NextSource Materials Inc. - Quarter Report: 2010 March (Form 10-Q)

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

OR

Commission File Number 000-51151

ENERGIZER RESOURCES INC.

 (Name of registrant in its charter)

520 – 141 Adelaide Street West, Toronto, Ontario M5H 3L5

(Address of principal executive offices)

_______________________

(416) 364-4911

(Issuer’s telephone number)

_______________________

Uranium Star Corp.

(Former Name or Former Address, if Changed Since Last Report)

_______________________

Securities registered under Section 12(b) of the Exchange Act:

None

Securities registered under Section 12(g) of the Exchange Act:

Common Stock, $0.001 par value per share

(Title of Class)

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

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 [_] No [_]

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act).Yes  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. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  ¨                    Accelerated filer  ¨                    Non–Accelerated filer  ¨  Smaller reporting company  x

As of  May 13, 2010,  there were 110,511,024 shares of the Registrant's common stock issued and outstanding.

Transitional Small Business Disclosure Format Yes      No   x

Energizer Resources Inc.

(Formerly Uranium Star Corp.)

CERTIFICATIONS

Exhibit 31 – Management certification…………………………………………………... 39-42

Exhibit 32 – Sarbanes-Oxley Act………………………………………………………….43-44

PART I

FINANCIAL INFORMATION

Item 1.

Interim Consolidated Financial Statements and Notes to Interim Consolidated Financial Statements

General

The accompanying reviewed interim consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q.  Therefore, they do not include all information and footnotes necessary for a complete presentation of financial position, results of operations, cash flows, and stockholders' equity in conformity with generally accepted accounting principles.  Except as disclosed herein, there has been no material change in the information disclosed in the notes to the consolidated financial statements included in the Company's annual report on Form 10-K for the year ended June 30, 2009.  In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature.  Operating results for the three and nine months ended March 31, 2010 are not necessarily indicative of the results that can be expected for the year ending June 30, 2010.

1

Energizer Resources Inc.

(Formerly Uranium Star Corp.)

(An Exploration Stage Company)

(Unaudited)

(Expressed in US dollars)

March 31, 2010

Index

Interim Consolidated Balance Sheets

F 1

Interim Consolidated Statements of Operations and Comprehensive Loss

F 2

Interim Consolidated Statements of Cash Flows

F 3

Notes to the Interim Consolidated Financial Statements

F 4 – F14

Energizer Resources Inc.

(Formerly Uranium Star Corp.)

(An Exploration Stage Company)

Interim Consolidated Balance Sheets

(Expressed in US dollars)

(Unaudited)

The accompanying notes are an integral part of these interim consolidated financial statements

F-1

Energizer Resources Inc.

(Formerly Uranium Star Corp.)

(An Exploration Stage Company)

Interim Consolidated Statements of Operations and Comprehensive Loss

(Expressed in US dollars)

(Unaudited)

The accompanying notes are an integral part of these interim consolidated financial statements

F - 2

Energizer Resources Inc.

(Formerly Uranium Star Corp.)

(An Exploration Stage Company)

Interim Consolidated Statements of Cash Flows

(Expressed in US dollars)

(Unaudited)

The accompanying notes are an integral part of these interim consolidated financial statements

F-3

Energizer Resources Inc.

(Formerly Uranium Star Corp.)

(An Exploration Stage Company)

Notes to the Interim Consolidated Financial Statements

March 31, 2010

(Expressed in US dollars)

(Unaudited)

1.

Exploration Stage Company

The Company was incorporated in the State of Nevada on March 1, 2004 and reincorporated in the State of Minnesota on May 14, 2008.  On December 16, 2009, the Company effected a name change from “Uranium Star Corp.” to “Energizer Resources Inc. The name change was processed by the Financial Industry Regulatory Authority (“FINRA”) and took effect on April 29, 2010 and a new trading symbol “ENZR” was assigned. The Company is an Exploration Stage Company, as defined by Accounting Standards Codification (“ASC”) Topic - 915 "Accounting and Reporting by Development Stage Enterprises".  In fiscal 2008 the Company incorporated Uranium Star (Mauritius) Ltd., a subsidiary in the country of Mauritius and Uranium Star Madagascar Sarl, a subsidiary in the country of Madagascar.  The Company's principal business is the acquisition and exploration of mineral resources.  The Company has not presently determined whether its properties contain mineral reserves that are economically recoverable.

These interim consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business.  The Company has never generated revenue from mining operations since inception and has never paid any dividends and is unlikely to pay dividends or generate earnings in the immediate or foreseeable future.  The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing to continue operations, confirmation of the Company's interests in the underlying properties, and the attainment of profitable operations.  As at March 31, 2010, the Company has accumulated losses of $42,772,479 since inception.  These factors raise substantial doubt regarding the Company's ability to continue as a going concern.  These consolidated interim financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

2.

Summary of Significant Accounting Policies

a)

Principals of Consolidation and Basis of Presentation

The accompanying interim consolidated financial statements include the accounts of Energizer Resources Inc. (Formerly Uranium Star Corp.) and its wholly-owned subsidiaries, Uranium Star (Mauritius) Ltd., THB Venture Ltd, Uranium Star Madagascar Sarl and Uranium Star Minerals Sarl.  All intercompany accounts and transactions have been eliminated on consolidation.  These interim consolidated financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States, and are expressed in US dollars.  The Company's fiscal year end is June 30.

b)

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

c)

Basic and Diluted Net Income (Loss) Per Share

The Company computes net income (loss) per share in accordance with ASC Topic -260, "Earnings per Share".  ASC Topic -260 requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement.  Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period.  Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if converted method.  In computing Diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants.  Diluted EPS excludes all dilutive potential shares if their effect is anti dilutive.  Basic and diluted loss per share is computed using the weighted average number of common shares outstanding.  Diluted EPS and the weighted average number of common shares exclude all dilutive potential shares since their effect is anti-dilutive.  Shares underlying these securities totaled approximately 38,859,667 as of March 31, 2010 (2009: 13,855,000).

F-4

Energizer Resources Inc.

(Formerly Uranium Star Corp.)

(An Exploration Stage Company)

Notes to the Interim Consolidated Financial Statements

March 31, 2010

(Expressed in US dollars)

(Unaudited)

2.

Summary of Significant Accounting Policies (continued)

d)

Comprehensive Income (Loss)

ASC Topic -220, "Reporting Comprehensive Income", establishes standards for the reporting and display of comprehensive income, its components and accumulated balances.  As at March 31, 2010 and June 30, 2009, the Company's only component of other comprehensive income is unrealized losses on marketable securities. Expenses were translated at a weighted average of the exchange rates which were in effect during the period.

e)

Cash and Cash Equivalents

The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents.

f)

Marketable Securities

The Company classifies and accounts for debt and equity securities in accordance with ASC Topic 320, “Accounting for Certain Investments in Debt and Equity Securities.  The Company has classified all of its marketable securities as available for sale, thus securities are recorded at fair market value and any associated unrealized gain or loss, net of tax, is included as a separate component of stockholders’ equity, “Accumulated Other Comprehensive Loss.”

g)

Property and Equipment

Property and equipment is stated at cost, less accumulated amortization, and consists of computer hardware and exploration equipment.  Amortization of computer hardware is computed using the straight-line method over three years and exploration equipment is amortized over five years on a straight-line basis.

h)

Mineral Property Costs

The Company has been in the exploration stage since its inception on March 1, 2004, and has not yet realized any revenues from its planned operations.  It is primarily engaged in the acquisition and exploration of mining properties. Mineral property exploration costs are expensed as incurred.  Mineral property acquisition costs are initially capitalized when incurred using the guidance in ASC Topic – 930, "Whether Mineral Rights Are Tangible or Intangible Assets".  The Company assesses the carrying costs for impairment under ASC Topic 360, "Accounting for Impairment or Disposal of Long Lived Assets" at each fiscal quarter end.  When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs then incurred to develop such property, are capitalized.  Such costs will be amortized using the units of production method over the estimated life of the probable reserve.  If mineral properties are subsequently abandoned or impaired, any capitalized costs will be charged to operations.

i)

Long Lived Assets

In accordance with ASC Topic 360, the carrying value of intangible assets and other long lived assets are reviewed on a regular basis for the existence of facts or circumstances that may suggest impairment.  The Company recognizes impairment when the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset.  Impairment losses, if any, are measured as the excess of the carrying amount of the asset over its estimated fair value.

j)

Financial Instruments

The fair value of cash and cash equivalents, amounts receivable, and accounts payable were estimated to approximate their carrying values due to the immediate or short term maturity of these financial instruments.  The Company's operations are in Canada and Madagascar which results in exposure to market risks from changes in foreign currency rates.  The financial risk is the risk to the Company's operations that arise from fluctuations in foreign exchange rates and the degree of volatility of these rates.  Currently, the Company does not use derivative instruments to reduce its exposure to foreign currency risk.

