HAWK URANIUM INC. (A Development Stage Company)

Transcription

1 HAWK URANIUM INC. INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED FEBRUARY 28, 2010 (EXPRESSED IN CANADIAN DOLLARS) (UNAUDITED)

2 MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING The accompanying unaudited interim consolidated financial statements of Hawk Uranium Inc. (A Development Stage Company) were prepared by management in accordance with Canadian generally accepted accounting principles. The most significant of these accounting principles have been set out in the August 31, 2009 audited consolidated financial statements. Only changes in accounting policies have been disclosed in these unaudited interim consolidated financial statements. Management acknowledges responsibility for the preparation and presentation of the unaudited interim consolidated financial statements, including responsibility for significant accounting judgments and estimates and the choice of accounting principles and methods that are appropriate to the Company s circumstances. Management has established processes, which are in place to provide them sufficient knowledge to support management representations that they have exercised reasonable diligence that (i) the unaudited interim consolidated financial statements do not contain any untrue statement of material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it is made, as of the date of and for the periods presented by the unaudited interim consolidated financial statements and (ii) the unaudited interim consolidated financial statements fairly present in all material respects the financial condition, results of operations and cash flows of the Company, as of the date of and for the periods presented by the unaudited interim consolidated financial statements. The Board of Directors is responsible for reviewing and approving the unaudited interim consolidated financial statements together with other financial information of the Company and for ensuring that management fulfills its financial reporting responsibilities. An Audit Committee assists the Board of Directors in fulfilling this responsibility. The Audit Committee meets with management to review the financial reporting process and the unaudited interim consolidated financial statements together with other financial information of the Company. The Audit Committee reports its findings to the Board of Directors for its consideration in approving the unaudited interim consolidated financial statements together with other financial information of the Company for issuance to the shareholders. Management recognizes its responsibility for conducting the Company s affairs in compliance with established financial standards, and applicable laws and regulations, and for maintaining proper standards of conduct for its activities. NOTICE TO READER Under National Instrument , Part 4, subsection 4.3(3)(a), if an auditor has not performed a review of the interim consolidated financial statements, they must be accompanied by a notice indicating that the financial statements have not been reviewed by an auditor. The accompanying unaudited interim consolidated financial statements of the Company have been prepared by and are the responsibility of the Company's management. The Company's independent auditor has not performed a review of these interim consolidated financial statements in accordance with standards established by the Canadian Institute of Chartered Accountants for a review of interim financial statements by an entity's auditor

3 Interim Consolidated Balance Sheets February 28, August 31, Assets Current assets Cash and cash equivalents $ 162,694 $ 127,213 Guaranteed investment certificate with Canadian chartered bank - 100,000 Prepaid expenses 11,294 25,369 Sundry receivables 9,465 43,410 Accounts receivable 19,070 21,447 Promissory note receivable (Note 5) - 70,956 Marketable securities 411,190 39,980 Investment in Wits Basin Precious Minerals Inc. (Note 6) 557, ,321 1,171, ,696 Equipment (Note 7) 14,271 16,790 Mining properties (Note 8) 2,224,093 2,623,723 $ 3,409,692 $ 3,570,209 Liabilities Current liabilities Accounts payable and accrued liabilities $ 159,613 $ 251,617 Shareholders' Equity Share capital Authorized Unlimited number of common shares Issued (Note 9) 3,555,892 3,375,562 Contributed surplus 2,594,110 2,359,519 Warrants (Note 11) 5,687,001 5,734,199 Deficit (8,630,335) (7,894,282) Accumulated other comprehensive (loss) income 43,411 (256,406) Nature of Operations and Going Concern (Note 1) Subsequent Events (Note 16) 3,250,079 3,318,592 $ 3,409,692 $ 3,570,209 Approved on Behalf of the Board: "Vance White" Director "Walter Brooks" Director The accompanying notes are an integral part of these unaudited interim consolidated financial statements - 2 -

4 Interim Consolidated Statements of Operations Cumulative since inception of the Three Months Ended Six Months Ended development February 28 February 28 stage on March 1, 2003 Revenue Management and rental income $ - $ - $ - $ 28,831 $ 387,121 Interest income - 2,203 1,627 5, ,119 Gain on receipt of Wits Basin Precious Minerals Inc. warrants - 1,000-23,250 36,300 Gain on disposal of investment in Wits Basin Precious Minerals Inc ,932 Gain (loss) on the disposal of marketable securities (12,742) - (9,926) - 694,239 Consulting, net of expenses ,398 Gain on contribution of mining option to joint venture ,402,836 (12,742) 3,203 (8,299) 57,790 4,638,945 Expenses Accounting and corporate services 11,005 9,515 17,230 18, ,397 Amortization 1, ,518 1,624 20,778 Directors' stock-based compensation ,950 Interest expense ,038 Office and general 37,334 92,019 70, ,630 1,095,103 Management fees (Note 14) 39,000 44, ,000 83, ,544 Professional fees 148, , , ,340 1,839,073 Rent 6,489 6,534 12,978 13, ,420 Shareholder relations 14,475 55,835 22,063 91,246 1,129,799 Expense recoveries (10,106) Stock-based compensation ,037,190 General exploration expense (Note 8(iii)) 31,001-95, ,709 Loss on disposal of mining properties , ,418 Write-off of mining claims 161, , , ,632 1,217,365 Write-off of oil and gas properties ,747 Impairment of mining properties ,137,109 Forgiveness of debt (1,053) Loss (gain) on foreign exchange 1,103 (9,463) 3,446 (52,516) (12,844) Gain on disposal of equipment (607) Write-down of investment in Wits Basin Precious Minerals Inc ,260,611 Write-down of marketable securities , ,588 1,072, ,754 1,266,988 14,065,082 (Loss) before income taxes $ (464,330) $(1,069,294) $ (736,053) $(1,209,198) $(9,426,137) The accompanying notes are an integral part of these unaudited interim consolidated financial statements - 3 -

