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 FORM 10-Q


x  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 31, 2012


o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT


Commission file number: 0-17386

 

CYCLONE URANIUM CORPORATION

 (Exact name of the registrant as specified in its charter)

 

 Nevada 

88-0227654

 (State or other jurisdiction of incorporation or organization)

(IRS Employer Identification No.)

 

2186 S. Holly St., Suite 104

Denver, CO  80222

(Address of principal executive offices)


303-800-0678

Telephone number, including

Area code


 FISCHER-WATT GOLD COMPANY, INC.

(Former name or former address if changed since last report)


Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes x  No o


Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o No x


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company:


Large accelerated filer o     Accelerated filer o     Non-accelerated filer o   Smaller reporting Company x


There were 141,062,125 shares of the issuer's common stock, par value $0.001, outstanding as of December 6, 2012.

 

1

 ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------




EXCHANGE RATES


Except as otherwise indicated, all dollar amounts described in this Report are expressed in United States (US) dollars.


CONVERSION TABLE


For ease of reference, the following conversion factors are provided:

 

 

1 mile = 1.6093 kilometers

1 metric tonne = 2,204.6 pounds

1 foot = 0.305 meters

1 ounce (troy) = 31.1035 grams

1 acre = 0.4047 hectare

1 imperial gallon = 4.5546 liters

1 long ton = 2,240 pounds

1 imperial gallon = 1.2010 U.S. gallons





2

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CYCLONE URANIUM CORPORATION

QUARTERLY REPORT ON FORM 10-Q

FOR THE PERIOD ENDED OCTOBER 31, 2012

 

CONTENTS

 

PART I – Financial Information

 

  

  

Item 1.  Financial Statements

4

  

  

Condensed consolidated financial statements (unaudited):

  

  

  

    Balance sheets 

4

  

  

    Statements of operations

5

  

  

    Statements of cash flows 

6

  

  

    Notes to unaudited condensed consolidated financial statements 

7

  

  

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

15

  

  

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

19

  

  

Item 4. Controls and Procedures 

19

  

  

PART II – Other Information

  

  

  

Item 1. Legal Proceedings

20

  

  

Item 1A. Risk Factors 

20

  

  

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 

20

  

  

Item 3.  Defaults Upon Senior Securities   

20

  

  

Item 4.  Mine Safety Disclosure 

 20

  

  

Item 5.  Other Information  

20

  

  

Item 6. Exhibits 

21

 

 

Signature

22

 


3

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ITEM 1. Financial Statements and Notes


Cyclone Uranium Corporation

(An Exploration Stage Company)

CONDENSED CONSOLIDATED BALANCE SHEETS

_________________________________________________________________________________________

 

 

 

 

 

 

October 31,

 

January 31,

 

 

 

 

 

 

2012

 

2012

 

 

 

 

 

 

(unaudited)

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

Cash

 

$

             80,632

$

                    315

 

 

Restricted deposits

 

             35,000

 

               35,000

 

 

Prepaid and other current assets

 

           217,607

 

               74,894

 

 

 

 

Total Current Assets

 

           333,239

 

             110,209

 

 

 

 

 

 

 

 

 

 

OTHER ASSETS

 

 

 

 

 

 

Mineral interests

 

        1,400,000

 

                         -

 

 

 

 

Total Other Assets

 

        1,400,000

 

                         -

 

TOTAL ASSETS

$

        1,733,239

$

             110,209

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

Accounts payable and accrued expenses

$

             52,508

$

                 6,614

 

 

Accounts payable and accrued expenses - related party

 

           284,936

 

             227,373

 

 

Notes payable shareholders

 

           191,000

 

             340,000

 

 

Note payable

 

           300,000

 

                         -

 

 

Accounts payable and accrued expenses - shareholders

 

           271,667

 

             271,667

 

 

 

 

Total Current Liabilities

 

        1,100,111

 

             845,654

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS' EQUITY (DEFICIT)

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock,  $0.001 par value, 200,000,000 shares authorized

     141,062,125 and 87,062,125 shares issued and outstanding,

     respectively

 

           141,061

 

               87,061

 

 

Additional paid-in capital

 

      20,932,925

 

        18,604,669

 

 

Accumulated (deficit) prior to exploration stage

 

    (15,353,115)

 

       (15,353,115)

 

 

Accumulated (deficit) during exploration stage

 

      (5,087,743)

 

         (4,074,060)

 

 

 

Total Stockholders' Equity (Deficit)

 

           633,128

 

            (735,445)

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

$

        1,733,239

$

             110,209


The accompanying notes are an integral part of these financial statements.


4

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Cyclone Uranium Corporation

(An Exploration Stage Company)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  

__________________________________________________________________________________________

 

 

 February 1, 2001

 

 

 (Inception of

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

Exploration Stage)

 

 

 

 

October 31,

 

October 31,

 

 to October 31,

 

 

 

 

2012

 

2011

 

2012

 

2011

 

2012

 

 

 

 

(unaudited)

 

(unaudited)

 

(unaudited)

 

(unaudited)

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

REVENUE

$

                -

$

              -

$

                -

$

                 -

$

                   44,240

 

 

 

 

 

 

 

 

 

 

 

 

 

COSTS AND EXPENSES

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue

 

                -

 

              -

 

                -

 

                 -

 

                   50,000

 

Exploration expense

 

      66,584

 

    33,455

 

    164,368

 

       96,945

 

              1,610,391

 

Impairment of mineral

    interests

 