F-5

Energizer Resources Inc.

(Formerly Uranium Star Corp.)

(An Exploration Stage Company)

Notes to the Interim Consolidated Financial Statements

March 31, 2010

(Expressed in US dollars)

(Unaudited)

2.

Summary of Significant Accounting Policies (continued)

k)

Foreign Currency Translation

The Company's functional and reporting currency is the United States dollar.  Monetary assets and liabilities denominated in foreign currencies are translated in accordance with ASC Topic – 830" Foreign Currency Translation,” using the exchange rate prevailing at the balance sheet date.  Gains and losses arising on settlement of foreign currency denominated transactions or balances are included in the determination of income.  Foreign currency transactions are primarily undertaken in Canadian dollars and Malagasy ariary.

l)

Stock Based Compensation

Effective January 1, 2006, the Company adopted the fair value recognition provisions of ASC Topic – 718 "Share Based Payments", using the modified retrospective transition method.  The Company had not issued any stock options or share based payments prior to January 1, 2006.  Accordingly, there was no effect on the Company's reported loss from operations, cash flows or loss per share as a result of adopting ASC Topic 718.

m)

Income Taxes

Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not.  The Company has adopted ASC Topic – 740 "Accounting for Income Taxes" as of its inception.  Pursuant to ASC Topic - 740 the Company is required to compute tax asset benefits for net operating losses carried forward.  Potential benefits of net operating losses have not been recognized in these consolidated interim financial statements because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years.

Management does not believe unrecognized tax benefits will significantly change within twelve months of the reporting date.  Interest and penalties related to income tax matters are recognized in income tax expense.  As of March 31, 2010 there is no accrued interest related to uncertain tax positions.

n)

Interim Consolidated Financial Statements

These unaudited interim consolidated financial statements have been prepared on the same basis as the annual financial statements and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company's financial position, results of operations and cash flows for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period.

o)

Recent Accounting Pronouncements

FASB Accounting Standards Codification — Effective for interim and annual periods ending after September 15, 2009, the FASB has defined a new hierarchy for U.S. GAAP and established the FASB Accounting Standards Codification (ASC) as the sole source for authoritative guidance to be applied by nongovernmental entities. The adoption of the ASC changes the manner in which U.S. GAAP guidance is referenced, but it does not have any impact on the Company’s financial position or results of operations.

Beginning July 1, 2008, the Company partially applied FAS 157 (ASC Topic – 820) as allowed by FASB Staff Position ("FSP") 157-2, (ASC Topic – 820 -10) which delayed the effective date of ASC Topic – 820 for nonfinancial assets and liabilities.  As of July 1, 2008 the Company has applied the provisions of ASC Topic – 820 to its financial instruments and the impact was not material.  On July 1, 2009, the Company adopted ASC Topic – 820 to its non-financial assets and liabilities. The adoption did not have a material impact on the financial statements.

F-6

Energizer Resources Inc.

(Formerly Uranium Star Corp.)

(An Exploration Stage Company)

Notes to the Interim Consolidated Financial Statements

March 31, 2010

(Expressed in US dollars)

(Unaudited)

2.

Summary of Significant Accounting Policies (continued)

The Company primarily applies the market approach for recurring fair value measurements and endeavors to utilize the best available information.  Accordingly, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs.  The Company is able to classify fair value balances based on the observability of those inputs.

ASC Topic – 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value.  The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement).  The three levels of the fair value hierarchy defined by ASC Topic 820 are as follows:

Marketable securities are measured at fair value on a recurring basis based on a level one measurement.

The Company adopted ASC 855, “Subsequent Events,” which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. The adoption of the ASC 855 on June 30, 2009 did not have a material impact on the Company’s consolidated financial statements.

No other accounting standards or interpretations issued recently are expected to a have a material impact on our consolidated financial position, operations or cash flows.

F - 7

Energizer Resources Inc.

(Formerly Uranium Star Corp.)

(An Exploration Stage Company)

Notes to the Interim Consolidated Financial Statements

March 31, 2010

(Expressed in US dollars)

(Unaudited)

3.

Property and Equipment

4.

Related Party Balances/Transactions

a)

During the nine months ended March 31, 2010, the Company incurred a total of $41,113 (2009: $40,810) in office administration and rent expense from a company related by common management.

b)

During the nine months ended March 31, 2010, 1,500,000 stock options were granted (2009:  Nil) to directors, officers and a relative of a director (see Note 7).

c)

During the nine months ended March 31, 2010, 2,125,000 (2009: 1,850,000) shares were issued to directors, officers and a relative of a director for services at a fair value of $361,250. In addition, 250,000 share purchase warrants were issued to a director valued at $113,125 and are exercisable at $0.58 per share for a period of two years from date of issuance.

d)

During the nine months ended March 31, 2010, the Company incurred a total of $351,005 (2009: $384,000) in administrative, management and consulting fees to directors, officers and a relative of a director.

5.

Mineral Properties

a)

The Company entered into a binding letter of intent dated May 2, 2006, for an option to acquire a 75% interest in 200 claims located in northern Quebec, Canada.  The vendor has the right and option to sell an additional 25% undivided interest in the property.  This agreement is subject to a royalty agreement dated May 27, 1992, as amended November 3, 1993.  The vendor had acquired a 100% interest in the property, subject to a 1% net smelter royalty (NSR) on certain claims, and a 0.5% NSR on other claims.  The vendor has the right to buy back half of the 1% NSR for $200,000 and half of the 0.5% NSR for $100,000.  In order to exercise its option, the Company must issue 2,000,000 shares of common stock  and 2,000,000 warrants, exercisable at $1.00 per share on or before June 1, 2009; and incur aggregate exploration expenditures in the amount of $2,000,000 on the property on or before August 31, 2008 (the “Earn In” period).  The Company has issued the 2,000,000 shares of common stock and warrants relating to the agreement, and incurred aggregate exploration expenditures of $6,832,279 as at March 31, 2010.

 During the Earn In period, the vendor will have the additional option to sell its remaining 25% for 1,000,000 common shares and 1,000,000 warrants of the Company.  On February 28, 2007, the vendor exercised the option to sell the remaining 25% interest in the property.  As such the Company issued 1,000,000 shares of common stock valued at $1,219,000 and 1,000,000 warrants valued at $752,985.

F - 8

Energizer Resources Inc.

(Formerly Uranium Star Corp.)

(An Exploration Stage Company)

Notes to the Interim Consolidated Financial Statements

March 31, 2010

(Expressed in US dollars)

(Unaudited)

5.

Mineral Properties   (continued)

b)

On August 15, 2006, the Company acquired an additional nineteen mineral claims contiguous to the northern Quebec property in consideration for a payment of $5,385 (CAD$6,000) as an acquisition fee, 150,000 common shares valued at $103,500 and 75,000 warrants valued at $34,961.  These shares and warrants were issued on October 4, 2006.  During the year ended June 30, 2008, the Company recognized an impairment loss of $143,846, as it had not yet been determined whether there were proven or probable reserves on the property.  As at March 31, 2010, the cumulative impairment loss is $143,846.

c)

On August 22, 2007, the Company entered into a joint venture agreement with Madagascar Minerals and Resources Sarl ("MMR"), a company incorporated under the laws of Madagascar.  The joint venture ( the “Three Horses Joint Venture”) was established with the Company owning a 75% undivided interest and MMR the remaining 25% interest.  The consideration paid to MMR to acquire the 75% stake in the joint venture consists of a signing fee of $15,000, a payment of $750,000, and the issuance of 1,250,000 common shares and 500,000 share purchase warrants of the Company all within 30 days of the properties vesting in the joint venture.  Each share purchase warrant is exercisable at $1.00 per share for a period of 2 years from the date of issuance.  On December 10, 2007, the Company issued 1,250,000 common shares valued at $375,000 based on the prevailing quoted market price of $0.30 per share and 500,000 share purchase warrants valued at $60,560 using the Black-Scholes pricing model.  In the event a shareholder's shareholding is diluted below 10% the remaining shareholding will be exchanged for a 2% net smelter return ("NSR").  The NSR may be acquired by the remaining shareholder at a price of $1,000,000 in cash or shares of the Company for the first 1% and at a price of $1,500,000 in cash or shares of the Company for the second 1%.