5 Interim Consolidated Statements of Operations Cumulative since inception of the Three Months Ended Six Months Ended development February 28 February 28 stage on March 1, 2003 (Loss) before income taxes $ (464,330) $(1,069,294) $ (736,053) $(1,209,198) $(9,426,137) Income taxes Current income taxes expense ,860 Future income tax recovery (958,792) Net (loss) for the period $ (464,330) $(1,069,294) $ (736,053) $(1,209,198) $(8,469,205) Net (loss) per share - basic and diluted (Note 12) $ (0.01) $ (0.02) $ (0.01) $ (0.02) Weighted average number of shares 54,640,944 52,445,941 54,107,607 51,635,286 The accompanying notes are an integral part of these unaudited interim consolidated financial statements - 4 -

6 Interim Consolidated Statements of Comprehensive Loss Cumulative since inception of the Three Months Ended Six Months Ended development February 28 February 28 stage on March 1, 2003 Net (loss) for the period $ (464,330) $(1,069,294) $ (736,053) $(1,209,198) $(8,469,205) Comprehensive (loss), net of taxes Increase (decrease) in unrealized gains on available-for-sale marketable securities and investment 274,771 86, ,053 (309,709) 25,324 Reclassification of realized loss on available-for-sale marketable securities to income 11,479-7,764-18,087 Comprehensive (loss) for the period $ (178,080) $ (983,026) $ (436,236) $(1,518,907) $(8,425,794) Interim Consolidated Statements of Deficit Cumulative since inception of the Three Months Ended Six Months Ended development February 28 February 28 stage on March 1, 2003 Net (loss) for the period $ (464,330) $(1,069,294) $ (736,053) $(1,209,198) $(8,469,205) Deficit, beginning of period (8,166,005) $(5,157,950) (7,894,282) (5,018,046) (150,317) Costs of amalgamation (10,813) Deficit, end of period $(8,630,335) $(6,227,244) $(8,630,335) $(6,227,244) $(8,630,335) The accompanying notes are an integral part of these unaudited interim consolidated financial statements - 5 -

7 Interim Consolidated Statements of Changes in Shareholders' Equity Accumulated Other Contributed Comprehensive Share Capital Surplus Warrants Deficit Loss Total Balance, August 31, 2008 $ 4,052,451 $ 2,220,650 $ 5,021,706 $ (5,018,046) $ 210,404 $ 6,487,165 Shares issued for debt settlement 22,844 26, ,661 Issued for mining properties 47, ,600 Issued for mining properties 11, ,200 Stock-based compensation - 66, ,012 Issuance of warrants - valuation (758,533) - 758, Expired warrants - 46,040 (46,040) Net change in unrealized gains on available-for-sale marketable securities (470,833) (470,833) Reclassification of loss on available-for-sale marketable securities ,023 4,023 Net loss for the year (2,876,236) - (2,876,236) Balance, August 31, ,375,562 2,359,519 5,734,199 (7,894,282) (256,406) 3,318,592 Shares issued for debt settlement 136, ,382 Stock-based compensation - 29, ,391 Issued pursuant to private placement 199,481-2, ,950 Issuance of warrants - valuation (155,533) - 155, Expired warrants - 205,200 (205,200) Net change in unrealized gains on available-for-sale marketable securities and investment , ,817 Net loss for the period (736,053) - (736,053) Balance, February 28, 2010 $ 3,555,892 $ 2,594,110 $ 5,687,001 $ (8,630,335) $ 43,411 $ 3,250,079 The accompanying notes are an integral part of these unaudited interim consolidated financial statements - 6 -

8 Interim Consolidated Statements of Cash Flows Cash and Cash Equivalents (Used in) Provided by: Cumulative since inception of the Three Months Ended Six Months Ended development February 28 February 28 stage on March 1, 2003 Operating Activities Payments to suppliers and employees $ (261,872) $ (86,844) $ (349,483) $ (313,473) $(3,950,530) Interest received - 2, ,709 94,210 Borrowing costs (15,979) (261,872) (84,336) (349,476) (307,764) (3,872,299) Financing Activities Shares issued 210, ,000-8,342,285 Special warrant issued ,062 Promissory notes payable ,357 Costs of issue - cash (8,050) - (8,050) - (711,199) 201, ,950-8,487,505 Investing Activities Proceeds on disposal of investment in Wits Basin Precious Minerals Inc. 19,425-19,425-43,175 Proceeds on disposal of short-term deposits - 200, , ,000 1,500,000 Purchase of short-term deposits (1,500,000) Proceeds on disposal of marketable securities ,629-1,345,259 Purchase of marketable securities (362,166) Cash (paid) received on (issuance) reduction of promissory note 69,130 (4,012) 69,130 (78,549) (5,673) Acquisition of equipment (43,443) Acquisition and exploration costs of mining properties (19,210) (221,521) (76,177) (967,516) (4,635,806) Disposal of oil and gas properties (917,747) Option payments received on mining properties ,894 Payments received on disposal of mining properties ,000-20,000 Cash acquired on amalgamation ,500 Cash paid on acquisition of investment in Wits Basin (34,608) Costs of amalgamation (131,488) Effect on mining properties as a result of the amalgamation ,699 69,345 (25,533) 183,007 (246,065) (4,499,404) - 7 -

