10KSB form10ksb.htm FORM 10-KSB  OMB Number: 3235-0420 Expires: April 30, 2009 Estimated average burden hours per response . . . . . 1646 OMB APPROVAL     UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-KSB/A1 (Mark One)  [ X ] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  For the fiscal year ended December 31, 2006  [     ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________ to __________________  Commission file number: 0-49942   STRATECO RESOURCES INC. (Name of small business issuer in its charter)  Quebec, CanadaN/A(State or other jurisdiction of incorporation
or organization)(I.R.S. Employer Identification No.)1225 Gay-Lussac, Boucherville, QuebecJ4B 7K1(Address of principal executive offices)(Zip Code)  Issuers telephone number: (450) 641-0775  Securities registered under Section 12(b) of the Exchange Act: None  Title of each class      Name of each exchange on which registered  ____________________________    ___________________________________   Securities registered under Section 12(g) of the Exchange Act:  Common Shares (Title of class)       Check whether the issuer (1) 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 (2) has been subject to such filing requirements for the past 90 days.  Yes X No  ̈  SEC 2337 (12-05)  Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB.  State issuers revenues for its most recent fiscal year: None- Junior Exploration Company  State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity, as of a specified date within the past 60 days. (See definition of affiliate in Rule 12b-2 of the Exchange Act.)  As of March 15, 2007 the average bid for the common shares for the past 60 days was $2.90 per share for and aggregate market value of $308,983,014.  Note: If determining whether a person is an affiliate will involve an unreasonable effort and expense, the issuer may calculate the aggregate market value of the common equity held by non-affiliates on the basis of reasonable assumptions, if the assumptions are stated.  (ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)  Check whether the issuer has filed all documents and reports required to be file by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes   ̈ No  ̈  (APPLICABLE ONLY TO CORPORATE REGISTRANTS)  State the number of shares outstanding of each of the issuers classes of common equity, as of the latest practicable date: 106,545,867 common shares.  DOCUMENTS INCORPORATED BY REFERENCE  Part II Item 7: Financial Statements of an exploration stage company  The Company, an exploration stage company, incorporates for reference to the present document the Strateco Resources Inc. consolidated audited financial statements for the fiscal year ending December 31, 2006 and audited financial statements for the fiscal year ending December 31, 2005 that include the report of U.S. GAAP reconciliation at Note 15. These financial statements follow the signature page of the present document.  Transitional Small Business Disclosure Format (Check one): Yes ____; No __X__        PART 1  Item 1  Business.  The year 2006 was an exceptional year for Strateco Resources Inc. (the Company) and its shareholders. The acquisition of the residual 49% interest in the Matoush uranium and Discovery gold properties in February proved to be the turning point for the Companys revival.  The acquisition of a 100% interest in the Discovery property led to the creation of Cadiscor Resources Inc. (Cadiscor). With the transfer of Discovery to Cadiscor for 20 million shares that were later distributed to Strateco shareholders in August 2006, management of the Company was able to turn its full attention to developing its uranium assets.  Exploration for 2006 totalled $3,243,300, thanks to the completion of a series of private placements for a total of $10,760,000 and the exercise of warrants and stock options for a total of $4,149,689. This exploration was primarily focused on the Matoush property, and included 38 holes drilled by a single drill in the vicinity of the AM-15 uranium structure.  Management also devoted substantial resources to investor and shareholder relations. The listing of the Companys shares on the Frankfurt Exchange, five rounds of road shows in Europe and four in western Canada and numerous trips to Toronto and the United States served to raise the Companys profile, primarily with institutional investors.  The efforts and funds devoted to public relations, the quality of drill results obtained on the Matoush property and climbing uranium prices all added up to exceptional share performance. The share price rose from $0.18 per share on December 31, 2005 to $2.55 per share a year later, for a 1,316% gain, not including the distribution of Cadiscor shares.  In addition, the Company closed a private placement for $25,000,000 in January 2007. Units priced at $2.60 consisted of a common share and half a warrant, with each whole warrant entitling its holder to purchase one common share of Strateco at $3.50 for a 24-month period. The private placement was completed in record time by a brokerage syndicate led by Orion Securities Inc., assisted by Dundee Securities Corporation, Blackmont Capital Inc. and Sprott Securities Inc.  This financing, along with funds raised in 2006, places the Company in a solid financial position, with over $30,000,000 in cash and term deposits to date. The operating budget for fiscal year 2007 is $16,600,000.  In the fall of 2006, the Board of Directors decided on a material change in corporate strategy. The corporate strategy announced at the 2005 Annual General Meeting was to explore and develop the Matoush property so as to be in a position to solicit bids for the Company as of Spring 2006. However, the quality of the exploration and drill results on Matoush and a better understanding of the uranium industry made it clear that it was in the shareholders best interest to finish assessing the Matoush resource and begin the process of obtaining a mining permit and conducting a feasibility study as of the Spring of 2006.  Due to repairs and construction on the winter road leading to the Matoush property, the Matoush camp now has all the fuel it requires for 2007. All the materials required for the construction and operation of the new 45-person camp have been brought to the site. Two additional drills have also been transported to the site via the winter road.  