On July 9, 2009 the Company entered into a definitive agreement to acquire the remaining 25% interest of the Green Giant Property (formerly the Three Horses Joint Venture) for a cash consideration of $100,000. On acquisition of the remaining 25% interest, the joint venture with MMR was terminated.  MMR retains a 2% net smelter return ("NSR").  The NSR on this 25% interest portion may be acquired by the Company at a price of $500,000 in cash or shares of the Company for the first 1% and at a price of $1,000,000 in cash or shares of the Company for the second 1% at the option of the Company.

The properties are comprised of mineral permits consisting of 36 "squares" with each square representing approximately 6.25 sq. kilometers.  The properties are located in the District of Toliara and are referenced as TN 12,306, P(R); TN 12,814, P(R); TN 12,887 P(R); TN 12,888 P(R); TN 13,020 P(R); TN 13,021 P(R) as issued by the Bureau de Cadastre Minier de Madagascar ("BCMM") pursuant to the Mining Code 1999 (as amended) and its implementing decrees.

As at March 31, 2010, the Company recognized a cumulative impairment loss of $1,300,560, as it has not yet been determined whether there are proven or probable reserves on the property.

F - 9

Energizer Resources Inc.

(Formerly Uranium Star Corp.)

(An Exploration Stage Company)

Notes to the Interim Consolidated Financial Statements

March 31, 2010

(Expressed in US dollars)

(Unaudited)

6.

Common Stock

a)

On January 27, 2009, the Company issued 2,500,000 common shares to directors, officers and consultants as compensation for services rendered at a fair value of $250,000.  The shares were valued at an estimated fair market value of $0.10 per share based on the prevailing quoted market price on the date of issue.

b)

On April 21, 2009, the Company issued 1,600,000 common shares to directors, officers and consultants as compensation for services rendered at a fair value of $128,000. The shares were valued at an estimated fair market value of $0.08 per share based on the prevailing quoted market price on the date of issue.

c)

On June 24, 2009, the Company issued 750,000 common shares and 375,000 share purchase warrants valued at $131,924 to a new director and to a special advisory member to the Board of Directors as incentive bonus for their current and future services. The share purchase warrants issued are exercisable at $0.20 per  share  for a period of two years from the date of issuance. The warrants were valued using the Black-Scholes model for pricing options. The following assumptions were used: risk free interest rate – 1.2%; expected volatility – 166%; dividend yield – NIL; and expected life – 2 years.

d)

Between June 15, 2009 and June 30, 2009, the Company closed a private placement comprising of 6,800,000 units for gross proceeds of $680,000. Each unit consists of one common share and one-half share purchase warrant . Each warrant is exercisable at $0.20 per share for a period of two years from date of issuance. In connection with the private placement, the Company paid 408,000 common shares and 408,000 broker warrants valued at $0.10 per unit as commission. Each broker warrant is exercisable at $0.10 per share for a period of 2 years from the date of issuance.

e)

On August 17, 2009, the Company issued 2,250,000 common shares to directors, officers and consultants as compensation for services rendered at a fair value of $382,500. The shares were valued at an estimated fair market value of $0.17 per share based on the prevailing quoted market price on the date of issue.

f)

On October 5, 2009 the Company issued 500,000 shares of common stock, valued at $340,000, and 250,000 share purchase warrants valued at $113,125 to a director as incentive bonus compensation. The shares were valued at an estimated fair market value of $0.68 per share based on the prevailing quoted market price on the date of issue. The share purchase warrants issued are exercisable at $0.58 per share for a period of two years from date of issuance. The warrants were valued using the Black-Scholes model for pricing options. The following assumptions were used: risk free interest rate – 2.25%; expected volatility – 172%; dividend yield – NIL; and expected life – 2 years.

g)

On March 15, 2010, the Company closed a private placement of 21,666,667 units for gross proceeds of $6,500,000 (the “2010 Offering”).  Each Unit consisted of one common share and one Common Share purchase warrant.  Each Warrant entitles the holder to purchase one Common Share at an exercise price of $0.50 for a period of three years following the later of March 15, 2010 and the date of listing on the TSX Venture Exchange ("TSX-V").  The expiry of the warrants may be accelerated by the Company if the Common Shares trade at a price greater than $0.75 at any time after 9 months from March 15, 2010 for a period of 21 consecutive days on the OTC Bulletin Board ("OTCBB") or the TSX-V, provided that the Company has filed, and had declared effective, the Registration Statement (as defined below).

The Units were issued together with listing and filing rights, which rights may be converted into an escalating number of Common Shares if the Company does not complete its TSX-V Listing or file a resale registration statement for the securities issued in connection with the 2010 Offering (the “Registration Statement”) by certain specific dates.  A maximum of 17,333,333 Common Shares may be issued pursuant to such rights.

F - 10

Energizer Resources Inc.

(Formerly Uranium Star Corp.)

(An Exploration Stage Company)

Notes to the Interim Consolidated Financial Statements

March 31, 2010

(Expressed in US dollars)

(Unaudited)

6.

Common Stock

In the event that the Common Shares of the Company have not commenced trading on the TSX-V on or before June 15, 2010, each holder of a Unit Share shall be entitled to be issued one-tenth of one common share (each whole share a “Listing Rights Share”) on June 15, 2010 and an additional one-tenth of one Listing Rights Share on every six month anniversary thereafter in which the Company fails to complete the TSX-V Listing until June 15, 2012 such that the maximum number of Listing Rights Shares which may be issued pursuant to such rights is equal to 50% of the Unit Shares issued under the 2010 Offering.  The Company’s common shares commenced trading on the TSX Venture Exchange (“TSX-V”) on May 5, 2010 under the trading symbol “EGZ”.

In the event that the Registration Statement has not been declared effective on or before December 15, 2010, each holder of a Unit Share shall be entitled to be issued one-tenth of one common share (each whole share a “Filing Rights Share”) starting on December 15, 2010 and an additional one-tenth of one Filing Rights Share on every six month anniversary thereafter in which the Company fails to have the Registration Statement declared effective until December 15, 2011 such that the maximum number of Filing Rights Shares which may be issued pursuant to such rights is equal to 30% of the number of Unit Shares issued under the 2010 Offering.  On May 5, 2010 the Common shares of the Company commenced trading on the TSX-V (note 8).

As consideration for their services in connection with the brokered private placement, Clarus Securities Inc. and Byron Securities Limited (the “Agents”) were (i) paid a cash commission equal to 6% of the gross proceeds of the brokered portion of the 2010 Offering, (ii) issued 870,000 class A broker warrants (“Class A Warrants”), and (iii) issued 870,000 class B broker warrants (“Class B Warrants”). Each class A broker warrant entitles the holder to acquire one common share at an exercise price of $0.30 until March 15, 2012. Each class B broker warrant entitles the holder to acquire one common share at an exercise price of $0.50 for a period of three years following the later of March 15, 2010 and the date of the Company’s listing on the TSX-V. One of the Agents, Clarus Securities Inc., was also issued 400,000 Common Shares and 400,000 Class C compensation warrants (“Class C Warrants”), each Class C Warrant is exercisable to acquire one common share at a price of $0.30 until March 15, 2013, in each case for advisory services rendered to the Company.

h)

On March 31, 2010, 2,000,000 stock options were exercised for gross proceeds of $300,000.

.

F - 11

Energizer Resources Inc.

(Formerly Uranium Star Corp.)