9 Interim Consolidated Statements of Cash Flows Cumulative since inception of the Three Months Ended Six Months Ended development February 28 February 28 stage on March 1, 2003 Change in cash and cash equivalents during the period 9,423 (109,869) 35,481 (553,829) 115,802 Cash and cash equivalents, beginning of period 153, , , ,370 46,892 Cash and cash equivalents, end of period $ 162,694 $ 154,541 $ 162,694 $ 154,541 $ 162,694 Other Supplementary Cash Flow Information Cash paid for interest $ - $ - $ - $ - $ 15,979 Supplementary Schedule of Non-Cash Transactions Shares issuance included in mining properties $ - $ - $ - $ - $ 802,000 Shares issue on property right cancellation $ - $ - $ - $ - $ 31,250 Shares issue on debt settlement $ - $ - $ - $ - $ 498,900 Shares issue on settlement of accounts payable $ 80,080 $ - $ 136,382 $ - $ 352,047 Warrants issued on settlement of accounts payable $ - $ - $ - $ - $ 104,000 Marketable securities issued on debt settlement $ - $ - $ - $ - $ 26,000 Accounts receivable settled through receipt of shares $ - $ - $ - $ - $ 292,750 Warrants received on extension of promissory note $ - $ (1,000) $ - $ (23,250) $ 36,300 The accompanying notes are an integral part of these unaudited interim consolidated financial statements - 8 -

10 1. Nature of Operations and Going Concern Hawk Uranium Inc. (a development stage company) ("the Company" or "Hawk") is in the mineral exploration business. It has a wholly-owned US subsidiary Hawk Uranium USA, Inc. ("Hawk USA") which holds an investment in Wits Basin Precious Minerals Inc. ("Wits Basin") which has investments in various mining properties throughout the world. The investment in Wits Basin is considered to be a portfolio investment, the Company owns 3.7% of the outstanding common shares of Wits Basin as at February 28, 2010 (4.3% as at August 31, 2009). In 2003, Hawk USA held a 50% interest in a joint venture called Active Hawk, LLC ("Active Hawk") which held an investment in a South African property. The joint venture was disposed to the other joint venturer, Wits Basin, in return for more shares of Wits Basin. To date, the Company has not earned revenue from its mining properties and is considered to be in the development stage as defined by the Canadian Institute of Chartered Accountants ("CICA") Accounting Guideline 11. The business of exploring for minerals involves a high degree of risk and there can be no assurance that planned exploration and development programs will result in profitable operations. The recoverability of amounts shown for mining properties is dependant upon completion of the acquisition of the property interests, the discovery of economically recoverable reserves, confirmation of the Company's interest in the underlying claims, the ability of the Company to obtain necessary financing to complete the development and future profitable production or, alternatively, upon disposition of such property at a profit. Changes in future conditions could require material write-downs of the carrying values of mining properties. Although the Company has taken steps to verify title to the property on which it is conducting exploration and in which it is acquiring an interest, in accordance with industry standards for the current stage of exploration of such property, these procedures do not guarantee the Company's title. Property title may be subject to unregistered prior agreements, aboriginal claims, and noncompliance with regulatory requirements. As at February 28, 2010, the Company had working capital of $1,011,715 and an accumulated deficit of $8,630,335. Management of the Company believes that it has sufficient funds to pay its ongoing administrative expenses and to meet its liabilities for the ensuing twelve months as they fall due. In assessing whether the going concern assumption is appropriate, management takes into account all available information about the future, which is at least, but not limited to, twelve months from the end of the reporting period. The Company s ability to continue operations and fund its mineral property expenditures is dependent on management s ability to secure additional financing. Management is actively pursuing such additional sources of financing, and while it has been successful in doing so in the past, there can be no assurance it will be able to do so in the future. Management is aware, in making its assessment, of material uncertainties related to events or conditions that may cast significant doubt upon the entity s ability to continue as a going concern. Accordingly, they do not give effect to adjustments that would be necessary should the Company be unable to continue as a going concern and therefore to realize its assets and liquidate its liabilities and commitments in other than the normal course of business and at amounts different from those in the accompanying unaudited interim consolidated financial statements