                -

 

              -

 

    281,477

 

                 -

 

                 590,977

 

Write down of inventory

    to market value

 

                -

 

              -

 

                              -

 

                 -

 

                 125,000

 

General and

    administrative

 

    132,856

 

  104,086

 

    405,594

 

     312,203

 

              4,435,077

 

 

TOTAL OPERATING EXPENSES

 

    199,440

 

   137,541

 

    851,439

 

     409,148

 

              6,811,445

 

 

 

 

 

 

 

 

 

 

 

 

 

(LOSS) FROM OPERATIONS

 

   (199,440)

 

 (137,541)

 

   (851,439)

 

    (409,148)

 

            (6,767,205)

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER INCOME (EXPENSES)

 

 

 

 

 

 

 

 

 

 

 

Interest expense – related

    party

 

       (6,947)

 

     (7,800)

 

      (22,272)

 

      (17,653)

 

               (145,776)

 

Interest expense

 

   (139,976)

 

              -

 

    (139,976)

 

                 -

 

               (139,976)

 

Relief of payables and

    other indebtedness

 

                -

 

              -

 

                 -

 

                  -

 

                   66,935

 

Other income

 

                -

 

              -

 

                 -

 

             504

 

             2,404,688

 

Interest income

 

                4

 

              -

 

                 4

 

               39

 

                  37,709

 

 

TOTAL OTHER INCOME (EXPENSES)

 

   (146,919)

 

     (7,800)

 

    (162,244)

 

      (17,110)

 

              2,223,580

 

 

 

 

 

 

 

 

 

 

 

 

 

(LOSS) BEFORE TAXES

 

   (346,359)

 

  (145,341)

 

 (1,013,683)

 

    (426,258)

 

             (4,543,625)

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME TAXES

 

                -

 

               -

 

                 -

 

                 -

 

                 556,868

 

 

 

 

 

 

 

 

 

 

 

 

 

NET (LOSS)

$

   (346,359)

$

  (145,341)

$

 (1,013,683)

$

    (426,258)

$

            (5,100,493)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET LOSS PER COMMON SHARE, BASIC AND DILUTED

$

         (0.00)

 

        (0.00)

$

          (0.01)

$

          (0.01)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE NUMBER OF COMMON STOCK SHARES OUTSTANDING, BASIC AND DILUTED

 

141,062,125

 

81,016,275

 

131,999,854

 

  80,513,655

 

 


The accompanying notes are an integral part of these financial statements.


5

 ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------








Cyclone Uranium Corporation

(An Exploration Stage Company)

STATEMENTS OF CASH FLOWS

__________________________________________________________________________________________

 

 

 

 

 

 

 

 Period from

 

 

 

 

 

 

 

 February 1, 2001

 

 

 

 

 

 

 

 (Inception of

 

 

 

Nine months ended

 

Exploration Stage

 

 

 

October 31,

 

 

October 31,

 

 to October 31,

 

 

 

2012

 

 

2011

 

2012

 

 

 

(unaudited)

 

 

(unaudited)

 

(unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net (loss)

$

  (1,013,683)

 

$

    (426,258)

$

               (5,100,493)

 

Adjustments to reconcile net (loss) to net cash

 

 

 

 

 

 

 

 

 

(used in) operating activities:

 

   

 

 

 

 

 

 

 

Income from sale of mineral interests

 

                  -

 

 

                 -

 

               (2,235,000)

 

 

Writedown of inventory to market value

 

                  -

 

 

                 -

 

                   125,000

 

 

Impairment of mineral interests

 

       281,477

 

 

                 -

 

                   590,977

 

 

Relief of payables and other indebtedness

 

                  -

 

 

                 -

 

                    (66,935)

 

 

Depreciation

 

                  -

 

 

                 -

 

                       7,062

 

 

Common stock issued for services

 

       100,000

 

 

       95,280

 

                   419,814

 

 

Stock subscriptions related to services provided

 

                  -

 

 

                 -

 

                     82,750

 

 

Stock options issued for services

 

                  -

 

 

                 -

 

                     75,500

 

 

Stock based compensation

 

 

 

 

 

 

                   699,937

 

 

Non cash interest expense

 

       132,332

 

 

 

 

                   132,332

 

 

Stock option expense

 

         99,924

 

 

       76,741

 

                   176,665

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

 

Inventory

 

                  -

 

 

                 -

 

                     50,000

 

 

Prepaid and other current assets

 

       (52,724)

 

 

      (31,745)

 

                  (124,416)

 

 

Accounts payable and accrued expenses

 

         (5,341)

 

 

       53,550

 

                   517,549

 

 

Asset retirement obligation

 

                  -

 

 

                 -

 

                    (52,000)

 

 

Accounts payable and accrued expenses - shareholders

 

         39,768

 

 

                 -

 

                   570,624

 

 

Net cash (used in) operating activities

 

     (418,247)

 

 

    (232,432)

 

               (4,130,634)

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Cash received in New Fork acquisition

 

       297,564

 

 

                 -

 

                   297,564

 

Cash received in Tournigan acquisition

 

                  -

 

 

                 -

 

                     12,829

 

Proceeds from sale of mineral interests

 

                  -

 

 

                 -

 

                2,235,000

 

Release of reclamation bonds

 

                  -

 

 

                 -

 

                   895,000

 

 

Net cash provided by investing activities

 

       297,564

 

 

                 -

 

                3,440,393

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

Repayment of amounts due to Tournigan Energy, Inc.