(An Exploration Stage Company)

Notes to the Interim Consolidated Financial Statements

March 31, 2010

(Expressed in US dollars)

(Unaudited)

7.

Stock Options and Warrants

(i)

Stock Options   

Effective March 8, 2006, the Company filed a Form S 8 Registration Statement in connection with its newly adopted 2006 Stock Option Plan ("the "2006 Plan") allowing for the direct award of shares or granting of stock options to acquire up to a total of 2,000,000 common shares.  On December 18, 2006 and February 16, 2007 and September 29, 2009, the Stock Option Plan was amended to increase the stock option pool by an additional 15,000,000 common shares.  The Company granted 1,505,000 stock options during the nine months ended March 31, 2010.  

The following table summarizes the continuity of the Company's stock options:

Additional information regarding options outstanding as at March 31, 2010 is as follows:

On April 21, 2009 the Company re-priced the 7,630,000 outstanding stock options by amending the exercise price ranging between $0.55 to $0.85 per share to $0.15 per share. The Company recorded stock based compensation expense of $128,328  resulting from the modification.

F – 12

Energizer Resources Inc.

(Formerly Uranium Star Corp.)

(An Exploration Stage Company)

Notes to the Interim Consolidated Financial Statements

March 31, 2010

(Expressed in US dollars)

(Unaudited)

7.

Stock Options and Warrants

(i)

Stock Options   

The weighted average assumptions used to value stock options are as follows:

(ii)

Warrants

The following table summarizes the continuity of the Company's warrants:

At March 31, 2010, the following share purchase warrants were outstanding:

a)

On April 21, 2009, the Company amended the 3,650,000 warrants issued to directors, officers and consultants on April 26, 2006.  The exercise price was re priced from $0.50 per share to $0.15 per share with an expiry date of April 26, 2010.

F-13

8.

Subsequent Event

On May 5, 2010 the common shares of the Company commenced trading on the TSX-V under the trading symbol “EGZ”.  An aggregate of 12,060,000 common shares, 4,435,000 warrants and 3,025,000 stock options of the Company controlled by “Principals” (as such term is defined in the Corporate Finance Manual of the TSX-V) and certain non-Principals of the Company will be subject to the surplus escrow requirements  of the TSX-V, applicable to a “Tier 2 Issuer” and will be released from escrow as follows: 5% of the original number of escrowed shares at the time of listing, 5% of the original number of escrowed securities 6 months after the listing date, 10% of the original number of escrowed securities 12 months after the listing date, 10% of the original number of escrowed securities 18 months after the listing date, 15% of the original number of escrowed securities 24 months after the listing date, 15% of the original number of escrowed securities 30 months after the listing date and 40% of the original number of escrowed securities 36 months after the listing date.

F-14

In this Quarterly Report on Form 10-Q, “Company,” “our company,” “us,” and “our” refer to Energizer Resources Inc. (formerly Uranium Star Corp.), unless the context requires otherwise.

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

Certain statements included in this Form 10-Q, including, without limitation, statements related to anticipated cash flow sources and uses, and words including but not limited to “anticipates”, “believes”, “plans”, “expects”, “future” and similar statements or expressions, identify forward looking statements. Examples of forward-looking statements include, but are not limited to:  (a) projections of our revenues, capital expenditures, growth, prospects, dividends, capital structure and other financial matters; (b) statements of our plans and objectives; (c) statements of our future economic performance; (d) statements of assumptions underlying other statements and statements about us and our business relating to the future; and (e) any statements using the words "believes," "budget," "target," "goal," "anticipate," "expect," "plan," "outlook," "objective," "may," "project," "intend," "estimate," or similar expressions. Any forward-looking statements herein are subject to certain risks and uncertainties in the business of Energizer Resources Inc. (Formerly Uranium Star Corp.) including but not limited to, reliance on key customers and competition in its markets, market demand, product performance, technological developments, maintenance of relationships with key suppliers, difficulties of hiring or retaining key personnel and any changes in current accounting rules, all of which may be beyond the control of our company. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth therein.

Management’s Discussion and Analysis of Results of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the financial statements included herein. Further, this quarterly report on Form 10-Q should be read in conjunction with the our Financial Statements and Notes to Financial Statements included in its 2009 Annual Report on Form 10-K filed with the Securities and Exchange Commission on September 21, 2009.

Our financial statements have been prepared in accordance with United States generally accepted accounting principles.  We urge you to read this report in conjunction with the risk factors described herein.   

BACKGROUND

Company Overview

Energizer Resources Inc. (formerly Uranium Star Corp.) was incorporated in the State of Nevada on March 1, 2004 and reincorporated in the State of Minnesota on May 14, 2008. Our fiscal year-end is June 30. On December 16, 2009, we effected a name change from “Uranium Star Corp” to “Energizer Resources Inc.”. We are an exploration stage company engaged in the search for uranium, gold and other minerals.  We have an interest in properties located in Canada (Province of Québec) and Madagascar.  None of the properties in which we hold an interest has known mineral reserves of any kind at this time.  As such, the work programs planned by us are exploratory in nature.

We have not had any bankruptcy, receivership or similar proceeding since incorporation. There have been no material reclassifications, mergers, consolidations or purchases or sales of any significant amount of assets not in the ordinary course of business since the date of incorporation.

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Business Development

UNTIL WE CAN VALIDATE OTHERWISE, THE PROPERTIES OUTLINED BELOW HAVE NO KNOWN MINERAL RESERVES OF ANY KIND AND WE ARE PLANNING PROGRAMS THAT ARE EXPLORATORY IN NATURE.  Further details regarding our  properties, although not incorporated by reference, including the comprehensive geological report prepared in compliance with Canada’s National Instrument 43-101 on our Sagar property in Northern Quebec can be found on our website:  www.uraniumstar.com. The comprehensive geological report prepared in compliance with Canada’s National Instrument 43-101 on our Three Horses Property located in Madagascar has been submitted to the SEC and TSX for approval.

Competitive Conditions

The mineral exploration and mining industry is competitive in all phases of exploration, development and production. We compete with a number of other entities and individuals in the search for, and acquisition of, attractive mineral properties. As a result of this competition, the majority of which is with companies with greater financial resources than us, we may not in the future be able to acquire attractive properties on terms it considers acceptable.  Furthermore, we compete with other resource companies, many of whom have greater financial resources and/or more advanced properties that are better able to attract equity investments and other capital.  Factors beyond our control may affect the marketability of minerals mined or discovered by us.

Sagar Property:  Romanet Horst, Labrador Trough, Québec, Canada

Property Description and Location

The Sagar Property comprises 219 blocks of claims in the Territory of Nunavik, Province of Québec, Canada.  The approximate center of exploration activity is circa 56°22’ N latitude and circa 68° 00’ W longitude.  Details on the individual claims are available on-line at the Government of Québec’s Ministère des Resources Naturelles et de la Faune GESTIM website at https://gestim.mines.gouv.qc.ca.

The area comprising these claims is approximately 6,580 hectares.  In this part of the Province of Québec, claim outlines are predetermined by “map staking.”  Previously staked claims are superimposed upon by the map-staking grid, producing some of the small parcels. There are no carried environmental liabilities on the property. All surface work requires provincial government permits, including camp construction permits. These have been acquired.

Agreement

On May 4, 2006, Virginia Mines Inc. (“Virginia”) and our company entered into a binding agreement whereby we were granted an option to acquire an undivided 75% participating interest in 200 claims constituting the Sagar Property located in the Labrador Trough in Northern Québec.  Under the terms of this agreement, we had the option to earn a 75% interest in the Sagar Property by issuing to Virginia 2,000,000 of our common shares and 2,000,000 of our common share purchase warrants, each warrant entitling Virginia to acquire one of our common shares at a price of US$1.00 for a period of three years from the date of issue thereof, and by incurring total exploration expenditures of $2,000,000 on the Sagar Property by August 2008.  Furthermore, Virginia had the option, at any time, to sell its remaining 25% participating interest in the Sagar Property in consideration for the issue to it of 1,000,000 of our common shares and 1,000,000 our of common share purchase warrants.  The common share purchase warrants shall be exercisable at a price equal to the 20-trading day weighted average closing price preceding the selling date, and shall be valid for a period of two years from the date of issuance.  Upon our earning a 100% interest in the Sagar Property, Virginia shall retain a 1.5% royalty (NSR).  In the event of a gold discovery on the Sagar Property with an NI 43-101 indicated resource of no less than 500,000 ounces, Virginia shall be entitled to exercise a back-in right to re-acquire a 51% interest in the Sagar Property by making a cash payment or issuing common shares equivalent to an amount equal to 250% of the expenditures incurred by us on the Sagar Property at such time.  Upon the exercise of such back-in right, Virginia would become the operator of the Sagar Property.