11 2. Basis of Presentation and Accounting Policies The unaudited interim consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and notes to the consolidated financial statements required by Canadian generally accepted accounting principles for annual consolidated financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended February 28, 2010 may not necessarily be indicative of the results that may be expected for the year ending August 31, The consolidated balance sheet as at August 31, 2009 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by Canadian generally accepted accounting principles for complete consolidated financial statements. The unaudited interim consolidated financial statements have been prepared by management in accordance with the accounting policies described in the Company's annual audited consolidated financial statements for the year ended August 31, 2009, except as noted below. For further information, refer to the audited consolidated financial statements and notes thereto included in the Company's annual consolidated financial statements for the year ended August 31, Goodwill and Intangible Assets In November 2007, the CICA approved Handbook Section 3064, Goodwill and Intangible Assets which replaces the existing Handbook Sections 3062, Goodwill and Other Intangible Assets and 3450 Research and Development Costs. This standard is effective for interim and annual financial statements relating to fiscal years beginning on or after October 1, 2008, with earlier application encouraged. The standard provides guidance on the recognition, measurement and disclosure requirements for goodwill and intangible assets. The Company adopted this standard on September 1, The application of this new standard had no impact on the Company's consolidated financial statements as at and for the three and six months ended February 28, Future Accounting Changes International Financial Reporting Standards ( IFRS ) In January 2006, the CICA s Accounting Standards Board ("AcSB") formally adopted the strategy of replacing Canadian generally accepted accounting principles with IFRS for Canadian enterprises with public accountability. The current conversion timetable calls for financial reporting under IFRS for accounting periods commencing on or after January 1, On February 13, 2008 the AcSB confirmed that the use of IFRS will be required in 2011 for publicly accountable profit-oriented enterprises. For these entities, IFRS will be required for interim and annual financial statements relating to fiscal years beginning on or after January 1, The Company has commenced the development of an IFRS implementation plan to prepare for this transition. Financial Instruments During 2009, CICA Handbook Section 3862, Financial Instruments - Disclosures, was amended to require disclosure about the inputs to fair value measurements, including their classification within a hierarchy that prioritizes the inputs to fair value measurement. The three levels of the fair value hierarchy are: Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities; Level 2 - Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly, and; Level 3 - Inputs that are not based on observable market data. This amended standard applies to annual financial statements for fiscal years ending after September 30, Accordingly the Company will adopt this amendment on August 31, 2010, with no anticipated impact on its operating results or financial position

12 2. Basis of Presentation and Accounting Policies (Continued) Future Accounting Changes (Continued) Business Combinations, Consolidated Financial Statements and Non-Controlling Interests The CICA issued three new accounting standards in January 2009: Section 1582, "Business Combinations", Section 1601, "Consolidated Financial Statements" and Section 1602, "Non-Controlling Interests". These new standards will be effective for fiscal years beginning on or after January 1, Section 1582 replaces section 1581 and establishes standards for the accounting for a business combination. It provides the Canadian equivalent to IFRS 3 - Business Combinations. Sections 1601 and 1602 together replace section 1600, Consolidated Financial Statements. Section 1601 establishes standards for the preparation of consolidated financial statements. Section 1602 establishes standards for accounting for a non-controlling interest in a subsidiary in consolidated financial statements subsequent to a business combination. It is equivalent to the corresponding provisions of IFRS las 27 - Consolidated and Separate Financial Statements. The Company is in the process of evaluating the requirements of the new standards. 3. Capital Management When managing capital, the Company s objective is to ensure the entity continues as a going concern as well as to achieve optimal returns to shareholders and benefits for other stakeholders. Management adjusts the capital structure as necessary, in order to support the acquisition, exploration and development of its projects. The Board of Directors does not establish quantitative return on capital criteria for management, but rather relies on the expertise of the Company's management to sustain future development of the business. The Company considers its capital to be equity, which is comprised of share capital, contributed surplus, warrants, deficit and accumulated other comprehensive (loss) income which at February 28, 2010 totaled $3,250,079 (August 31, $3,318,592). The properties in which the Company currently has an interest are in the exploration stage. As such the Company is dependent on external financing to fund its activities. In order to carry out its planned exploration programs and pay for administrative costs, the Company will spend its existing working capital and raise additional amounts when economic conditions permit it to do so. Management has chosen to mitigate the risk and uncertainty associated with raising additional capital in current economic conditions by: (i) maintaining a liquidity cushion in order to address any potential disruptions or industry downturns, if possible; (ii) minimizing discretionary disbursements; (iii) reducing or eliminating exploration expenditures that are of limited strategic value; and (iv) exploring alternative sources of liquidity. In light of the above, the Company will continue to assess new properties and seek to acquire an interest in additional properties if the Company believes there is sufficient potential and if it has adequate financial resources to do so. Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is appropriate. There were no changes in the Company's approach to capital management during the three and six months ended February 28, The Company is not subject to any capital requirements imposed by a regulator or lending institution. The Company expects that its current capital resources will be sufficient to discharge its liabilities as at February 28,

13 4. Financial Risk Factors (a) (b) Property Risk The Company s major mineral properties are: (i) Holdsworth Property, (ii) McFauld's Lake - McDonald JV Property (McNugget), (iii) Charlebois Lake Property, (iv) Grand Calumet Property. Unless the Company acquires or develops additional material properties, the Company will be mainly dependent upon these properties. If no additional major mineral properties are acquired by the Company, any adverse development affecting these properties would have a material adverse effect on the Company s financial condition and results of operations. Financial Risk The Company s activities expose it to a variety of financial risks: credit risk, liquidity risk, market risk [including interest rate, foreign exchange rate, and commodity and equity price risk]. Risk management is carried out by the Company's management team with guidance from the Audit Committee under policies approved by the Board of Directors. The Board of Directors also provides regular guidance for overall risk management. Credit Risk Credit risk is the risk of loss associated with a counterparty s inability to fulfill its payment obligations. The Company's credit risk is primarily attributable to cash and cash equivalents, sundry receivables, accounts receivable, and promissory note receivable. Cash and cash equivalents are held with reputable financial institutions which are closely monitored by management. Financial instruments included in sundry receivables, and accounts receivable consist of sales tax receivable from government authorities in Canada, and receivables from directors and employees for operating disbursements, and sale proceeds from the disposition of the Company's interest in its Cluff Lake property. The promissory note receivable consists of an interest bearing note from a public company and is unsecured. Management believes that the credit risk concentration with respect to financial instruments included in sundry receivables, accounts receivable, and promissory note receivable is minimal. Liquidity Risk The Company's approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due. As at February 28, 2009, the Company had an aggregate cash and cash equivalents and guaranteed investment certificate balance of $162,694 (August 31, $227,213) to settle current liabilities of $159,613 (August 31, $251,617). All of the Company's financial liabilities have contractual maturities of less than 60 days and are subject to normal trade terms. (refer to subsequent events, Note 16)