With the three drills now on site, 30,000 metres of drilling will be completed in about 80 holes, including several deep holes that will test the sedimentary/bedrock contact.  Two drills will be used to delineate the AM-15 zone resource. Work on a 43-101 compliant resource estimate should begin in June 2007, to be used as a basis for a scoping study to be done in the summer of 2008.  Geophysics and prospecting carried out in the summer and fall of 2006 have provided a basis for a 35-hole drilling program on the Mont-Laurier property. The results of this drilling will enable us to decide on a corporate strategy for this uranium project.  The meteoric rise in uranium prices from US $6.00 to $85.00/lb in recent years has prompted renewed interest in uranium exploration. Given its location, the sustained rise in uranium prices and growing demand for alternative energy sources, the Mont-Laurier Uranium project is a solid addition to the Companys property portfolio.  Shareholder and investor relations will continue to be a priority in 2007, which promises to be as interesting as was 2006.  In November 2006, the Company lost a director and member of its Audit Committee. Francine Bélanger, C.A., passed away after a brief illness. Her professionalism and enthusiasm will be greatly missed by us all. In January 2007, Claude Hubert, Ph.D., stepped down from the board for personal reasons. Ms. Bélanger and Mr. Hubert had been very active in the board of directors since the Company was first formed, and had been associated with our group since the early 1980s. We are very grateful to Henri Lanctôt and Marcel Bergeron, C.A., who have agreed to replace Ms. Bélanger and Mr. Hubert as directors.  On behalf of the Board of Director   Guy Hébert, President March 5, 2007  Item 2: Properties.  The Company owns 100% of three mining properties and has interests in or options on two other properties in Québec. These properties cover 426 claims for a total area of 23,128 hectares.  MATOUSH PROJECT  U3O8 100% INTEREST  Location and Access  The Matoush project is located in the Otish Mountains in northern Québec, about 300 kilometres north of Chibougamau, and consists of the Matoush, Matoush Extension and Eclat properties. The Matoush project presently covers 313 claims for a total area of 16,619 hectares. The project is accessible by air, and in winter by the Eastmain winter road, which runs about seven kilometres to the west of the property.    [form10ksba001.jpg]     [form10ksba002.jpg]    Matoush Property  Mining Claims  The property consists of 25 claims covering an area of 1,330 hectares.  A letter of intent dated May 12, 2005 provided for the Company to earn a 51% interest from Ditem Explorations Inc. (Ditem), which owned a 100% interest, in consideration of: payments totalling $125,000 over two years, including $5,000 on signature of the agreement; $750,000 in exploration work over three years, including $200,000 the first year; and the issuance of 600,000 common shares of the Company over two years. The Beaver Lake Area project, which lies approximately 20 kilometres to the west, is also covered by this agreement.  A new letter of intent was signed with Ditem on February 21, 2006, giving the Company a 100% interest in the Matoush property under the following terms:  -        Upon signature of the letter of intent$                       10,000-        Within five days following approval of the transaction by regulatory authorities$                     140,000-       The issuance of 400,000 shares of Strateco Resources Inc. within five days following regulatory approval. The shares were subject to a resale restriction of four months plus a day.-        A 2% NSR, as defined by industry standards  The claims in the Beaver Lake area project have not been renewed by the Company.  Uranium Potential  The Otish Mountain area is well known for its uranium potential, particularly due to exploration conducted by Uranerz Mining and Cogema in the late 1970s and early 1980s. Mining giant Cameco Corporation, the largest public uranium producer in the world, holds a large number of claims immediately to the south of the Companys Matoush and Eclat properties, and has conducted a range of exploration activities in recent years, primarily geophysics. A drilling program is currently underway.  The results of exploration conducted by Uranerz Exploration and Mining in the early 1980s before uranium prices tumbled, as well as those obtained by the Company in 2006, indicate that the Matoush property has a very good potential.  Uranerz only explored a 900-metre section of the Matoush structure, which had been traced over 3,900 metres on this property. This exploration work included holes drilled at a spacing of about 200 metres.  Hole AM-15, which returned a 16-metre intersection grading 0.95% U3O8 (19 lbs/ton),  served as the Companys point of departure for exploration of the property. It is clear that the positive drill results obtained by the Company in 2006 created renewed interest in uranium exploration in the Otish Mountains, with various exploration companies taking positions in the area.  The holes drilled on the Matoush property indicate that the uranium mineralization is closely linked to the tourmaline alteration on both sides of a gabbro dike in the sediments. The alteration envelope associated with the Matoush structure is symmetrical, with an average thickness of 40 metres. Typically, adjacent to and moving outward from the dike is first a tourmaline zone, then a chlorite-fuschite-muscovite zone and a limonite-hematite zone. The intensity of the tourmaline alteration appears to increase with depth, with the best grades associated with the most intense alteration.  Exploration Work  The Company was very active in exploration on the Matoush property in 2006, with various activities carried out from February 2006 on, mainly drilling. . The results were encouraging. A helicopter-borne radiometry, magnetic and electromagnetic survey covering the entire Matoush project over about 1,410 line-kilometres was also done, along with prospecting. The holes drilled on the Matoush property served to confirm the presence of the ACF (Active Channel Facies), favourable to the deposition of uranium mineralization. This observation, based on the technical report for the last drilling program by Uranerz in 1984, as well as in-depth reading of each of the holes drilled by the Company in 2006, proved to be a valuable guide for exploration, and particularly for the identification of future drill targets.  