 

                  -

 

 

                 -

 

                  (330,000)

 

Cash received from sale of common stock

 

         50,000

 

 

                 -

 

                   856,486

 

Proceeds from the exercise of stock options

 

                  -

 

 

                 -

 

                     35,000

 

Proceeds from notes payable

 

       300,000

 

 

                 -

 

                   300,000

 

Proceeds from notes payable - shareholder

 

                  -

 

 

     180,000

 

                   350,500

 

Repayment of note payable - shareholder

 

     (149,000)

 

 

                 -

 

               (1,150,568)

 

Capital contribution by shareholder

 

                  -

 

 

                 -

 

                   689,068

 

 

Net cash provided by financing activities

 

       201,000

 

 

     180,000

 

                   750,486

 

 

INCREASE(DECREASE) IN CASH

 

         80,317

 

 

      (52,432)

 

                     60,245

 

 

 

Cash, beginning of period

 

              315

 

 

       58,764

 

                     20,387

 

Cash, end of period

   $

         80,632

 

$

         6,332

  $

                     80,632

 

NON-CASH INVESTING AND FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Reclassification of capital contributions to

   note payable

   $

                 -   

 

$

               -   

  $

                  864,068

 

Conversion of notes payable and accrued

   interest to common stock

   $

                 -   

 

$

     141,681  

  $

                   329,181

 

Conversion of amounts due to shareholders

   to common stock

   $

                 -   

 

$

               -   

  $

                   374,089

 

Conversion of amounts due to shareholders

   upon exercise of  stock warrants

   $

                 -   

 

$

     231,498

  $

                   347,498

 

Common shares issued for stock

   subscriptions

   $

                 -   

 

$

               -   

  $

                   433,813

 

Conversion of amounts due to affiliate to stock subscription

   $

                 -   

 

$

               -   

  $

                   131,282

 

Purchase of inventory via direct payment by

   shareholder    

   $

                 -   

 

$

               -   

  $

                   175,000

 

Contribution of accounts payable and

  accrued expenses - shareholder

   $

                 -   

 

$

               -   

  $

                     50,000

 

Contribution of amounts due Tournigan

  Energy Ltd to capital

   $

                 -   

 

$

     600,000

  $

                   873,327

 

Common shares issued for New Fork

   acquisition

   $

    2,000,000

 

$

               -   

  $

                2,000,000







The accompanying notes are an integral part of these financial statements.


6

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CYCLONE URANIUM CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

October 31, 2012

(Unaudited)


NOTE 1 – Nature of Operations and Basis of Presentation


Cyclone Uranium Corporation (formerly Fischer-Watt Gold Company, Inc., referred to herein as “Fischer-Watt” or the “Company”), and its subsidiaries are engaged in the business of mining and mineral exploration.  This includes locating, acquiring, exploring, improving, leasing and developing mineral interests, primarily in the field of precious metals.


The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) pursuant to Item 210 of Regulation S-X. They do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year. For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Report on Form 8-K as filed July 3, 2012 and the Annual Report on Form 10-K for the year ended January 31, 2012.


The accounting policies followed by the Company are set forth in Note 1 to the Company’s consolidated financial statements in the Report on Form 8-K as filed July 3, 2012 and the Form 10-K for the year ended January 31, 2012, and are supplemented throughout the notes to condensed consolidated financial statements in this report. It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and notes included in the Report on Form 8-K as filed July 3, 2012 and the Form 10-K for the year ended January 31, 2012.


The accompanying condensed consolidated financial statements include the accounts of the Company and its subsidiaries. Intercompany transactions and balances have been eliminated in consolidation.


NOTE 2 - Mineral Interests


On February 27, 2009, the Company completed the acquisition of 100% of the common shares of Tournigan USA, Inc. (“TUSA”), a wholly owned subsidiary of Tournigan Energy, Ltd. (“Tournigan Energy”). As consideration for this transaction, the Company issued Tournigan Energy an interest-free promissory note in the amount of $325,327. In addition, the Company agreed to secure the release of, or reimburse Tournigan Energy for, the existing reclamation bonds on the properties in the amount of $930,000, less any applicable reclamation costs. The Company granted Tournigan Energy a 30% carried interest on each of the existing properties up to the completion of a feasibility study for any project encompassing any of these properties. At that point, Tournigan Energy could elect to convert its interest into a 30% contributing working interest or allow its interest to dilute to a 5% net profits interest.


7

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The Company delivered a promissory note in the amount of $325,327 to Tournigan Energy. This note represented the amount paid by Tournigan Energy for the then current year’s Federal mineral claim maintenance fees along with working capital adjustments on the closing date. In addition to this note, the Company agreed to secure the release of reclamation bonds in the amount of $930,000 less any applicable reclamation costs. As of October 31, 2012, the deposit for reclamation bonds remains $35,000.


Both the promissory note to Tournigan Energy and the release of the reclamation bonds were unsecured, non-interest-bearing and were due August 31, 2009. The due date of the promissory note was extended to December 15, 2009. In a further agreement dated December 14, 2009, Tournigan Energy agreed to reduce the promissory note to $100,000 with payment of this amount on December 15, 2009. This payment was made by Fischer-Watt and the promissory note was extinguished.