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On February 19, 2007, Virginia exercised its option to sell its 25% remaining interest in the Sagar Property to us and in connection therewith, we issued to Virginia 1,000,000 of our common shares and 1,000,000 of our common share purchase warrants, with each such warrant being exercisable at a price of $1.24 for a period of two years from the date of issuance. As a result of this exercise, we now hold a 100% interest in the Sagar Property, subject to a royalty equal to 1% of net smelter returns on certain claims 0.5% on net smelter returns on other claims owned by Pierre Poisson and Joanne Jones (the "P&J Royalty") (see below), and a royalty in favour of Virginia equal to 1.5% of net smelter returns. Under the agreement with Virginia, we must incur aggregate exploration expenditures of at least $2,000,000 on the Sagar Property on or before August 31, 2008.

The agreement with Virginia is subject to a royalty agreement dated May 27, 1992 (as amended by agreements dated May 10, 1993 and November 3, 1993, collectively, the "Virginia Royalty Agreement") between Virginia Gold Mines Inc. (predecessor to Virginia) and Pierre Poisson and Joanne Jones.  Pursuant to the Virginia Royalty Agreement, Virginia acquired a 100% interest in the Sagar Property, subject to the P&J Royalties.  Pursuant to the Virginia Royalty Agreement, Virginia had the right to buy back half of the 1% net smelter return royalty (0.5%) for $200,000, and half of the 0.5% net smelter return royalty (0.25%) for $100,000, such P&J Royalty repurchase are now held by us.

As at March 31, 2010, we incurred an aggregate of $6,832,279 of exploration expenditures on the Sagar Property.

We are currently up to date with all obligations required to maintain the property in good standing.

FERDERBER CLAIMS

Property Description and Location

We acquired a 100% undivided right, title and interest in and to 19 mining claims (0036315, 0036316, 0036317, 0036318, 0036319, 0036320, 0036321, 0036322, 0036323, 0036324, 0036325, 0036326, 0036327, 0030649, 0030650, 0030640, 0030638, 0030612, 0030613) held by Mr. Peter Ferderber, covering an area of approximately 64 hectares located in the Central Labrador Trough Region of Québec, 13 of which are contiguous to our Sagar Property.

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In consideration of our receiving a 100% interest in these claims (free and clear of all encumbrances), subject to any net smelter return royalties, we paid Cdn$6,000, and issued 150,000 shares of our common stock and a warrant exercisable for 75,000 of our common shares, exercisable at $1.00 for a three year period from date of issuance.

Underlying Royalty (NSR)

Mr. Ferderber retains a 1% net smelter return royalty on this property and agreed that we shall have a first right of refusal to purchase the 1% net smelter return royalty should Mr. Ferderber, at his sole discretion, elect to sell the royalty.

Sagar Property and Ferderber Claims Highlights

The following are key features of the Sagar Property:

The geological setting of the property is the northwest trending Romanet Horst within the Labrador Trough. The significant mineral potential of this geological setting is well demonstrated by the abundance and diversity of uranium-gold showings, which range from veins to breccia’s to shear zones. There is also locally significant sedimentary-hosted copper mineralization. The most spectacular mineralization found to date is the 500 x 200 meter Mistamisk boulder field which contains 150 boulders that range up to 640 g/t gold and 4.11% uranium, with 70 tested boulders averaging 64.9g/t gold and 1.3% uranium. The boulders discovered within the Mistamisk boulder field range in length from 0.30 to 2.0 metres. Previous work has not determined the bedrock source of this boulder field.

Copper mineralization has been defined in a number of locations, the most significant being the Dehli-Pacific showing, which has reported 4.2% copper over 7.6 meters within a drill hole that intersected a shear zone along a sediment-gabbro contact.

We are currently up to date with all obligations required to maintain our option in good standing.

MADAGASCAR PROPERTY

Property Description and Location

The Madagascar properties are comprised of mineral permits consisting of 36 “squares”, each square representing approximately 6.25 sq. kilometers. The properties are located in the District of Toliara and are referenced as TN 12,306,P(R); TN 12,814, P(R); TN 12,887 P(R); TN 12,888 P(R); TN 13,020 P(R); TN 13,021 P(R) as issued by the Bureau de Cadastre Minier de Madagascar (“BCMM”) pursuant to the Mining Code 1999 (as amended) and its implementing decrees.

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Three Horses Property Boundary

(blue lines are creeks, red lines are property boundary, black lines are seasonal tracks)

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Agreement

On August 22, 2007, we entered into a joint venture agreement with Madagascar Minerals and Resources sarl, a company incorporated under the laws of Madagascar. The joint venture, to be known as the “Three Horses Joint Venture”, will be operated through a Madagascar limited liability company in which we will own a 75% undivided interest and Madagascar Minerals will own the remaining 25% interest. The consideration paid to Madagascar Minerals to acquire the 75% stake in the joint venture consisted of:

(i)

a signing fee of $15,000 within 15 days of the properties vesting in the joint venture;

(ii)

a payment of $750,000 within 15 days of the properties vesting in the joint venture  and

(iii)

the issuance of 1,250,000 of our common shares and 500,000 of our share purchase warrants within 30 days of the properties vesting in the company created for the joint venture under Madagascar law. Each share purchase warrant is exercisable at $1.00 per share for a period of 2 years from the date of issuance.

In the event that a joint venture party’s interest in the joint venture is diluted below 10%, then that interest will be exchanged with the majority shareholder for a 2% net smelter return.  Furthermore, that royalty may be acquired by the remaining joint venture party as follows:

(i)

the 1^st 1% at US$1,000,000 in cash or our common shares; and

(ii)

the 2^nd  1% at US$ 1,500,000 in cash or our common shares;

both at the option of the remaining shareholder.

On July 9, 2009, our company entered into a definitive agreement to acquire the remaining 25% interest of the “Three Horses Joint Venture” for cash consideration of $100,000. On acquisition of the remaining 25% the joint venture with MMR was terminated.  MMR retains a 2% net smelter return ("NSR").  The NSR on this 25% interest portion may be acquired by us at a price of $500,000 in cash or shares of our common stock for the first 1% and at a price of $1,000,000 in cash or shares of our common stock for the second 1% at our option.

Exploration Programs

The Green Giant Property (formerly called the Three Horses Property), consists of 31 squares, covering an area of approximately 194 square kilometres, and displays extensive gossan outcroppings at surface. An examination of part of the Property revealed several large areas covered with gossanous boulders which are believed to overlie massive sulphide mineralization.

All phases of the exploration projects have been managed by Taiga Consultants Ltd. of Calgary.

We conducted a first phase of exploration from September to November 2007 for the Three Horses Joint Venture, which included the following activities:

·

Stream Sediment sampling of all stream on the property area

·

Detailed Geological mapping over selected startigraphic horizons

·

Reconnaissance geological mapping over the entire property

·

Soil sampling over selected target areas

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·

Prospecting over selected target areas.