The Matoush mineralized showing lies in the Indicator Formation, in the the Otish Mountain Paleoproterozoic sedimentary basin. Locally, the Indicator Formation is subdivided into repetitive sequences of two main facies. The first, the Active Channel Facies, or ACF, is composed of relatively coarse, immature arkosic-to-sub-arkosic sandstone. The second, the Channel Bar Facies, or CBF, consists of relatively fine, mature arkosic sandstone, finely laminated with some cross-lamination. Three pairs of ACF-CBF have been identified in holes drilled by the Company in 2006 and the old Uranerz drill holes.  To date, three main ACF and two intercalated CBF have been identified from surface. The first ACF extends from surface to -40 metres, the second from -200 to -260 metres and the third from -360 to -460 metres, remaining open at depth as the deepest hole drilled by the Company was to -460 metres.  From March 22 to December 17, 2006, 38 holes totalling 13,668 metres were drilled by one drill operated by Major Drilling International Ltd of Val dOr. Drilling was ongoing, except for during the thaw period from April 17 to June 16.  With the exception of one hole (MT-06-17) that targeted the upper part of the ACF below -400 metres and another drilled in the upper facies near surface (MT-06-24), the 2006 holes were drilled in the AM-15 zone and its northern extension. The Matoush structure, which has been identified over a distance of eight kilometres, was tested by drilling over 720 metres in 2006, and remains open in both directions. The Company received chemical analysis results in 2006 from Saskatoon Research Centre (SRC) laboratories for 25 of the 38 holes drilled during the year and for the remaining 13 holes on February 16, 2007. The results were released on February 20, 2007.  The results obtained on the AM-15 zone, confirmed the high-grade potential over notable widths.  The results obtained included the following holes.  MT-06-041.01% U3O814.1 m.  20.2 lb/tonMT-06-051.54% U3O89.5 m.  30.8 lb/tonMT-06-091.68% U3O85.6 m.  33.6 lb/tonMT-06-101.12% U3O810.8 m.  22.4 lb/tonMT-06-302.10% U3O812.4 m.  42.0 lb/tonMT-06-352.13% U3O815.2 m.  42.6 lb/ton  These results compare favourably to Hole AM-15 drilled by Uranerz in the early 1980s (0.95% U3O8over 16 metres). The first holes drilled by the Company in March 2006, particularly Hole MT-06-02, which was a duplicate of Hole AM-15, returned 0.74% U3O8 over 18.2 metres. Note that the section of 0.95% U3O8 over 16 metres includes an high grade of 20.4% U3O8 over 0.5 metre. The first 29 holes drilled by the Company did not intersect high grades. However, Hole MT-06-30 with a pierce point 50 metres north of Hole AM-15 in the upper ACF and Hole MT-06-35 with a pierce point in the lower ACF, 42 metres from Hole MT-06-30 and 25 metres from Hole AM-15, confirmed the existence of high grades, with 16.6% U3O8over 0.3 metre for MT-06-30 and 11.16% U3O8over 0.9 metre for MT-06-35. Intersections for holes MT-06-30 (2.10 % U3O8 over 12.4 metres) and MT-06-35 (2.13% U3O8over 15.2 metres) proved to be the best to date for the property as a whole. Radiometry on the core showed counts-per-second (cps) of up to 65,000.  The last holes drilled in 2006 on the AM-15 zone (MT-06-30 to MT-06-38) showed the strength of the system. In addition to holes MT-06-30 and MT-06-35 referred to above, which intersected a high grade of more than 2.0% U3O8over a substantial average width of 13.8 metres (45 feet), Hole MT-06-36 intersected 0.78% U3O8 over an impressive width of 23.4 metres (77 feet).  Definition drilling therefore led to a substantial increase in the number of pounds of uranium in the AM-15 zone.  Compelling results were generated by holes MT-06-31, 32, 33 and 37, drilled in the northern extension of Hole MT-06-30, and particularly by Hole MT-06-32. These holes were drilled to test the uranium potential at the ACF/CBF contacts. Hole MT-06-32 was a pleasant surprise, intersecting two mineralized sections in the CBF, the first returning 1.66% U3O8 over 5.5 metres from the fault hangingwall, and the second yielding 0.81% U3O8 over 3.3 metres at the level of the fault.  Exploration holes MT-06-20 to MT-06-27, drilled on a grid of about 100 metres to the north of the AM-15 zone, all intersected the fault with typical alteration. Radiometry on the core indicated weak-to-moderate values of up to 2,500 cps, corresponding to Hole MT-06-25, which intersected 0.20% U3O8 over 1.5 metres in the CBF.  To date in 2007, drilling has been focused on the southern extension to the AM-15 zone. Core radiometry readings for the first holes, MT-07-01 and MT-07-06, were encouraging. Once the ice on the lake near the camp is thick enough, the second drill already on site will be moved approximately 250 metres south of AM-15 to drill a high-priority target. The move is expected to take place in the second week of March 2007.  The target area corresponds to the best intersection obtained in 1984 by Uranerz Exploration and Mining in the ACF near surface, namely AM-09, which returned a grade of 0.29% U3O8 over 4 metres. In comparison, Hole AM-06, drilled near surface above AM-15, intersected 0.30% U3O8 over 0.55 metre. The potential of this area is increased by the presence of numerous sub-angular blocks discovered recently by one of the Companys prospecting crews, about one kilometre south of the target area. High radiometry of 20,000 to 30,000 cps were obtained repeatedly on these blocks, which show the fuschite alteration typical of the Matoush project uranium zones.  A third, lighter drill will be mobilized by helicopter at the end of March. The arrival of the second drill on site allowed the first deep hole to be started on February 19, 2007 to explore the contact (discordance) between the sediment and the bedrock, expected to occur at a depth of approximately 900 metres. The first hole will establish the stratigraphy of the sediments and the number of ACF-type sedimentary units in which high uranium grades have been discovered to date on the Matoush property. The Athabaska Basin is known to host perched deposits with grades similar to those found at Matoush, with the richest deposits located at or near the discordant sediment/bedrock contact.  