Tournigan Energy also extended the repayment date of the first $530,000 of the reclamation bonds to December 15, 2009 and the repayment of the remaining $400,000, less the cost of the reclamation work, to September 30, 2010. Tournigan Energy agreed to accept a payment of $100,000 on December 15, 2009 as part payment of the $530,000 installment of the reclamation bond due on that date. The balance of $400,000, less the cost of reclamation work was to be paid from one half of subsequent equity share issues of common stock of the Company until paid in full. The $100,000 payment was made to Tournigan Energy as scheduled.


On December 22, 2010, Fischer-Watt paid Tournigan Energy $130,000 as a payment on its outstanding debt.


At April 30, 2011, after completion of reclamation, the balance due to Tournigan Energy was $600,000. This amount was to be repaid from one-half of the proceeds (net of issuance costs) of all equity share issues of common stock of the Company until Tournigan Energy has been paid in full.


On July 13, 2011, the Company renegotiated its debt and property interests with Tournigan Energy concerning its uranium properties in the western United States. Tournigan Energy agreed to defer receipt of its debt and property interests by converting these Company liabilities to a two percent (2%) net smelter return (“NSR”) royalty interest on uranium properties within the Company’s current areas of work.


Pursuant to the renegotiated terms between the Company and Tournigan Energy:


a) Tournigan Energy forgave the $600,000 payable by the Company;


b) Tournigan Energy converted its interests in the Company’s properties to a two percent (2%) NSR royalty up to a maximum of $10,000,000;


8

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c) The Company is entitled to buy back up to one-half of this royalty for $3,000,000 at any time up to July 13, 2016, and thereby reduce the remaining royalty to a one percent (1%) NSR royalty capped at $5,000,000;


d) The NSR royalty will apply to any uranium production by the Company in the Wyoming counties of Carbon, Fremont, Sublette and Sweetwater, and the South Dakota county of Fall River. These are all areas where the Company currently holds uranium property interests.


This transaction has been approved by the TSX Venture Exchange, as Tournigan Energy is listed in Toronto on the TSX Venture Exchange.


The transaction described above relating to the acquisition of TUSA was accounted for as a business combination. A summary of the transaction is presented below:

 

 

 

 

 

 

Fair value of net tangible assets acquired:

 

 

Cash

$     12,829

 

Accrued interests receivable

         3,202

 

Restricted deposits

     930,000

 

Accounts payable

          (204)

 

Asset retirement obligation

     (52,000)

 

Acquired net assets (100%)

    893,827

 

 

 

Purchase Price:

 

 

Promissory note payable

$   325,327

 

Due to Tournigan Energy, net

     878,000

 

 

 

 

Total

$ 1,203,327

 

 

 

 

Mineral rights

$   309,500


Subsequent to the acquisition of TUSA, the Company evaluated its new holdings, and determined that the carrying value of the mineral rights exceeded their net realizable value. Accordingly, the Company recorded an impairment charge of $309,500 for the year ended January 31, 2010.



NOTE 3 - Acquisition of New Fork Uranium Corporation


On March 14, 2012, the Company entered into a Stock Purchase Agreement whereby the shareholders of New Fork Uranium Corporation (“New Fork”) sold all of the issued and outstanding shares of New Fork to the Company in exchange for the issuance to the shareholders of an aggregate of 50,000,000 shares of common stock, at $0.001 par value, of the Company.


9

 ----------------------------------------------------------------------------------------------------------------------------------------------------------



The 50,000,000 shares of common stock of the Company issued pursuant to the Stock Purchase Agreement were issued pro rata to all of the shareholders of New Fork on the basis of 0.877192983 shares of the Company’s common stock for each outstanding New Fork share of common stock issued and outstanding on the effective date of the Stock Purchase Agreement.


New Fork holds 521 mining claims in the areas adjacent to the Company’s Cyclone Rim uranium exploration properties in Sweetwater County, Wyoming. New Fork’s assets are comprised of 521 federal mining claims covering about 10,000 acres of Bureau of Land Management (“BLM”) land. These claims cover a large portion of the sinuous, uranium bearing roll-front that exists in this part of south-central Wyoming. The Company’s existing Cyclone Rim claims cover a 28 mile extent of the western portion of this same roll-front trend. This area of Sweetwater County is a historical uranium-mining district that is seeing a resurgence of development activity. The Company now holds significant acreage on key uranium ground in the Red Desert.


The transaction described above relating to the acquisition of New Fork was accounted for as a business combination. A summary of the transaction is presented below:

 

 

 

 

 

 

Fair value of net tangible assets acquired:

 

 

Cash

$   297,564

 

Prepaid expenses and other assets

       89,989

 

 

 

 

Accounts payable

     (69,030)

 

Acquired net assets (100%)

    318,523

 

 

 

Purchase Price:

 

 

Issuance of 50,000,000 shares of stock

$ 2,000,000

 

 

 

 

Total

$ 2,000,000

 

 

 

 

Mineral rights

$1,681,477


Subsequent to the acquisition of New Fork, the Company evaluated its new holdings, and determined that the carrying value of the mineral rights exceeded their net realizable value. Accordingly, the Company recorded an impairment charge of $281,477 for the quarter ended April 30, 2012.


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 ----------------------------------------------------------------------------------------------------------------------------------------------------------






NOTE 4 – Earnings (Loss) Per Share


Basic earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of shares and dilutive common stock equivalents outstanding. During periods when they are anti-dilutive, common stock equivalents are not included in the calculation.