·

Limited trenching over selected targets

·

Construction of a cinder block base camp

·

Construction of a one kilometre long surfaced airstrip

·

Repair and surfacing of the access road from base camp to the airstrip

·

Airborne geophysical surveying over the Three Horses property by Fugro Airborne Surveys Limited

In the latter part of March 2008 to June 2008 a full field exploration program following up on the airborne geophysical survey and results of the 2007 exploration program was implemented. This exploration consisted of the following activities:

·

Infill stream sediment sampling

·

Detailed Geological mapping over selected stratigraphic horizons

·

Prospecting over selected target areas

·

Grid emplacement over selected target areas

·

Ground-based magnetometer and frequency domain EM surveys

·

Soil sampling over selected target areas

After reviewing the analytical data obtained from the March to June, 2008 program, additional exploration was conducted on the property from July 1 to September 30, 2008 in preparation for a drill program. This exploration consisted of the following activities:

·

Infill stream sediment sampling

·

Detailed Geological mapping over selected stratigraphic horizons

·

Prospecting over selected target areas with the aid of a mobile XRF analyzer

Based on compiled analytical results obtained from the various exploration programs, a drill program was initiated on the property from September 30 to November 24, 2008. This exploration program consisted of the following activities:

·

Prospecting over selected target areas with the aid of a mobile XRF analyzer

·

Ground-based scintillometer surveying over selected target areas

·

Diamond drilling of 31 holes (TH-08-01 to TH-08-31) over 4073.3 metres

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2008 Diamond Drill Hole Locations

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Diamond drilling completed in 2008 on the Three Horses Property tested a series of gossans and EM conductors, however no Volcanic Massive Sulphide (VMS) mineralization of significance was encountered. Drilling did confirm the presence of a series of mineral occurrences highly enriched in vanadium and a number of associated anomalous elements which were first seen in stream sediment sampling programs. Due to this unexpected result the focus of exploration shifted to vanadium mineralization part way through the 2008 drill program.

                             Composited Vanadium Mineralization in 2008 Drill Holes                           

Average of Drill Intercepts - 43.9m @ 0.36% V₂O₅

The serendipitous discovery of potentially economic vanadium mineralization on the property changed the course of the 2008 diamond drilling program.  Through a combination of prospecting, ground based scintillometer surveying, and analysis of airborne radiometrics, five extensive vanadium-bearing trends were identified over the course of the 2008 exploration program.

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Vanadium-bearing Trends

Based on positive early indications of the presence of potentially economic grades and volumes of vanadium on the Three Horses Property, another exploration program was initiated on the Green Giant Project in the spring of 2009. The program (completed between April 23 and July 16, 2009) consisted of an extensive X-Ray Fluorescence analysis (XRF) soil sampling program coupled with mechanical trenching and scintillometer surveys over known areas of vanadium enrichment and new areas, defined by the soil XRF survey.

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After reviewing the analytical results from the spring 2009 exploration program, an additional exploration program was carried out between September and December 2009. This exploration program involved mechanical trenching, diamond drilling with accompanying litholgical, structural and geotechnical logging, specific gravity determination, point load tests and metallurgical sampling. All work was carried out under a well supervised Quality Assurance and Quality Control program.

The primary aim of the September to December 2009 drill program was to delineate reserves at the Jaky and Manga targets. A total of 8,931 meters (4509.2m in 30 drill holes at the Jaky target and 4422m in 24 drill holes at the Manga target) of diamond drilling was completed. Selected drill holes were oriented with point load test and orientation measurements recorded.

Composited Vanadium Mineralization in 2009 Drill Holes

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All drill core assays have been received, and PEG Mining Consultants Inc. have been retained to undertake a resource calculation for the Manga and Jaky Zones. It is anticipated, but cannot be guaranteed, that these calculations will be available by June, 2010.

Metallurgy

SGS Mineral Services completed preliminary metallurgical testing as described below

Generally the following observations can be made:

High free acid levels of 100 g/L H₂SO₄ led to higher V extraction in both samples than the test performed under 20 g/L H₂SO₄ conditions.

The tests performed with 100 g/L FA concentrations seem to continue leaching at 24 hrs (based on increasing extraction and decreasing residue assays.

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Overall extraction of vanadium from the silicate sample is higher (78.2%) than from the oxide sample (69.9%).

Despite the higher extraction of vanadium from the silicate samples, acid consumption (using the 100 g/L series of tests) is generally lower with the silicate sample (179 kg/t) than with the oxide sample (250 kg/t). This can be attributed to higher co-extraction of acid consuming elements such as aluminum, magnesium and manganese.

It was observed that a precipitate formed in the filtrate of the Silicate Composite leaches if the pulp was filtered hot. These filtrate samples were filtered again and the precipitate from all of the filtrate samples was combined to be analysed. At 23% Ca this precipitate is presumed to be mainly gypsum.

Vanadium Extraction vs Time

Further metallurgical analysis was initiated in December 2009. A 250kg sample of mineralization from the Jaky Zone has been sent to Mintek Laboratories in South Africa for additional metallurgical test work. The results of this work should be available in the second quarter of 2010. Another 200kg sample of higher-grade mineralization was collected from the Manga Zone.

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Current metallurgical work is aimed at upgrading the V₂O₅ content of the mineralization before subjecting it to acid leaching. A significant decrease in acid consumption is expected.

Future Programs

The property merits an ambitious exploration program consisting of exploratory and infill diamond drilling over vanadium-bearing zones identified by diamond drilling and trenching completed in 2008 and 2009. The goal of the program is to establish a compliant vanadium resource in the Jaky, Manga and Mainty Zones at a minimum, and to continue exploration on other less well-developed target areas mainly the Fondrana and Maitso Zones. A minimum of 6,500 meters of diamond drilling is scheduled to be completed in 2010.

The economic potential of the property rests upon the ability to extract vanadium using reasonable, potentially economic parameters. We are carrying out further larger sample tests and more complete mineralogy and metallurgical testing of vanadium ores to establish the technological and economic parameters of vanadium processing. The goal of this work is to identify a potentially economic processing method to extract vanadium from both the vanadium silicate and vanadium oxide types, which are known to exist on the property.

We have begun the collection of weather, environmental and social data that would be required in any engineering and socio-economic pre-feasibility study.

The expected cost of the recommended program through to the end of 2010 is US$3,100,000.

Sagar Property, Quebec

Taiga Consultants Limited executed exploration programs on Energizer Resources (Formerly Uranium Star’s) behalf in 2007.  Both programs utilized a refurbished exploration camp on the east shore of Lake Mistamisk, and were helicopter supported by Expedition Helicopters Inc.  The objective of both programs was to identify the source of the Mistamisk Boulder Field mineralization.  During the course of exploration activities, 46 diamond drill holes (DDH) over 5,610 metres, and 164 reverse circulation (RC) holes over 2,625 metres were drilled.  The RC holes were pattern drilled to try and establish a glacial transportation vector for the boulder field mineralization, while the DDH’s were drilled to test geophysical anomalies on the Sagar Property.  In addition to drilling, other exploration activities included prospecting of airborne geophysical targets, grid emplacement, ground magnetometer surveying, characterization of the lithogeochemical signature of Mistamisk boulders, and soil sampling.

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Future Programs

In light of empirical observations collected during the course of 2007 exploration activities, other targets have been identified which could prove to be volumetrically more significant than the source of the Mistamisk Boulder Field.  In order of priority, management believes future exploration on the Sagar Property should focus on the discovery of:

1.

Gold and uranium mineralization at redox boundaries along major faults. This work should focus on the intersection between the Romanet fault and the reducing lithologies of the Dunphy and Lace Lake formations.

2.

Unconformity associated polymetallic uranium-style mineralization at the Archean basement contact.  The ‘Kilo’ soil anomaly should be targeted for this exploration due to the anomalous soil, RC, and DDH geochemistry, as well as the numerous coincident geophysical anomalies.  

3.

Iron-Oxide Copper Gold (IOCG) mineralization.  This work should focus on the east-west structure bisecting the Romanet Horst.  In particular, the area to the south-west of the Lac Plisse showing should be drill tested as it has coincident gravity and magnetic highs, and has an anomalous IOCG-related geochemical signature for RC, soil, and water geochemical data. Additionally, the DDH geochemistry and alteration mineralogy observed from holes in the ‘Alpha’ soil target area should be re-examined in the context of IOCG mineralization.

4.

Source mineralization for the Mistamisk Boulder Field. The anomalous Alpha, Delta, and Kilo soil targets, as well as A, B, and E RC targets identified during the course of the 2007 exploration program should be examined to ascertain the source mineralization for the Mistamisk Boulder Field.  