Repairs to the winter road began in mid-January 2007 and a new 12-kilometre section was built. An impressive quantity of equipment has been mobilized, including a 45-person camp, which will be operational two months earlier than expected, in mid-April. Management is very proud of this accomplishment, and wishes to thank all those who participated in this assignment.  Thanks to a major private, non-flow-though financing of $25,000,000 completed in late January by management, your Company is in an excellent financial position to continue to aggressively explore the Matoush project by carrying out, among other things, a drilling program of over 30,000 metres.  Eclat Property  Location and Access  The Eclat property is located in the Otish Mountains of northern Québec, immediately south of the Matoush property. The property is accessible by helicopter as well as by the winter road that links the Eastmain mine to Témiskamie. [form10ksba003.jpg]     [form10ksba004.jpg]     Mining Claims  The property consists of 90 mining claims covering 4,787 hectares. Vija Ventures Corporation holds a 100% interest in the property.  A letter of intent dated July 12, 2005 grants Strateco an option on a 100% interest.  The interest applies to all minerals except diamonds.  The agreement provides for the Company to earn its 100% interest by making payments totalling $150,000 over four years, including $7,000 on signature of the agreement and $7,000 on the first, $20,000 on the second, $20,000 on the third and $96,000 on the fourth anniversary, by carrying out $500,000 in exploration over four years and by issuing 600,000 common shares of the Company over three years, of which 200,000 have already been issued. The property is subject to a 2% NSR.  Uranium Potential  The property is strategically located in a relatively unexplored area with known uranium potential. It is bordered to the north by the Matoush property, wholly-owned by the Company, and to the south by ground recently staked by Cameco Corporation, the worlds largest public uranium producer.  The property lies in the southern extension of the Matoush structure, which was traced by Uranerz over 3,900 metres using ground VLF surveys conducted in the early 1980s. The holes drilled by Uranerz and Strateco clearly show uranium potential.  The Matoush structure also appears to continue for at least two kilometres on the Eclat property, which adds to its value.  Exploration Work  Hole EC-06-01, drilled 5.8 kilometres south of Uranerz Hole AM-15, primarily to maintain certain mining claims in the area, confirmed the southern extension of the Matoush fault.  The results were compelling. The structure was intersected at 111 metres down the hole, at a vertical depth of 76 metres. While unmineralized, the typical tourmaline alteration of the structure was intersected over a 10-metre section, with the fault appearing to be strongly choritized. This hole therefore confirms the presence of the Matoush structure over a distance of more than seven kilometres.  The radiometry and magnetometry survey carried out by Aeroquest Limited in the fall of 2006 on the Matoush property also covered the entire Eclat property.  Matoush Extension Property  The Matoush Extension property is located north, west and east of the Matoush property.     [form10ksba005.jpg]    [form10ksba006.jpg]  Mining Claims  Wholly-owned by the Company, the Matoush Extension property consists of 198 claims covering 11,504 hectares. These mining claims were acquired by the Company in the fall of 2005 and the winter and summer of 2006 to protect the area in the vicinity of the Matoush and Eclat properties.  The northern border of the property is very close to the northern edge of the Otish Basin. The property is broken up by a row of mining claims belonging to Pacific Bay.  With the addition of the Matoush Extension property, the Matoush project as a whole covers 23 kilometres along its north-south axis, intersected by a 900-metre section belonging to Pacific Bay.  Exploration Work  No significant exploration work was conducted on the Matoush Extension property except for the radiometry and magnetometry survey, which covered most of the property.  MONT-LAURIER PROPERTY  U3O8 100% INTEREST  Location and Access  The Mont-Laurier project is located in Pérodeau Township, 40 kilometres northeast of Mont-Laurier, Québec. The property is easily accessible by paved road from Mont Laurier.  [form10ksba007.jpg]    - [form10ksba008.jpg]  Mining Claims  The project consists of 80 claims that cover an area of 4,710 hectares. Strateco owns a 100% interest in the property, acquired at the end of March 2005.  Uranium Potential  The ground acquired lies within the Cabonga-Mont-Laurier radioactive district of the Grenville geological province. Intensive exploration work was conducted in the area from 1969 to 1981, after Canadian Johns-Manville discovered uranium mineralization in 1967.  Stratecos property covers ground previously held by Mont-Laurier Uranium Mines in the 1970s. The claims block straddles the crest of a northeast-trending anticline and covers the high-potential southern extension of the Tom Dick uranium zones.  The uranium occurs mainly as disseminated uraninite in metamorphosed white pegmatites, as well as in biotite gneiss and impure biotite feldspath quartzites. The paragneiss covers Archean granite gneiss exposed mainly in the eroded windows along the crest of the major northeast-trending anticlinal folds.  Two white pegmatite uranium zones have been identified in the centre-south portion of the ground held by the Company, previously known as the Lac Hanson claims. The largest zone, which is six metres thick and dips 20o to the northwest, has been traced over a distance of 365 metres to the northeast by trenching. Previous work reported an estimate of 544,000 tons grading 0.075% U3O8, or 1.5 lb/ton. The central portion of Stratecos property, on the same axis between the Lac Hanson and the Tom Dick zones, remains virtually unexplored due to the fluvio-glacial overburden.  To the north of the property, various zones of radioactive metamorphosed white pegmatite identified by Allied Mining, Canadian Johns-Manville and Mont-Laurier Uranium Mines Inc. indicate a potential for high-tonnage, low-grade, uranium deposits near surface and minable by open pit. SOQUEM also identified molybdenite in the white uranium-bearing pegmatite that could represent a subproduct and improve the economics of the deposit.  