NOTE 5 - Going Concern


The Company has incurred operating losses of $20,440,858 since inception and has a working capital deficit of $766,872 at October 31, 2012.  The Company has no current revenue producing operations and is in default on its $300,000 note dated August 31, 2012. These conditions raise substantial doubt about the Company's ability to continue as a going concern.


The ability of the Company to achieve its operating goals and thus positive cash flows from operations is dependent upon the future market price of metals, future capital raising efforts, and the ability to achieve and sustain efficient revenue producing operations. Management's plans will require additional financing, reduced exploration activity or disposition of or joint ventures with respect to mineral properties. While the Company has been successful in these capital raising endeavors in the past, there can be no assurance that its future efforts and anticipated operating improvements will be successful.


The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.


NOTE 6 - Notes Payable – Shareholder


In 2005, a shareholder advanced $30,000 to the Company for working capital purposes and to assist in identification of new mining properties.  This loan is due on demand and bears interest at 10% per annum.  During the years ended January 31, 2010 and 2009, the shareholder advanced an additional $50,000 and $80,000, respectively, under substantially identical terms.  On August 31, 2011, the shareholder advanced a further $150,000 and added an additional $30,000 on October 27, 2011, for a loan total at the time of $340,000.  The terms of the loans and interest rates are the same.  The Company repaid $149,000 related to the loans during the nine months ended October 31, 2012.  The balance outstanding on the Notes Payable – Shareholder totaled $191,000 as of October 31, 2012.


Non-affiliated


On August 31, 2012 the Company entered into a $300,000 bridge loan financing arrangement with an unaffiliated accredited investor, the proceeds of which were used to pay maintenance fees to the Bureau of Land Management and general operating expenses of the Company.  The note payable bears interest at a rate of 15% per annum and was due and payable on or before October 30, 2012.  In addition, the note is secured by all of the property of the Company.  In connection with the financing agreement, the Company issued a five year warrant to the lender to purchase 6,814,000 shares of Company common stock, exercisable at $0.02 per share.  


11

 ----------------------------------------------------------------------------------------------------------------------------------------------------------



As of October 31, 2012, the Company was unable to repay the note, thus, the Company is in default on the note.  The default interest rate is 45%. We are currently engaged in discussions with the lender with regard to negotiating an extension on the note.


NOTE 7 - Asset Retirement Obligations and Restricted Deposits


Asset retirement obligations relate to legal obligations for site restoration and clean-up costs for exploration drilling activities in Arizona and Wyoming. The Company posts restricted deposits with US government agencies that are legally restricted for the purpose of settling these obligations.


During 2008 and 2009, TUSA carried out the required reclamation work and reseeding of affected areas in Wyoming. During the year ended January 31, 2010, the Wyoming Department of Environmental Quality (WDEQ) inspected the property and subsequently released $575,600 of restricted deposits. Approximately $340,000 of this amount was used to pay annual mineral claim fees, $200,000 was paid to Tournigan Energy, and the balance was used for operations.


During the year ended January 31, 2011, the remaining reclamation work was completed, and $304,400 of restricted deposits were released. Approximately $127,000 of this amount was used to pay annual mineral claim fees, $130,000 was paid to Tournigan Energy, and $47,000 was used for operations.


The balance of restricted deposits at October 31, 2012 was $35,000, which may be released upon future inspection by the Arizona BLM.


NOTE 8 - Stockholders’ Equity (Deficit)


During the nine months ended October 31, 2012, the Company issued 50,000,000 shares to the shareholders of New Fork at $0.04 per share, 2,000,000 shares for services at $0.05 per share valued at $100,000, and 2,000,000 units each consisting of one common share and one half warrant for cash of $50,000.


NOTE 9 - Common Stock Options and Warrants    


The Company's Stock Option Plan states that the exercise price of each option will be granted at an amount that equals the market value at the date of grant. All options vest at a time determined at the discretion of the Company's Board of Directors. All options expire if not exercised within 10 years from the date of grant, unless stated otherwise by the Board of Directors upon issuance.


The Company records compensation expense for the fair value of options granted under the Company's stock option plan. The Company estimates the fair value of each stock option at the grant date by using the Black-Scholes option-pricing model.


12

 ----------------------------------------------------------------------------------------------------------------------------------------------------------



During the quarter ending April 30, 2012, the Company issued stock options of 2,500,000 to the officers and directors. The options were priced at $0.06 per share and expire five years from the date of issuance. The fair value of the option grant was estimated on the date of grant utilizing the Black-Scholes option pricing model. The fair value of these options was determined to be $99,924 based on the following assumptions: expected life of options of 5 years, expected volatility of 305.3%, risk-free interest rate of 1.01% and no dividend yield.



 

 

 

 

 

 

 

 

 

 




Options



Number of

Shares

Weighted

Average

Exercise

Price

Remaining

Contractual

Life

(in years)



Aggregate

Intrinsic Value

 

 

 

 

 

Outstanding at February 1, 2012

13,450,000

$0.25

2.02 yrs

$0.00

Issued

2,500,000

$0.06

4.38 yrs

$0.00

Exercised

-

-

-

 

Expired/Cancelled

(1,700,000)

$0.10

-

$0.00

Outstanding at October 31, 2012

14,250,000

$0.23

2.57 yrs

$0.00

Exercisable at October 31, 2012

14,250,000

$0.23

2.57 yrs

$0.00


The following table summarizes information about stock options at October 31, 2012:


 

 

 

 

 

 

 

 

 

 

 

 


