements concerning the benefits that we expect will result from our business activities and certain transactions that we contemplate or have completed, such as increased revenues, decreased expenses and avoided expenses and expenditures;
† statements concerning the results of our exploration program; and
† statements of our expectations, beliefs, future plans and strategies, anticipated developments and other matters that are not historical facts.
These statements may be made expressly in this document or may be incorporated by reference to other documents that we will file with the Securities and Exchange Commission ("SEC"). You can find many of these statements by looking for words such as "believes," "expects," "anticipates," "estimates" or similar expressions used in this report or incorporated by reference in this report.
These forward-looking statements are subject to numerous assumptions, risks and uncertainties that may cause our actual results to be materially different from any future results expressed or implied in those statements. Because the statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied. We caution you not to put undue reliance on these statements, which speak only as of the date of this report. Further, the information contained in this document or incorporated herein by reference is a statement of our present intention and is based on present facts and assumptions, and may change at any time and without notice, based on changes in such facts or assumptions.
Risk Factors Impacting Forward-Looking Statements
The important factors that could prevent us from achieving our stated goals and objectives include, but are not limited to, those set forth in other reports we have filed with the SEC and the following:
† The success of our ongoing exploration program;
† The worldwide economic situation;
† Any change in interest rates or inflation;
† The willingness and ability of third parties to honor their contractual commitments;
† Our ability to raise additional capital, as it may be affected by current conditions in the stock market and competition in the gold mining industry for risk capital;
† Our costs of exploration and production, if any;
† Environmental and other regulations, as the same presently exist and may hereafter be amended;
† Our ability to identify, finance and integrate other acquisitions; and
† Volatility of our stock price.
We undertake no responsibility or obligation to update publicly these forward-looking statements, but may do so in the future in written or oral statements. Investors should take note of any future statements made by or on our behalf.
|
|