While the Mont-Laurier district is classified under pegmatite-type deposits, it displays a geological context similar to the deposit-rich geology of the Athabaska basin in Saskatchewan. Both contexts lie along a major discordance in the deformed bedrock underlying the Proterozoic sedimentary basin. The pegmatite origin of the rocks hosting the Mont-Laurier mineralization is the result of anatexy of the sandstone units during high-intensity metamorphosis.  In the past, Allied-Mining, Canadian Johns-Manville and Mont Laurier Uranium Mines Inc. all confirmed the areas potential for high-tonnage, low-grade open-pit operations. This renewed interest in uranium exploration has been prompted by the meteoric rise in uranium prices from US $6.00 to $85.00/lb in recent years. Given its location, the sustained rise in uranium prices and growing demand for alternative energy sources, the Mont-Laurier property is a solid addition to the Companys property portfolio.  Exploration Work  The Company initiated exploration work on the Mont-Laurier project in the summer and fall of 2006.  First, in mid-June 2006, a helicopter-borne geophysical survey was done over the entire property. The radiometry, Mag and VLF survey was flown along lines spaced at 100 metres, totalling 885 line-kilometres. Various anomalous zones were identified.  The radiometry anomalies, particularly the uranium anomalies, are primarily concentrated along a 200- to 1,000-metre wide, northeast striking band that crosses the entire property. This band of anomalies covers a distance of over 14 kilometres. The two most strongly-anomalous areas are in the north and south of the property.  Following this survey, prospecting was carried out on the most promising areas. This work primarily consisted of scintillometry prospecting over approximately 26 line-kilometres, blasting and collection of 73 samples in the Tom Dick area. Some 11.2 kilometres of linecutting was done in the Lac Hanson area.  This exploration work resulted in the identification of zones of high radioactivity (many times the background level) in the Tom Dick South, Hanson West and Hanson Centre areas. Occasional readings of over 10,000 cps were seen.  Local outcrop spectrometry measurements (GR-135 spectrometer) confirmed the presence of uranium in association with the target helicopter-borne anomalies. For instance, on an outcrop containing white pegmatite on Tom Dick South, the unit recognized as the host of uranium mineralization showed readings of 1,800 to 2,500 cps. Readings of 2,000 to 10,250 cps were recorded at sites on Hanson West, and 4,800 cps on Hanson Centre.  An initial drilling program started on January 19, 2007 on the Mont-Laurier property. The 3,000-metre, 35-hole program covers the Lac Hanson areas, the central part and the Tom Dick, which has never been tested by drilling.  Area A (Lac Hanson West) corresponds to a large radiometry anomaly over 800 metres by 300 metres that was stripped in the 1970s, with two holes drilled in 1973. The scintillometry survey located and confirmed the anomalous zone. The 2007 drilling is aimed at testing this zone in a preliminary fashion, on a loose drill grid. A series of 29 holes (2,400 metres) will be drilled on a 100-by-100-metre grid.  These vertical holes of about 80 metres will test a subhorizontal zone of granitic gneiss/white pegmatite bedding that dips 20o west-northwest.  Area B corresponds to the extension of the radiometry response that extends from Area A to Area C. The geology and the explanation for the surface radiometry are not well-known. Regional folding may have raised fertile bands of white pegmatite similar to those exposed on the Tom Dick showings. Limited prospecting also shows numerous large blocks of radioactive white pegmatite of unknown origin. Two grassroots-type 100-150-metre drill holes (300 metres of drilling) are planned to test this area and identify new zones of mineralization.  Area C lies in the southern extension of the Tom Dick showings, in a favourable radiometry context confirmed by mapping done by SOQUEM in 1982, and by sampling done by Strateco in 12 trenches scattered along 300 metres in the fall of 2006, for which results are still pending.  A line of three vertical 100-metre drill holes totalling 300 metres distributed along a 500 metre section are planned to test the geology underlying this area. The holes will test the area below the trenches that showed white pegmatite on surface.  DISCOVERY AND CAMERON PROPERTIES  AU 100% INTEREST  [form10ksba009.jpg] The Company transferred its gold assets, including the Discovery and Cameron properties, to Cadiscor Resources Inc. on August 17, 2006. The properties are located near Lebel-sur-Quévillon, Québec.  The Company did not conduct any significant exploration on Discovery in 2006.  The 2,500-metre drilling program that started on December 6, 2005, on the Cameron property was completed on January 26, 2006. In all, 10 holes were drilled for a total of 2,547 metres. The holes intersected the Cameron structure at vertical depths of between -100 and -290 metres. Hole CAM-05-11, 700 metres to the west of Hole CAM-03-02, drilled in December 2003, returned an intersection of 6.18 g/t Au over 0.4 metre in a carbonatized andesite with centimetre-sized calcite veinlets containing 5% sphalerite.  Claims  Location and Access  The Discovery project comprises the Desjardins and Borduas-Martel properties, which lie 45 kilometres northwest of Lebel-sur-Quévillon, Québec, Canada, in Bruneau and Desjardins townships.  The properties are easily accessible by the gravel road that connects Lebel-sur-Quévillon with Matagami. A large network of logging roads provides access to various parts of the property.     [form10ksba010.jpg]     Mining Claims  The Desjardins and Borduas-Martel properties are made up of 65 contiguous claims covering an area of 1,612 hectares. The claims belong to GéoNova Explorations Inc. (GéoNova), a wholly-owned subsidiary of Campbell Resources Inc. (Campbell).  Homestake Canada Inc. (Homestake) has a 1 to 3% NSR on the 28 Desjardins property claims. Fourteen of these 28 claims are also subject to a 20% net profits interest payable to Noranda Inc. The Borduas-Martel property claims are subject to an NSR of up to 2% or $1.00 per tonne on mineral substances milled or sold, payable to Messrs. Jean-Jacques Martel and Bernard Borduas.  