Range

of

Prices

Weighted

Average

Number

Outstanding



Contractual

Life

Weighted Average

Exercise

Price

Weighted

Average

Number

Exercisable

Weighted

Average

Exercise

Price

 

 

 

 

 

 

$0.05

2,000,000

3.55 yrs

$0.05

2,000,000

$0.05

$0.06

3,150,000

2.22 yrs

$0.06

3,150,000

$0.06

$0.08

500,000

2.22 yrs

$0.08

500,000

$0.08

$0.30

100,000

2.22 yrs

$0.30

100,000

$0.30

$0.40

4,000,000

.10 yrs

$0.40

4,000,000

$0.40

$0.60

2,000,000

3.10 yrs

$0.60

2,000,000

$0.60

$0.06

2,500,000

4.38 yrs

$0.06

2,500,000

$0.06


During the year ended January 31, 2011, the Company issued 6,626,486 warrants in connection with a private placement. The warrants are exercisable for a period of two years for $0.12 per share. However, if the common shares trade at over $0.18 per share in any 20-day period during the life of the warrants, the Company has the right to accelerate the expiration date of the warrants. Warrants in the amount of 2,859,820 were exercised by two shareholders in settlement of debt. During the nine months ended October 31, 2012, 3,766,666 warrants expired.


13

 ----------------------------------------------------------------------------------------------------------------------------------------------------------



On June 19, 2012 the Company issued 2,000,000 shares of common stock and a warrant to purchase 1,000,000 shares of common stock at $0.05 per share within a three year period.


On August 31, 2012, in connection with a note payable, the Company entered into a Warrant Purchase Agreement with an unaffiliated accredited investor. As part of the terms of the note, the Company issued a five year warrant to the lender to purchase 6,814,000 shares of Company common stock, exercisable at $0.02 per share. The fair value of these warrants at the date of grant was $132,332 using a Black Scholes option pricing model and the following assumptions: expected life of warrants is five years, expected volatility rate of 194.81%, risk free rate of 0.59%, and an exercise price of $0.02.  The $132,332 was amortized to interest expense over the term of the bridge loan.    


On October 31, 2012, the Company had the following outstanding warrants:


 

 

 

 

 

 



Exercise

Price



Number

of Shares


Remaining

Contractual

Life

Exercise Price

Times Number

of Shares

Weighted

Average

Exercise Price


Aggregate Intrinsic Value

 

 

 

 

 

 

$0.05

1,000,000

2.63 yrs

$50,000

$0.05

$0.00

$0.02

6,814,000

4.84 yrs

$136,280

$0.02

$0.00


NOTE 10 - Related Party Transactions


During 2011, Minex Exploration which is controlled by our Director Gregory Schifrin, provided services to New Fork related to maintaining our mining claims in Sweetwater County, Wyoming for $86,358. As of October 31, 2012, $51,358 was owed to Minex Exploration for these services.


Prior to the acquisition of New Fork in March 2012, former employees of the Company had advanced/loaned the Company money.  Outstanding liabilities related to the advances/loans as of October 31, 2012 include $191,000 in notes payable, $284,936 in accounts payable and accrued expenses to related parties and $271,667 in accounts payable and accrued expenses - shareholders.


NOTE 11 - Subsequent Events


On September 17, 2012 the Company’s Board of Directors and on November 12, 2012 the Company’s shareholders approved an amendment to change the name of the Company to Cyclone Uranium Corporation and also to increase the Company’s authorized shares of common stock to 600,000,000.  The Company filed an amendment to its Articles of Incorporation on December 5, 2012 to effect the name change and increase the authorized capital of the Company.  The amendment was effective on December 14, 2012.


14

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 ITEM 2.   Management's Discussion and Analysis of Financial Condition and Results of

                  Operations.

 

Cautionary Statement about Forward-Looking Statements

 

This Form 10-Q contains forward-looking statements regarding future events and the Company’s future results that are subject to the safe harbors created under the Securities Act of 1933 (the “Securities Act”) and the Securities Exchange Act of 1934 (the “Exchange Act”). These statements are based on current expectations, estimates, forecasts, and projections about the industry in which the Company operates and the beliefs and assumptions of the Company’s management. Words such as “hopes,” “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “continues,” “may,” variations of such words, and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections of the Company’s future financial performance, the continuing development of the Company’s website, the prospects for selling advertising on the website and new visitors and visitor page views related to advertising agreements, the Company’s anticipated growth and potentials in its business, and other characterizations of future events or circumstances are forward-looking statements. Readers are cautioned that these forward-looking statements are only predictions and are subject to risks, uncertainties, and assumptions that are difficult to predict, including those identified under “Risk Factors” in our Form 10-K for the year ended January 31, 2012.  Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements.

 

The Company is under no duty to update any of these forward-looking statements after the date of this report. You should not place undue reliance on these forward-looking statements.


Overview


Cyclone Uranium Corporation (formerly known as Fischer-Watt Gold Company, Inc., collectively with its subsidiaries, "Fischer-Watt", "FWG" or the "Company"), was formed under the laws of the State of Nevada in 1986. Fischer-Watt's primary business is mining and mineral exploration, and to that end to own, acquire, improve, sell, lease, convey lands or  mineral  claims or any  right,  title or  interest  therein;  and to search, explore,  prospect or drill for and exploit ores and minerals therein or thereupon.