14 4. Financial Risk Factors (Continued) (b) Financial Risk (Continued) Market Risk Market risk is the risk of loss that may arise from changes in market factors such as interest rates, foreign exchange rates, and commodity and equity prices. i) Interest Rate Risk The Company has cash balances and no interest-bearing debt. The Company's current policy is to invest excess cash in investment-grade short-term deposit certificates issued by its banking institutions. The Company periodically monitors the investments it makes and is satisfied with the creditworthiness of its banks. ii) Foreign Currency Risk The Company's reporting and functional currency is the Canadian dollar and major purchases are transacted in Canadian dollars. The Company funds major exploration expenses in Canada. Management believes the foreign exchange risk derived from currency conversions is negligible and therefore does not hedge its foreign exchange risk. iii) Price Risk Sensitivity Analysis The Company is exposed to price risk with respect to commodity and equity prices. Equity price risk is defined as the potential adverse impact on the Company's earnings due to movements in individual equity prices or general movements in the level of the stock market. Commodity price risk is defined as the potential adverse impact on earnings and economic value due to commodity price movements and volatilities. The Company closely monitors commodity prices, as it relates to uranium, gold and other precious metals, individual equity movements, and the stock market to determine the appropriate course of action to be taken by the Company. The Company's investment in Wits Basin Precious Minerals Inc. and other marketable securities are subject to fair value fluctuations arising from changes in the equity and commodity markets. The Company classified its cash and cash equivalents as held-for-trading, which are measured at fair value. Sundry receivables, accounts receivable and promissory note receivable are classified as loans and receivables, which are measured at amortized cost which equals fair value. Accounts payable and accrued liabilities are classified as other financial liabilities, which are measured at amortized cost which also equals fair value. As of February 28, 2010, both the carrying and fair value amounts of the Company's financial instruments are approximately equivalent. The sensitivity analysis shown in the notes below may differ materially from actual results

15 4. Financial Risk Factors (Continued) Sensitivity Analysis (Continued) Based on management's knowledge and experience of the financial markets, the Company believes the following movements are "reasonably possible" over a three month period. i) The Company maintains common shares valued at $557,615CAD, all with respect to Wits Basin Precious Minerals Inc., and all originally denominated in USD. Sensitivity to a plus or minus 5% change in foreign exchange rates would affect net loss and comprehensive loss by approximately $28,000 with all other variables held constant. ii) iii) The Company is exposed to price risk as it relates to its investments held in marketable securities, and its investment in Wits Basin Precious Minerals Inc. Sensitivity to a plus or minus 10% change in the bid price as at February 28, 2010 would effect comprehensive loss by approximately $97,000. Commodity price risk could adversely affect the Company. In particular, the Company's future profitability and viability from mineral exploration depends upon the world market price of uranium, gold and other precious metals. Commodity prices have fluctuated significantly in recent years. There is no assurance that, even if commercial quantities of uranium, gold and other precious metals can be produced in the future, a profitable market will exist for them. As of February 28, 2010, the Company is not a producer of uranium, gold and other precious metals. As a result, commodity price risk may affect the completion of future equity transactions such as equity offerings and the exercise of stock options and warrants. This may also affect the Company's liquidity, its ability to meet its ongoing obligations, and may result in material writedowns in the Company's mineral properties. 5. Promissory Note Receivable In December 2009, the promissory note held by the Company with Wits Basin Precious Minerals Inc. ("Wits") was fully repaid. 6. Investment in Wits Basin As at February 28, 2010, the Company owned 6,191,378 (August 31, ,701,378) shares of Wits Basin. The Company is entitled to dispose of all of its shares in Wits Basin within the next twelve months. Consequently, the investment is shown as a current asset. 7. Equipment Net Book Value Net Book Value Accumulated February 28, August 31, Cost Amortization Motor vehicle $ 17,444 $ 3,173 $ 14,271 $ 16,

16 8. Mining Properties Three Months Six Months Cumulative from Ended Ended date of February 28 February 28, inception project Holdsworth Property** Balance, beginning of period $ 1,170,695 $ 1,033,455 $ 1,150,171 $ 585,710 $ - Acquisition costs ,266 Assays and sampling - 121,594 3, , ,482 Drilling - 10, , ,264 Technical report ,213 Transportation and accommodation 3,364-10,129 55,287 80,895 Exploration costs 1,007 7,853 7,720 89, ,584 Other 1,865-5,711 11,861 30,227 6, ,847 26, ,592 1,176,931 Balance, end of period $ 1,176,931 $ 1,173,302 $ 1,176,931 $ 1,173,302 $ 1,176,931 McFauld's Lake - McDonald JV Property (McNugget)** Balance, beginning of period $ 333,012 $ 333,012 $ 333,012 $ 333,012 $ - Acquisition costs ,620 Exploration costs , ,012 Balance, end of period $ 333,012 $ 333,012 $ 333,012 $ 333,012 $ 333,012 McFauld's Lake "Ring of Fire" Project** Balance, beginning of period $ - $ 698,086 $ - $ 457,891 $ - Acquisition costs ,000 Survey ,873 Geologists and consultants ,170 Exploration costs - 60, , ,589 Write-off of expenditures - (758,632) - (758,632) (758,632) - (698,086) - (457,891) - Balance, end of period $ - $ - $ - $ - $ - ** For a description of these properties, please refer to Note 8 of the audited consolidated financial statements for the year ended August 31,