Pursuant to a formal agreement dated October 8, 2002, amended on September 3, 2003 the Company obtained an option to acquire a 50% interest in the Discovery and Cameron projects. The agreement allowed the Company to earn its interest by funding $4,500,000 in exploration over a maximum period of four years, including a $750,000 in the first year, and by issuing 600,000 common shares over three years. All of these shares have now been issued. Each share was accompanied by half a warrant, with a whole warrant entitling its holder to acquire one share of the Company at a price equal to the weighted-average price of the shares on the TSX Venture Exchange for the 10 days prior to issuance, plus a premium of 20%. In February 2006, GéoNova exercised 75,000 warrants and all the other warrants have expired.  On February 13, 2006, the Company signed another letter of intent with GéoNova to acquire a 100% interest in the Discovery and Cameron projects. The terms were as follows:  -
Upon signature of the letter of intent (firm and non-refundable);$                    25,000-
Within five days of Stratecos annual meeting, and no later than May 30, 2006;$                  200,000-
Following completion of the initial public offering (IPO) of a new company Cadiscor Resources Inc., into which the property will be transferred no later than August 30, 2006;$                  275,000-
At Stratecos option, either $1,000,000 in common shares of Cadiscor Resources Inc. which will be qualified in the IPO prospectus to be issued to GéoNova or $1,000,000 to be paid in cash no later than August 30, 2006;A 2% NSR on all of the property claims. The royalty is redeemable for $1,000,000.  On August 17, 2006, Strateco has upon realisation of these three conditions transferred all of its 100 % interest in the mining claims for the Discovery and Montbray properties at Cadiscor Resources Inc.  Exploration  The Discovery project lies in the eastern extension of the Harricana-Turgeon belt.  Previous exploration conducted on the Discovery project from 1986 to 1998, particularly by Homestake and GéoNova, led to the delineation of the Discovery gold-bearing zone for a distance of over 800 metres and to a depth of 600 metres. The Discovery mineralized zone splits into three subvertical gold-bearing lenses, each 100 to 200 metres wide. On the East lens, the two deepest holes drilled below the -400-metre level returned intersections of 11.97 g/t Au over 4.35 metres and 12.40 g/t Au over 2.00 metres. On the Central lens, the deepest hole drilled at the -580-metre level returned 4.33 g/t Au over 7.59 metres, including 5.51 g/t Au over 5.11 metres.  The Company conducted its initial exploration program on the Discovery project between mid-October and late November 2002. The program consisted of 2,029 metres drilling, preceded by two structural studies carried out for the Company by engineering firm SRK. The first study was conducted on the Discovery Zone to determine the fundamental controls on the shape and distribution of the known gold mineralization. The second, a regional study, was carried out to enhance the understanding of the area in preparation for further exploration outside the Discovery mineralized corridor.  The Discovery property is located at the North center of the Archean (2750-2698 Ma) Abitibi Greenstone Belt, a Subprovince of the Superior Province. The geological units form the Discovery area belong to the monocyclic volcanic segment of the northern Volcanic Zone, more precisely to the Vezza-Bruneau volcano-sedimentary belt (Dussault, 1990; Dussault et Joly, 1991) , at the south-eastern extremity of the Harricana-Turgeon furrow (Lacroix, 1989). The general metamorphism degree is to greenschist facies.  The host rock for the gold mineralization is a multi-phase gabbro sill at the assemblage top of the Southern Volcanites at 50 to 100 meters from the contact with the Taïbi Group sediments. The gabbro has a relatively steady thickness of approximately 60 meters in the western part of the Discovery Zone and gradually enlarges south-easterly.  The mineralization of the Discovery project is hosted within 10-50 m thick heterogeneous shear zone (mylonites) affecting a gabbro sill. The gold bearing shear zone, oriented N1200- 1300 with 800-900 dip, is sub-parallel to a gabbro  sill and can be traced over 5 km; the known gold deposits being found in a 2.6 kilometres long section of the shear, which is noteworthy located in a highly magnetite-rich (northern side) sub-unit of the gabbro sill.  Three zoned mineral alteration facies are recognized around the core of gold mineralization in the shear. Only the highly ankeritic altered schistose rocks with quartz  albite - -biotite  pyrrhotite - -pyrite ± magnetite are economically gold-bearing.  [form10ksba011.jpg]  The drilling program, the first on the project since 1997, consisted of five NQ-calibre holes drilled to test the lateral extension of the East lens of the Discovery Zone and to further explore the southeast continuity of the Discovery structural corridor. The results proved to be encouraging.  In 2003, the Company drilled 15 holes and 10 wedges totalling 11,254 metres. The primary purpose of this program was to better delineate the gold mineralization of the Discovery Zone and to clarify the structural context in preparation for a new resource estimate.  On the East lens, the intersections obtained indicated a 150-metre by 75-metre core with sub-vertical longitudinal elongation. The East lens remains open at depth.  Drilling on the West lens was aimed at the -200 to -500 metre level.  Wildcat hole BD-03-76, drilled 600 metres to the east of the East lens on an unexplored section of the property led to the discovery of the 600 sector. Three mineralized lenses were intersected, two of which returned interesting results.  In October 2003, SRK performed a new resource estimate using geo-statistical methods. The estimate was prepared in compliance with Canadian National Instrument 43-101 and was preceded by a detailed review of the entire database.  [form10ksba012.jpg] [form10ksba013.jpg] SRK estimated the mineral resource of the Discovery Zone using a total of 198 holes representing 10,425 metres of drilling.  