Mineral Properties


Through several acquisitions, the Company evolved and has focused on building a portfolio of uranium mining claims in Wyoming, South Dakota and Arizona.  The most recent of which was the March 14, 2012 acquisition of New Fork.  New Fork's assets are comprised of 521 federal mining claims covering about 10,000 acres of BLM land.  These claims cover a large portion of the sinuous, uranium bearing roll-front that exists in this part of south-central Wyoming.  The Company’s existing Cyclone Rim claims cover a 28-mile extent of the western portion of this same roll-front trend.  This area of Sweetwater County is a historical uranium-mining district that is seeing a resurgence of development activity.  The Company now holds significant acreage on key uranium ground in the Red Desert.

 

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On March 19, 2012, James G. Baughman was appointed Chairman, President, CEO, and acting Chief Financial Officer to succeed Peter Bojtos who had held those positions since 2005.  Mr. Baughman is an experienced geologist and mining company executive with proven management skills, and possesses an international background in the mining industry. Mr. Baughman has worked as a geologist for more than 25 years in mining operations and mineral exploration projects for precious, base metals, and uranium and has also provided technical services and project management for a number of major and junior mining companies.


Results of Operations


The following discussion involves the results of operations for the quarters ended October 31, 2012 and October 31, 2011.


The Company had no revenue from production during the quarters ended October 31, 2012 or 2011 as the Company had no properties in production.


Exploration expenses for the quarter ended October 31, 2012 were $66,584 compared to $33,455 for the quarter ended October 31, 2011.  This increase is attributed to the additional mining claims acquired in the New Fork transaction.


General and administrative expenses for the quarter ended October 31, 2012 amounted to $132,856 compared to $104,086 for the quarter ended October 31, 2011.  General and administrative expenses increased approximately 27% primarily due to increased professional services incurred during the quarter.


Total other expenses for the quarter ended October 31, 2012 were $146,919 compared to $7,800 for the quarter ended October 31, 2011.  Most of this increase was attributable to the interest expense associated with warrants issued during the most recent quarter.


For the quarter ended October 31, 2012, the Company reported a net loss of $346,359 compared to a net loss of $145,341 for the quarter ended October 31, 2011.


The following discussion involves the results of operations for the nine months ended October 31, 2012 and October 31, 2011.


The Company had no revenue from production during the nine months ended October 31, 2012 or 2011 as the Company had no properties in production.


Exploration expenses for the nine months ended October 31, 2012 were $164,368 compared to $96,945 for the nine months ended October 31, 2011.  This increase is attributed to the additional mining claims acquired in the New Fork transaction.


General and administrative expenses for the nine months ended October 31, 2012 amounted to $405,594 compared to $312,203 for the nine months ended October 31, 2011.  This increase was largely attributable with costs associated with the New Fork acquisition and additional professional service costs incurred.  General and administrative costs are closely monitored and the Company continues to use contract personnel whenever needed.


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Total other expenses for the nine months ended October 31, 2012 were $162,244 compared to $17,110 for the nine months ended October 31, 2011.  Most of this increase was attributable to the interest expense associated with warrants issued during the most recent quarter.


During the nine months ended October 31, 2012 the Company recognized $281,477 of impairment charges relating to our mineral interests compared to $-0- of impairment charges for the nine months ended October 31, 2011.  The impairment charges resulted from the Company’s evaluation of certain mineral interests associated with the New Fork acquisition.


For the nine months ended October 31, 2012, the Company reported a net loss of $1,013,683 compared to a net loss of $426,258 for the nine months ended October 31, 2011.



Liquidity and Financial Condition


The Company had unrestricted cash on hand at October 31, 2012, of $80,632 compared to $315 on January 31, 2012. The increase was attributable to cash injected from the acquisition of New Fork and note payable from an unaffiliated accredited investor.  The Company also holds restricted cash of $35,000 relating to reclamation bonds covering the mineral properties acquired from Tournigan Energy.



Current liabilities amounted to $1,100,111 on October 31, 2012 compared to $845,654 on January 31, 2012 of which $747,603 and $839,040, respectively, were owed to affiliates.  The Company increased its current liabilities due to a $300,000 bridge loan from a non-affiliate on August 31, 2012, which is currently in default.  Current assets amount to $333,239 resulting in a working capital deficit of $766,872 at October 31, 2012.


Cash used in operating activities for the nine months ended October 31, 2012 was $418,247 compared to $232,432 for the nine months ended October 31, 2011.


Cash provided from investing activities for the nine months ended October 31, 2012 was $297,564 compared to $-0- for the nine months ended October 31, 2011.  This increase was due to an infusion of cash from the New Fork acquisition.


Cash provided by financing activities for the nine months ended October 31, 2012 was $201,000 compared to $180,000 for the nine months ended October 31, 2011.  The increase was primarily due to proceeds from the sale of  common stock and a bridge loan, offset by repayment of a portion of a shareholder note payable.


The Company recognizes its need for additional funding either from equity sales or borrowings to create a more favorable working capital ratio and allow for a more aggressive property acquisition program. The Company also recognizes that there is no assurance that adequate additional financing is either available or achievable on terms acceptable to it.

 

The Company's financial statements are prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has experienced significant net losses since inception and has a significant negative working capital position.  These issues raise substantial doubt about the Company's ability to continue as a going concern.


17

 ----------------------------------------------------------------------------------------------------------------------------------------------------------



Other


Management believes that the Company has adequately reserved its reclamation commitments. Management also believes that the Company is substantially in compliance with all environmental regulations.