Other Expenses

Management anticipates spending approximately $250,000 in ongoing general and administrative expenses per quarter for the next twelve months.  These general and administrative expenses will consist primarily of professional fees for the accounting, audit and legal work relating to our regulatory filings throughout the year, as well as transfer agent fees and general office expenses. However, the overall general and administration expenses will vary in direct proportion with the level of activity relating to future acquisitions and exploration programs.

Cautionary Note

Based on the nature of our business, we anticipate incurring operating losses in the foreseeable future. We base this expectation, in part, on the fact that very few mineral properties in the exploration stage ultimately develop into producing, profitable mines. Our future financial results are also uncertain due to a number of factors, some of which are outside our control. These factors include, but are not limited to:

- our ability to raise additional funding;

- the market price for gold;

- the market price for uranium;

- the market price for vanadium;- the results of our proposed exploration programs on our mineral properties; and

- our ability to find joint venture partners for the development of our property interests.

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If we are successful in completing an equity financing, existing shareholders will experience dilution of their interest in our company. In the event we are not successful in raising additional financing, we anticipate that we will not be able to proceed with our business plan. In such a case, we may decide to discontinue our current business plan and seek other business opportunities in the resource sector. Any business opportunity would require our management to perform diligence on possible acquisition of additional resource properties. Such due diligence would likely include purchase investigation costs such as professional fees by consulting geologists, preparation of geological reports on the properties, conducting title searches and travel costs for site visits. It is anticipated that such costs will not be sufficient to acquire any resource property and additional funds will be required to close any possible acquisition.

During this period, we will need to maintain our periodic filings with the appropriate regulatory authorities and will incur legal and accounting costs. In the event no other such opportunities are available and we cannot raise additional capital to sustain operations, we may be forced to discontinue business. We do not have any specific alternative business opportunities in mind and have not planned for any such contingency.

Due to our lack of operating history and present inability to generate revenues, our auditors have stated their opinion that there currently exists substantial doubt about our ability to continue as a going concern.

Capital Financing

From inception to June 30, 2004, we raised $59,750 through the issuance of 9,585,000 common shares.

For the year ended June 30, 2005, we did not raise any new financing.

For the year ended June 30, 2006, we raised $795,250 through the issuance of 2,750,000 common shares and 2,265,000 share purchase warrants.

For the year ended June 30, 2007, we raised $17,300,000 through the issuance of 34,600,000 common shares and 29,000,250 share purchase warrants.

For the year ended June 30, 2008, we did not raise any new financing.

For the year ended June 30, 2009, we raised $680,000 through the issuance of 6,800,000 common shares and 3,400,000 share purchase warrants.

For the nine months ended March 31, 2010, we raised $6,500,000 through the issuance of 21,666,667 common shares and 21,666,667 share purchase warrants.

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We anticipate that additional funding will be in the form of equity financing from the sale of our common stock.  However, our company cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of common stock for additional phases of exploration.  Our management believes that debt financing will not be an alternative for funding additional phases of exploration.  We do not have any arrangements in place for any future equity financing.

Results of Operations

We have had no operating revenues from inception on March 1, 2004 through to the period ended March 31, 2010.  Our activities have been financed from the proceeds of share subscriptions.  From inception, on March 1, 2004, to March 31, 2010, we raised gross aggregate proceeds of $25,335,000 from private offerings of our securities.

For the period from inception, March 1, 2004, to March 31, 2010, we incurred a loss before income taxes of $42,772,479.  Expenses included $22,518,829 in mineral property and exploration costs.  These costs charged to operations were for the acquisition of the Sagar  Properties in Canada,  Madagascar properties, and other abandoned properties including ancillary costs related to the mineral properties.  We also incurred $2,172,025 in professional fees during the period. We had general and administrative expenses of $3,121,548; stock based compensation of $16,530,208, a foreign exchange translation gain of $685,137 and other income (including interest) of $947,885.

Liquidity and Capital Resources

As at March 31, 2010, we had cash on hand of $4,544,880 and a working capital of $4,671,706.

Our company business has been funded to date through the sale of our common stock.

We hold a significant portion of cash reserves in Canadian dollars.  Due to foreign exchange rate fluctuations, the value of these Canadian dollar reserves can result in both translation gains or losses in US dollar terms.  If there was to be a significant decline in the Canadian dollar versus the US Dollar the US dollar cash position would also significantly decline.  We have not entered into derivative instruments to offset the impact of foreign exchange fluctuations.  Such foreign exchange declines could cause us to experience losses.

There are no assurances that we will be able to achieve further sales of common stock or any other form of additional financing.  If our company is unable to achieve the financing necessary to continue the plan of operations, then we will not be able to continue our exploration and our venture will fail.

Issuances of Securities

We have funded our business to date from sales of our common stock.  During the year ended June 30, 2009, we closed a private placement comprising of 6,800,000 units for gross proceeds of $680,000. Each unit consists of one share of common stock and one-half share purchase warrant . Each warrant is exercisable at $0.20 per share for a period of two years from date of issuance. In connection with the private placement, we paid 408,000 shares of common stock and 408,000 broker warrants valued at $0.10 per unit as commission. Each broker warrant is exercisable at $0.10 per share for a period of 2 years from the date of issuance.

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All of these shares were issued to non-US investors pursuant to the exemption provided by Regulation S under the Securities Act for a transaction not involving a public offering.

The offer and sale of all shares of our common stock and warrants listed above were affected in reliance on the exemptions for sales of securities not involving a public offering, as set forth in Regulation S promulgated under the Securities Act.  The Investor acknowledged the following: Subscriber is not a United States Person, nor is the Subscriber acquiring the shares of our common stock and warrants directly or indirectly for the account or benefit of a United States Person.  None of the funds used by the Subscriber to purchase the shares of our common stock and warrants have been obtained from United States Persons. For purposes of this Agreement, “United States Person” within the meaning of U.S. tax laws, means a citizen or resident of the United States, any former U.S. citizen subject to Section 877 of the Internal Revenue Code, any corporation, or partnership organized or existing under the laws of the United States of America or any state, jurisdiction, territory or possession thereof and any estate or trust the income of which is subject to U.S. federal income tax irrespective of its source, and within the meaning of U.S. securities laws, as defined in Rule 902(o) of Regulation S, means:

(i) any natural person resident in the United States; (ii) any partnership or corporation organized or incorporated under the laws of the United States; (iii) any estate of which any executor or administrator is a U.S. person; (iv) any trust of which any trustee is a U.S. person; (v) any agency or branch of a foreign entity located in the United States; (vi) any non-discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary for the benefit or account of a U.S. person; (vii) any discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary organized, incorporated, or (if an individual) resident in the United States; and (viii) any partnership or corporation if organized under the laws of any foreign jurisdiction, and formed by a U.S. person principally for the purpose of investing in securities not registered under the Securities Act, unless it is organized or incorporated, and owned, by accredited investors (as defined in Rule 501(a)) who are not natural persons, estates or trusts.

On January 27, 2009, we issued 2,500,000 common shares to directors, officers and consultants as compensation for services rendered at a fair value of $250,000.  The shares were valued at an estimated fair market value of $0.10 per share based on the prevailing quoted market price on the date of issue.

On April 21, 2009, we issued 1,600,000 common shares to directors, officers and consultants as compensation for services rendered at a fair value of $128,000. The shares were valued at an estimated fair market value of $0.08 per share based on the prevailing quoted market price on the date of issue.

On June 24, 2009, we issued 750,000 common shares and 375,000 share purchase warrants valued at $131,924 to a new director and to a special advisory member to the Board of Directors as incentive bonus for their current and future services. The share purchase warrants issued are exercisable at $0.20 for a period of two from the date of issuance. These shares were issued in reliance on the exemption for sales of securities not involving a public offering as set forth in Rule 506 promulgated under the Securities Act of 1933 and in Section 4(2) and Section 4(6) of the Securities Act of 1933.

On August 17, 2009, we issued 2,500,000 shares of our Common Stock to directors, officers and consultants as 2009 Bonus Compensation Shares for their services to our company.  The foregoing securities were exempt from registration provided by Section 4(2) of the Securities Act of 1933 and Rule 506 of Regulation D thereunder and Regulation S Securities Act of 1933. Subsequent to the issuance, we cancelled 250,000 shares of our Common Stock issued to a consultant.