Cautionary Note to U.S. Investors concerning estimates of Measured and Indicated Resources. This section uses the terms measured and indicated resources. We advise U.S. investors that while those terms are recognized and required by Canadian regulations, the U.S. Securities and Exchange Commission does not recognize them. U.S. investors are cautioned not to assume that any part or all of mineral deposits in these categories will ever be converted into reserves.  Cautionary Note to U.S. Investors concerning estimates of Inferred Resources. This section uses the term inferred resources. We advise U.S. investors that while this term is recognized and required by Canadian regulations, the U.S. Securities and Exchange Commission does not recognize it. Inferred resources have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an Inferred Mineral Resource will ever be upgraded to a higher category. Under Canadian rules, estimates of Inferred Mineral Resources may not form the basis of feasibility or pre-feasibility studies, except in rare cases. U.S. investors are cautioned not to assume that part or all of an inferred resource exists, or is economically or legally minable.  RESOURCESTONNESGRADE (g/t Au)Inferred1,660,5174.31Indicated276,2094.94  In 2004, the Company conducted a 4,444-metre drilling program. Carried out between July 7 and November 15, the program consisted of six holes and four wedges. The holes drilled in 2004 were primarily aimed at better defining the high-grade core of the East lens of the Discovery Zone and further exploring the new 600 sector discovered in December 2003.  Results for the holes drilled to in-fill an 80- by 70-metre area at the heart of the East lens were compelling. Hole (wedge) BD-04-74B (Section 1+05W), drilled on the extension of the East lens at depth, indicated that the main zone of this lens has pinched out by the -600-metre level. The lens remains open between -475 and -600 metres.  Two holes and a wedge were drilled for a total of 1,682 metres on the new 600 sector identified in the fall of 2003. These holes were drilled to test a new model based on the intersection of northeast trending striking cross-faults. Several displacements of the gabbro sill (host of the Discovery gold mineralization) by the northeast-striking faults were revealed at regular spacings of about 600 metres. Three of these displacements coincide with the location of the East and West lenses of the Discovery Zone and a high-grade lens on section 1200E. Another large displacement is centred on the 600 sector. The holes drilled on this section returned encouraging gold intersections from structures A and B.  [form10ksba014.jpg]  Exploration on the Discovery project continued in the first quarter of 2005. The drilling program that took place between January 26 and March 1, 2005 was preceded by a 3D magnetic and geological modeling study conducted by Mira Geosciences Ltd. Four holes were drilled for a total of 1,964 metres. The holes were drilled to test the northwest extension of the gabbro sill between sections 10+50 W and 14+00 W, at vertical depths of from -250 to -450 metres. The gabbro sill that hosts the Discovery mineralization remained unexplored below the -100-metre level to the west of the Discovery zone.  The holes drilled indicated that the gabbro sill has a thickness of from 85 to 100 metres between sections 10+50 W and 14+00 W, including a relatively small 30- to 40-metre magnetic section corresponding to the total magnetic field response of the airborne and ground surveys. Three structures were identified, in positions similar to those of the known gold-bearing structures further southeast, representing their extensions. No significant gold values were intersected. Numerous factors indicate a drop in the intensity of the hydrothermal system in the area drilled, including the reduced quartz-ankerite alteration, the low proportion of veins and sulfides, particularly pyrrhotite, as well as the relatively narrow width of the magnetic section of the gabbro.  Management plans to continue exploring the Discovery zone in 2006, through NewCo to increase resources, as all the lenses remain open at depth. The gold price renders the project more attractive from an economic perspective. An engineering study should be conducted before the end of 2006. the Company has retained Innovexplo Inc. to prepare a new resource estimate in accordance with National Instrument 43-101. The report should be available by mid-April 2006.  Cameron Project  Location and Access  The Cameron project lies adjacent to the Discovery project in Bruneau and Desjardins townships, about 45 kilometres northwest of Lebel-sur-Quévillon, Québec in Canada as shown on the map entitled Location of the Cameron Project  [form10ksba015.jpg] Mining Claims  The Cameron project consists of 59 contiguous mining claims covering an area of 1,759 hectares. All the claims are registered to GéoNova.  Claim Status  From a total of fifty-nine (59) claims forming the property, twenty-eight (28) mineral claims were acquired by map staking in December 2002; another twenty-seven (27) claims were acquired by field staking in March 2003; and four (4) other claims were transferred from the Desjardins and Borduas-Martel properties and are subject to the following encumbrances. One claim from the Desjardins property (#4569022) is subject to a three (3) percent net smelter return (NSR) payable to Homestake Canada Inc. The three (3) claims transferred from the Borduas-Martel property (#4358671, #4358672 and #4358673) are subject to a royalty equal to the greater of two (2) percent NSR or (Cans 1.00) per tonne for any mineral substance processed and/or sold payable to Messrs. Bernard Borduas and Jean-Jacques Martel. All other claims are free of any encumbrances.  [form10ksba016.jpg] Under the terms of an Option and Joint Venture Agreement (Agreement) executed on October 8, 2002 between Strateco, GéoNova and Campbell, Strateco has the right to acquire a fifty (50) percent interest in the Discovery project from GéoNova providing that Strateco incurs Can$4.5 million in exploration expenditures over four (4) years (including Can$750,000 the first year) and issues to GéoNova 600,000 shares of Strateco over three years. On September 3, 2003, the original Agreement between Strateco, GéoNova and Campbell was amended to include the new Cameron claims. In addition, the option agreement was modified to include all exploration expenditures on the Cameron claims and other expenditures to maintain the claims in good standing or acquire further claims in the project area as Expenditures. As a result, the recorded ownership of the claims will be transferred to GéoNova. The transfer request has been filed with MRNQ on September 8, 2003.  