While it intends to continue with its uranium exploration, management also continues to evaluate precious and/or base-metal mineral properties with a view to developing into a cash generating, profitable, producing mine. The chief area of interest is in the western United States.



Contractual Obligations


The Company entered into an employment agreement with James Baughman on March 19, 2012.  The term is indefinite and provides for an annual salary of $36,000.  Upon termination without cause, Mr. Baughman is entitled to two times the annual salary, two times the targeted annual bonus and accrued but unused vacation time.

 

Off Balance Sheet Arrangements


The Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our shareholders.

 

Recently issued and adopted accounting pronouncements


There were various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries. None of the updates are expected to have a material impact on the Company's consolidated financial statements.


Business Combinations


On March 14, 2012, Fischer-Watt and the Shareholders of New Fork Uranium Corporation, a Wyoming corporation, entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) whereby the shareholders of Company sold all of the issued and outstanding shares of New Fork to the Fischer-Watt in exchange for the issuance to the shareholders of an aggregate of 50,000,000 shares of common stock, $.001 par value, of Fischer-Watt.


The 50,000,000 shares of common stock of Fischer-Watt issued pursuant to the Stock Purchase Agreement were issued pro rata to all of the shareholders of New Fork on the basis of 0.877192983 shares of Fischer-Watt’s common stock for each outstanding New Fork share of common stock issued and outstanding on the effective date of the Stock Purchase Agreement.  


18

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Critical Accounting Policies

 

There were no material changes to critical accounting policies since January 31, 2012.

 

 

Item 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET

              RISK.


           Not applicable.


Item 4. CONTROLS AND PROCEDURES


Disclosure Controls and Procedures

 

As required by Rule 13a-15 under the Securities Exchange Act of 1934 (the “1934 Act”), as of October 31, 2012, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures.  This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer (our principal executive officer).  Based upon and as of the date of that evaluation, our Chief Executive Officer concluded that our disclosure controls and procedures are not effective to timely alert management to material information required to be included in our periodic reports filed with the Securities and Exchange Commission  and to ensure that information required to be disclosed in such reports is accumulated and communicated to our management, including our Chief Executive Officer, to allow timely decisions regarding required disclosures.  However, management believes that the financial statements included in this report present fairly, in all material respects, the Company’s consolidated financial position, results of operations and cash flows for the periods presented.  Due to our limited financial resources and limited personnel we are not able to, and do not intend to, immediately take any action to remediate the material weaknesses identified.


19

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Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the 1934 Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.  Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the 1934 Act is accumulated and communicated to our management, including our principal executive officer as appropriate, to allow timely decisions regarding required disclosure.

 

Changes in Internal Control Over Financial Reporting


We had significant changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) promulgated by the SEC under the 1934 Act) during the nine months ended October 31, 2012, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting as a result of the acquisition of New Fork. Primarily we had changes in key personnel and changes in key policies and procedures as we integrated the results of this new entity. We continue to develop controls and procedures and plans to implement additional controls and procedures sufficient to accurately report our financial performance in the foreseeable future.


 

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PART II - OTHER INFORMATION


Item 1.  LEGAL PROCEEDINGS


None.

 

Item 1A.  RISK FACTORS

 

There have been no material changes to the risk factors set forth in Item 1A. to Part II of our Form 10-Q, as filed on July 6, 2012, except to the extent factual information disclosed elsewhere in this Form 10-Q relates to such risk factors.


Item 2.    UNREGISTERED SALES OF EQUITY SECURITIES


On June 19, 2012 the Company issued 2,000,000 shares of common stock and a warrant to purchase 1,000,000 shares of our common stock at $0.05 per share within a three year period.  The Company received $50,000 for the purchase of these securities.  The common stock and warrant were issued to the investor in reliance on the exemption from registration contained in Rule 506 of Regulation D under the Securities Act of 1933.  No commissions or other remuneration were paid on the transaction.  

 

Item 3. DEFAULTS UPON SENIOR SECURITIES

 

On the October 30, 2012 maturity date, the Company failed to pay the principal and interest outstanding on the August 31, 2012 Secured Convertible Promissory Note issued by the Company to an unaffiliated accredited investor.  As such, the Company is in default under the note, which is secured by all of the real and personal property of the Company.  The default interest rate on the note is 45%.  The principal amount of the note is $300,000. We are currently engaged in discussions with the lender with regard to negotiating an extension on the note.


Item 4. MINE SAFETY DISCLOSURES


Not applicable.


Item 5. OTHER INFORMATION


None.



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Item 6. EXHIBITS

 



Exhibit No.

Document

3.1

Articles of Incorporation, as amended.  Filed herewith.

 

 

3.2

By-laws of the Corporation. Amended and Restated. Filed herewith.

 

 

10.1

Note and Warrant Purchase Agreement, dated August 31, 2012 between the Corporation and BOCO Investments, LLC. Filed herewith.

 

 

31

Officers Certification under Section 302 of the Sarbanes-Oxley Act of 2002 for James G. Baughman.  Filed herewith.

 

 

32

Certification of Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act of 2002 for James G. Baughman. Filed herewith.

 

 

101

Interactive data files pursuant to Rule 405 of Regulation S-T.  Filed herewith.


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SIGNATURES


In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  

  

 

CYCLONE URANIUM CORPORATION

  

  

 

  

  

  

  

 

  

  

  

  

 

  

  

Date:

  December 17, 2012

 

By:

/s/ James G. Baughman

  

  

 

  

James G. Baughman

  

  

 

  

President and Chief Executive Officer





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