17 8. Mining Properties (Continued) Three Months Six Months Cumulative from Ended Ended date of February 28 February 28, inception project Cluff Lake Project** Balance, beginning of period $ - $ 545,944 $ 313,725 $ 510,238 $ - Acquisition costs ,000 Survey , ,452 Transportation and accommodation ,483 Other ,079 Impairment (232,109) Sale of interest in project (Note 8(i)) - - (313,905) - (313,905) - - (313,725) 35,706 - Balance, end of period $ - $ 545,944 $ - $ 545,944 $ - Charlebois Lake Property** Balance, beginning of period $ 436,574 $ 760,918 $ 400,622 $ 760,918 $ - Acquisition costs (Note 8(ii)) 10,000 22,104 42,500 22, ,204 Geologists and consultants ,614 Transportation and accommodation ,007 Survey - - 3, ,251 Other ,498 Impairment (395,000) 10,000 22,104 45,952 22, ,574 Balance, end of period $ 446,574 $ 783,022 $ 446,574 $ 783,022 $ 446,574 ** For a description of these properties, please refer to Note 8 of the audited consolidated financial statements for the year ended August 31,

18 8. Mining Properties (Continued) Three Months Six Months Cumulative from Ended Ended date of February 28 February 28, inception project Grand Calumet Property** Balance, beginning of period $ 354,995 $ 623,415 $ 354,683 $ 623,415 $ - Acquisition costs ,134 Geologists and consultants ,143 Transportation and accommodation ,225 Other ,493 Impairment (350,000) ,995 Balance, end of period $ 354,995 $ 623,415 $ 354,995 $ 623,415 $ 354,995 Cortez-Gladwin Property** Balance, beginning of period $ 158,929 $ 308,704 $ 158,929 $ 286,355 $ - Acquisition costs ,665 Exploration costs ,638 Geophysical 2,974 (976) 2,974 4, ,843 Transportation and accommodation ,925 36,572 Staking ,600 Other ,626 11,585 Write-off of expenditures (161,903) - (161,903) - (321,903) (158,929) (976) (158,929) 21,373 - Balance, end of period $ - $ 307,728 $ - $ 307,728 $ - ** For a description of these properties, please refer to Note 8 of the audited consolidated financial statements for the year ended August 31,

19 8. Mining Properties (Continued) Three Months Six Months Cumulative from Ended Ended date of February 28 February 28, inception project Workman Creek Property** Balance, beginning of period $ - $ - $ - $ - $ - Acquisition costs ,000 Disposal of properties (44,000) Balance, end of period $ - $ - $ - $ - $ - 2,311,512 3,766,423 2,311,512 3,766,423 2,311,512 Quebec Refundable Tax Credits and Mining Duties Refund Balance, beginning and end of period (87,419) (87,419) (87,419) (87,419) (87,419) Total Mining Properties, End of Period $ 2,224,093 $ 3,679,004 $ 2,224,093 $ 3,679,004 $ 2,224,093 ** For a description of these properties, please refer to Note 8 of the audited consolidated financial statements for the year ended August 31, i) On November 26, 2009, the Company entered into an agreement with CanAlaska Uranium Ltd. to sell its 100% interest in 6 mineral claims and project data for the Cluff Lake located in the Western Athabasca Basin, Saskatchewan in consideration for 1,250,000 CanAlaska shares (assigned a fair value of $215,278) and a cash payment of $62,500. These amounts are included in accounts receivable. The Company will retain a Net Smelter Return (NSR) of 2.5% of which 2% will be purchasable by CanAlaska for payments of $2.0 million. ii) During the period, the Company negotiated an extension to the $40,000 option payment payable on August 7, 2009 pertaining to the Charlebois Lake property. Under the new terms, four payments of $10,000 are payable in each of four months commencing in September As compensation for the extension, the Company has agreed to issue 50,000 common shares (ascribed a fair value of $2,500) to Mr. Bell. iii) On November , the Company entered into a Letter of Intent with Xtra-Gold Resources Corp. ( Xtra ) with respect to a proposed transaction (the Transaction ) whereby the Company would obtain the exclusive right to explore for, develop and mine alluvial gold on Xtra s Kwabeng Mining Concession ( Kwabeng Concession ) in the Republic of Ghana (the Contract Mining Rights ). The proposed arrangement would have had an initial term of five years and would be renewable for successive periods of five years thereafter, provided that annual gold production in each year of a renewal period is at least 6,000 ounces. On December 16, 2009, the Company announced the letter of intent had expired, with no further activity planned with respect to the proposed transaction. Accordingly, all costs associated with the proposed transaction have been expensed in general exploration expense on the Company's statement of operations