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On September 29, 2009, our company issued 500,000  shares of common stock and 250,000 share purchase warrants to a director as an incentive bonus compensation. The foregoing securities are exempt from registration provided by Section 4(2) of the Securities Act of 1933 and  Regulation S Securities Act of 1933.

On March 15, 2010, we closed a private placement of 21,666,667 units for gross proceeds of $6,500,000 (the “2010 Offering”).  Each Unit consisted of one common share (a “Unit Share”) and one Common Share purchase warrant (a "Warrant").  Each Warrant entitles the holder to purchase one Common Share (a "Warrant Share") at an exercise price of $0.50 for a period of three years following the later of March 15, 2010 and the date of listing on the TSX Venture Exchange ("TSX-V").  The expiry of the warrants may be accelerated by the Company if the Common Shares trade at a price greater than $0.75 at any time after 9 months from March 15, 2010 for a period of 21 consecutive days on the OTC Bulletin Board ("OTCBB") or the TSX-V, provided that the Company has filed, and had declared effective, the Registration Statement (as defined below).

The Units were issued together with listing and filing rights, which rights may be converted into an escalating number of Common Shares if the Company does not complete its TSX-V Listing or file a resale registration statement for the securities issued in connection with the 2010 Offering (the “Registration Statement”) by certain specific dates.  A maximum of 17,333,333 Common Shares may be issued pursuant to such rights.

In the event that the Common Shares of the Company have not commenced trading on the TSX-V on or before June 15, 2010, each holder of a Unit Share shall be entitled to be issued one-tenth of one common share (each whole share a “Listing Rights Share”) on June 15, 2010 and an additional one-tenth of one Listing Rights Share on every six month anniversary thereafter in which the Company fails to complete the TSX-V Listing until June 15, 2012 such that the maximum number of Listing Rights Shares which may be issued pursuant to such rights is equal to 50% of the Unit Shares issued under the 2010 Offering. Our common shares commenced trading on the TSX-V on May 5, 2010 under the trading symbol “EGZ”.

In the event that the Registration Statement has not been declared effective on or before December 15, 2010, each holder of a Unit Share shall be entitled to be issued one-tenth of one common share (each whole share a “Filing Rights Share”) starting on December 15, 2010 and an additional one-tenth of one Filing Rights Share on every six month anniversary thereafter in which the Company fails to have the Registration Statement declared effective until December 15, 2011 such that the maximum number of Filing Rights Shares which may be issued pursuant to such rights is equal to 30% of the number of Unit Shares issued under the 2010 Offering.

As consideration for their services in connection with the brokered private placement, Clarus Securities Inc. and Byron Securities Limited (the “Agents”) were (i) paid a cash commission equal to 6% of the gross proceeds of the brokered portion of the 2010 Offering, (ii) issued 870,000 class A broker warrants (“Class A Warrants”), and (iii) issued 870,000 class B broker warrants (“Class B Warrants”). Each class A broker warrant entitles the holder to acquire one common share at an exercise price of $0.30 until March 15, 2012. Each class B broker warrant entitles the holder to acquire one common share at an exercise price of $0.50 for a period of three years following the later of March 15, 2010 and the date of the Company’s listing on the TSX-V. One of the Agents, Clarus Securities Inc., was also issued 400,000 Common Shares and 400,000 class C compensation warrants (“Class C Warrants”), each Class C Warrant is exercisable to acquire one common share at a price of $0.30 until March 15, 2013, in each case for advisory services rendered to the Company.

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The Offering of such shares of our common stock and common stock purchase warrants  to the Investors was effected in reliance on the exemptions for sales of securities not involving a public offering, in reliance upon Regulation S of the Securities Act of 1933, as amended (the “Securities Act”) , based on the following: (a) the Investors confirmed to us that they were "accredited investors," as defined in Rule 501 of Regulation D promulgated under the Securities Act and had such background, education and experience in financial and business matters as to be able to evaluate the merits and risks of an investment in the securities; (b) there was no public offering or general solicitation with respect to the offering; (c) the Investors were provided with certain disclosure materials and all other information requested with respect to our company; (d) the Investors acknowledged that all securities being issued were "restricted securities" for purposes of the Securities Act, and agreed to transfer such securities only in a transaction registered under the Securities Act or exempt from registration under the Securities Act; and (e) a legend was placed on the certificates representing each such security stating that it was restricted and could only be transferred if subsequent registered under the Securities Act or transferred in a transaction exempt from registration under the Securities Act.  The Investors, in conjunction with the issuance of common shares and common stock purchase warrants pursuant to Rule 903(a) and (b)(3) of Regulation S represented to us that they were not a “U.S. Person”. We did not engage in a distribution of this offering in the United States. The Investors represented its intention to acquire the securities for investment only and not with a view towards distribution. Appropriate legends have been affixed to the stock certificate issued to the Investors in accordance with Regulation S.

For purposes of this disclosure, “U.S. Person” within the meaning of U.S. tax laws, means a citizen or resident of the United States, any former U.S. citizen subject to Section 877 of the Internal Revenue Code, any corporation, or partnership organized or existing under the laws of the United States of America or any state, jurisdiction, territory or possession thereof and any estate or trust the income of which is subject to U.S. federal income tax irrespective of its source, and within the meaning of U.S. securities laws, as defined in Rule 902(o) of Regulation S, means:

(i) any natural person resident in the United States; (ii) any partnership or corporation organized or incorporated under the laws of the United States; (iii) any estate of which any executor or administrator is a U.S. person; (iv) any trust of which any trustee is a U.S. person; (v) any agency or branch of a foreign entity located in the United States; (vi) any non-discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary for the benefit or account of a U.S. person; (vii) any discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary organized, incorporated, or (if an individual) resident in the United States; and (viii) any partnership or corporation if organized under the laws of any foreign jurisdiction, and formed by a U.S. person principally for the purpose of investing in securities not registered under the Securities Act, unless it is organized or incorporated, and owned, by accredited investors (as defined in Rule 501(a)) who are not natural persons, estates or trusts.

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We anticipate that additional funding will be in the form of equity financing from the sale of our common stock. However, we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common stock for additional phases of exploration. We believe that debt financing will not be an alternative for funding additional phases of exploration. We do not have any arrangements in place for any future equity financing.

There are no assurances that we will be able to achieve further sales of our common stock or any other form of additional financing. If we are unable to achieve the financing necessary to continue our plan of operations, then we will not be able to continue our exploration and our venture will fail.

Foreign exchange matters

We hold a significant portion of our cash reserves in Canadian dollars. Due to foreign exchange rate fluctuations, the value of these Canadian dollar reserves can result in either translation gains or losses in US dollar terms. If there was to be a significant decline in the Canadian dollar versus the US Dollar our US dollar cash position would also significantly decline. We have not entered into derivative instruments to offset the impact of foreign exchange fluctuations. Such foreign exchange declines could cause us to experience losses.

Off-balance sheet arrangements

We have no off-balance sheet arrangements including arrangements that would affect the liquidity, capital resources, market risk support and credit risk support or other benefits.

We do not hold any derivative instruments and do not engage in any hedging activities. Most of our activity is the development and mining of our mining claim.

ITEM 4. Controls and Procedures

a) Evaluation of Disclosure Controls and Procedures

Our principal executive officer and our principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act), as of the last day of the fiscal period covered by this report, March 31, 2010.  The term disclosure controls and procedures means our controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange 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 by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of March 31, 2010.

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Our principal executive officer and our principal financial officer, are responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f).  Our principal executive officer and our principal financial officer  are required to base their assessment of the effectiveness of our internal control over financial reporting on a suitable, recognized control framework, such as the framework developed by the Committee of Sponsoring Organizations (COSO).  The COSO framework, published in Internal Control-Integrated Framework, is known as the COSO Report.  Our principal executive officer and our principal financial officer, have chosen the COSO framework on which to base their assessment.  Based on this evaluation, our principal executive officer and our principal financial officer concluded that our internal control over financial reporting was effective as of March 31, 2010.

Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in our annual reports on Form 10-K for the annual reporting periods through June 30, 2009.

It should be noted that any system of controls, however well designed and operated, can provide only reasonable and not absolute assurance that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of certain events. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.