20 9. Share Capital Number of Shares Stated Value Balance, August 31, ,371,900 $ 3,375,562 Private placement (ii) 2,799, ,000 Cost of issue (ii) - (10,519) Shares issued for settlement of debt (i) 1,363, ,382 Issuance of warrants (Note 11(i)) - (155,533) Balance, February 28, ,535,718 $ 3,555,892 i) During the six months ended February 28, 2010, the Company received approval from the Exchange for a shares for debt settlement with three officers and five of its services providers (the Creditors ) to settle debt in the aggregate amount of $136,382, inclusive of GST, for certain services rendered during the period from February 1, 2009 to November 30, Subsequently 1,363,819 common shares at a price of $0.10 have been issued. ii) On January 7, 2010, the Company closed a non-brokered private placement (the Private Placement ), in which 2,799,999 common share units (each, a Unit ) were purchased at a price of $0.075 per Unit for aggregate proceeds of $210,000. Each Unit is comprised of one common share in the capital of Hawk (a Common Share ) and one half of one purchase warrant, each whole warrant being exercisable to purchase one Common Share for three years from the date of issue at a price of $0.15 per share in the first year, $0.20 per share in the second year and $0.25 per share in the third year. The securities are subject to a four-month hold period which expires on May 7, In connection with this offering, Hawk has paid cash finder s fees of $8,050, equal to 7% of the funds raised by finders, and issued broker warrants exercisable to purchase 107,333 Common Shares, equal to 7% of the number of Units placed by finders. The 1,400,000 purchase warrants, and 107,333 broker warrants issued under the terms of this private placement were assigned an aggregate fair value of $32,200 and $2,469 respectively using the Black- Scholes valuation model with the following assumptions: dividend yield 0%, expected volatility %, risk-free rate of return 1.37% and expected life of 2 years

21 10. Stock Options The following table reflects the continuity of stock options for the six months ended February 28, 2010: Number of Stock Options Weighted Average Exercise Price Balance, August 31, ,030,000 $ 0.26 Options granted (i) 400, Options expired (300,000) 0.32 Balance, February 28, ,130,000 $ 0.25 (i) On February 23, 2010, the Company granted 400,000 incentive stock options to two consultants of the Company at an exercise price of $0.10. These options expire on February 23, 2012 and vest immediately upon grant. A fair value of $28,800 was assigned to these options, calculated using the Black-Scholes valuation model with the following assumptions: dividend yield 0%, expected volatility %, risk-free rate of return 1.33% and expected life of 2 years. As of February 28, 2010, the following options were outstanding Weighted Fair Value Average of Fair Value Number of Expiry Exercise Contractual Options per Options Date Price ($) Life (Years) Outstanding ($) Option ($) Outstanding July 9, , ,325,000 October 12, , ,000 February 18, , ,000 February 20, , ,000 March 10, , ,000 April 14, , ,000 April 12, , ,225,000 February 23, , , ,346 5,130,000 Of the 5,130,000 options outstanding, 4,705,000 options have vested and are exercisable

22 11. Warrants The following table reflects the continuity of warrants for the six months ended February 28, 2010: Number of Warrants Weighted Average Exercise Price Balance, August 31, ,954,984 $ 5,734,199 Extension of warrants (i) - 123,333 Expiry of warrants (766,667) (205,200) Issuance of warrants (Note 9(ii)) 1,507,333 34,669 Balance, February 28, ,695,650 $ 5,687,001 i) On November 2, 2009, the Company received TSX Venture Exchange (the Exchange ) approval for the extension of the terms of issued and outstanding warrants exercisable for a total of 3,333,333 common shares at an exercise price of $0.50 per share (the Warrants ). The Warrants were issued as part of a private placement that closed on November 5, Since issuance, none of the Warrants have been exercised and all of the Warrants are outstanding. As originally issued, the Warrants had a term of two years, expiring on November 6, Hawk extended the term of these Warrants for an additional three years, with the result that they expire on November 4, A fair value of $123,333 was assigned to these amended warrants using the Black-Scholes pricing model with the following assumptions: dividend yield 0%, expected volatility 201%, risk free interest rate 1.28%, and an expected life of two years. On January 22, 2010, the Company announced that it received Exchange approval to amend the exercise price of warrants exercisable for 3,333,333 common shares. The exercise price was reduced to $0.10 per share until November 4, 2010, $0.15 per share from November 5, 2010 to November 4, 2011 and $0.20 per share from November 5, 2011 to November 4, In addition, the term of these warrants will be shortened to 30 days if the closing price for the Company s shares is in excess of the following prices during the applicable period: (a) until November 4, 2010, $0.133 per share, (b) from November 5, 2010 to November 4, 2011, $0.20 per share and (c) from November 5, 2011 to November 4, 2012, $0.266 per share

23 11. Warrants (Continued) As at February 28, 2010, the Company had the following warrants outstanding: Number of Warrant Type of Warrant Warrants Value Regular Warrants 25,588,317 $ 5,681,532 Broker compensation warrants 107,333 2,469 25,695,650 $ 5,684,001 Details of the Regular Warrants outstanding as at February 28, 2010 are as follows: Exercise Number of Expiry Date Price($) Warrants Regular Warrants October 12, ,668 January 19, ,500,000 January 29, ,075,000 February 9, ,773,316 November 4, 2012 (Note 11(i)) ,333,333 January 7, ,400,000 25,588,317 Compensation Warrants: January 7, ,333 Total Warrants Outstanding 25,695, Basic and Diluted (Loss) per Share Basic (loss) per share is computed by dividing the (loss) for the period by the weighted average number of common shares outstanding during the period. Diluted (loss) per share reflects the maximum possible dilution from the potential exercise of outstanding stock options and all warrant classes. For both periods presented, the conversion of all warrant classes and stock options was not done because the basic/diluted (loss) per share calculation was anti-dilutive

24 13. Segmented Information The Company's operations are comprised of a single reporting operating segment engaged in the exploration and development of mineral resources. As the operations comprise a single reporting segment, amounts disclosed in the financial statements also represent a single reporting segment. The Company's assets and exploration properties are situated in Canada and the United States. Since operations are a single reporting segment, it is impractical to disclose the assets and exploration properties by geographic area. 14. Related Party Transactions During the three and six months ended February 28, 2010 the Company incurred an aggregate of $39,000 and $108,000 (three and six months ended February 28, $39,000 and $78,000) respectively in management fees to four (February 28, three) officers for administering the Company's affairs on a daily basis. As at February 28, 2010, $13,000 (February 28, $19,593) pertaining to these fees were included in accounts payable. During the three and six months ended February 28, 2010, legal fees of $49,880 and $85,521 (February 28, $48,654 and $82,749) respectively were paid to legal firm from which an officer of the Company is a partner. These amount have been included in professional fees. As at February 28, 2010, $49,880 (August 31, $82,212) pertaining to these fees were included in accounts payable. During the three and six months ended February 28, 2010, the Company issued 434,936 and 434,936 common shares respectively to three officers, as well as 161,002 and 416,731 common shares respectively to the legal firm to settle debt pertaining to these service providers As at February 28, 2010, the Company advanced $1,532 (August 31, $4,260) to a director, which is included in accounts receivable. The advance is due on demand and is non-interest bearing. Officers of the Company were reimbursed for out of pocket expenses that occurred in the normal course of operations. The above noted transactions were in the normal course of operations and were measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties. 15. Comparative Figures Certain comparative figures have been reclassified to conform to the current period's financial statement presentation

25 16. Subsequent Events a) On April 13, 2010, the Company announced that it had entered into a Letter of Intent ( LOI ) with Canadian Orebodies Inc. (TSXV: CO) ( Orebodies ) whereby Hawk will acquire (1) a 100% legal and beneficial interest in Orebodies eight 100% owned properties and (2) all of Orebodies interests in Orebodies seven 50% owned properties held through a joint venture among Orebodies, Macdonald Mines Exploration Ltd. (TSXV: BMK) and Temex Resources Corp. (TSXV: TME) (the Properties ). The Properties consist of approximately 444 claim units (100% owned by Orebodies) comprising approximately 7,104 hectares, and approximately 891 claim units (50% owned by Orebodies) comprising approximately 14,256 hectares, all which are located in the James Bay Lowlands Ring of Fire, in Ontario. The 100% owned properties would remain subject to a 10% net profits interest in favour of Orebodies, whereas Orebodies would retain a 5% net profits interest in the properties subject to the joint venture with Macdonald Mines Exploration Ltd. and Temex Resources Corp. (which would be converted to a 0.15% net smelter returns royalty if Hawk s interest in those properties is reduced to less than 10% and therefore converted to a net smelter returns royalty). In order for Hawk to complete the purchase of the Properties, Hawk is required to: (1) Issue to Orebodies an aggregate amount of 5,000,000 common shares of Hawk; (2) Issue to Orebodies 4,000,000 share purchase warrants of Hawk, each warrant entitling Orebodies to acquire one common share of Hawk at an exercise price of $0.15 per share for a period of four years from closing; and (3) Grant Orebodies the right to appoint one individual to the board of directors of Hawk to represent Orebodies interest. Closing of the transaction remains subject to Hawk being satisfied with the results of its due diligence on the Properties, subsequent adjustments and confirming the number of claims and size of the properties, the execution of a definitive purchase and sale agreement and the approval of the TSX Venture Exchange and the board of directors of Orebodies. Assuming Hawk is satisfied with its review of the Properties and proceeds to conclude this acquisition, it will pay a total finder s fee of 450,000 shares to two parties who introduced Hawk to this opportunity, subject to the approval of the TSX Venture Exchange. b) On April 7, 2010, the Company announced it had engaged IBK Capital Corp. to assist with a private placement of up to 5,000,000 Flow-Through Units, priced $0.10 per unit to raise up to $500,000. Each Flow-Through Unit consists of one common share of Hawk to be issued as a "flow-through share" and one half non-flow-through common share purchase warrant. Each full common share purchase warrant will entitle the holder to purchase one common share of Hawk for a period of two (2) years at an exercise price of $0.15 per second share for the first 12 months from the date of issue, and at an exercise price of $0.20 per second share for the next 12 months. All securities issued in connection with this financing will be subject to a four-month hold period from the closing date. This financing is subject to approval by the TSX Venture Exchange, as well as other applicable regulatory approval. Under the terms of the compensation arrangement with IBK Capital Corp., Hawk will pay a 9% commission on the amount raised, plus 10% of the amount raised in the form of brokers' warrants to acquire common share units of Hawk exercisable at $0.10 per unit for a period of four years from the date of issue. Each common share unit would be comprised of one common share and one half of one warrant of Hawk (having the same terms as the warrants included in the Flow-Through Units). The closing date is scheduled on or about April 22,