At the end of August 2005, Strateco had issued to GéoNova all the required shares (600,000). Since 2002, Strateco has financed exploration expenditures amounting to Can$2.3 million on the Discovery and Can$0.7 million  Cameron projects. By way of an amendment letter dated September 14, 2005, GéoNova has agreed to extend the period to the end of March 2006 without conditions.  In February 2006, Strateco has signed a letter of intent with Géonova to acquire the remaining 50% of interest in the properties, Cameron and Discovery, for an amount of $500,000, $1,000,000 in common shares or $1,000,000 to be paid in cash no later than August 30, 2006 and a 2% NSR royalty on all the property claims. The royalty is redeemable for $1,000,000.  As of May 2006, all mineral titles of the Cameron Property are in good standing as indicated on the Quebec Government mineral title registry. There are no land claim issues or ownership disputes pending with the Property.  As of August 2006, all mineral titles of the Cameron Property have been transferred from the Company to Cadiscor Resources Inc. pursuant to an agreement to purchase and sale dated May, 10, 200 and assumption of the Companys obligations toward GéoNova by Cadiscor Resources Inc.  The property is located in the eastern extension of the Harricana-Turgeon Belt. Exploration was first carried out in the area in the early 1930s. Mining companies such as Esso Minerals, Homestake and GéoNova conducted intensive exploration to the north on the Discovery project and to the southeast on the Chieftain and Gander projects. The little exploration done on the Cameron project consisted of a few reverse circulation holes drilled by Esso on the southeastern tip of the property that returned anomalous values.  Gold Potential The Cameron project was acquired for its potential to host an Archean mesothermal-type gold deposit based on the regional structural study done by SRK in the fall of 2002. The study revealed the presence of a discontinuity to the south of the Discovery deposit which was interpreted as the western extension of the known deformation zone near the Flordin and Cartwright gold deposits, several kilometres to the east.  The property lies along an SE-striking section of a regional network of interconnected deformation corridors extending east from the Québec-Ontario border and crossing the volcanic zone to the north of the Abitibi Greestone Belt. This network of intense deformation zones (Cameron-Casa-Bérardi deformation zone) represents a geological discontinuity characterized by narrow linear stratigraphic sedimentary basins that interrupt the structural and stratigraphic pattern, a prime environment for ultramafic and syenite intrusions.  In the immediate vicinity of the Cameron project, the Cameron shear shows a pronounced bend in direction in an otherwise linear northwest-southeast corridor. In this area, the interrupted magnetic patterns indicating strong deformation are interpreted as evidence of faults and folding of the lithology. Such structures are high priority targets for gold exploration.  Exploration Works  In June 2003, following its acquisition of the project, the Company cut new lines parallel to the Discovery project line network over an area of approximately 8.6 kilometres. Linecutting was followed by a ground magnetic survey aimed at improving the resolution of the local magnetic field and highlighting the structural interpretation of the magnetic patterns. Prospecting was carried out in parallel with the geophysical survey. A single outcrop was identified, consisting of a gabbro similar to that hosting the Discovery mineralization.  In November 2003, the Company drilled two stratigraphic holes for a total of 942 metres. The second hole intersected a major, 60-metre wide deformation zone, located less than two kilometres south of the Discovery Zone.  This deformation zone is affected by a ferrous carbonate alteration and contains 2-10% quartz-ankerite veins and 1-3% pyrite throughout. There are several zones of more intense deformation and alteration that returned anomalous gold values. A magnetic gabbro similar to that which hosts the Discovery mineralization flanks the deformation zone to the south. The ferrous carbonate alteration, the presence of quartz-ankerite veins and the anomalous gold values all indicate a gold-bearing hydrothermal system.  Between late February and early April 2004, the Company carried out a drilling program totalling 2,411 metres in seven holes. This program was aimed at testing various induced polarization anomalies identified by a survey conducted in 2003. Four of these holes drilled on a loose 700-metre grid tested the eastern extension of the deformation zone intersected by hole CAM-03-2 over a distance of 2.1 kilometres. The four holes confirmed the presence of a deformation corridor. The holes drilled in 2004 allowed the location of the target structure to be established over a distance of 2.1 kilometres. To date, the property has been tested to a depth of only -100 metres.  Hole CAM-04-3 intersected a deformation zone about 13 metres thick, containing 2-10% quartz-ankerite veins with iron carbonate alteration. No sulfide-vein alteration was seen, however, and no gold mineralization was intersected during the program.  In 2005, prior to further drilling on the Cameron project, a new satellite-image-assisted structural study was carried out to help define new drill targets.  Performed by consulting firm 43S, the study consisted of initial litho-structural mapping of the entire property hosting the Discovery and Cameron projects. Permeability mapping was then done to determine the pressure gradients on the property, as gold mineralization appears to be associated with low-pressure zones on the periphery of high-pressure zones. Various drill targets were identified during the study, particularly in the extension of known northeast-southwest trending faults on Discovery.  This unexplored area was the focus of the first three holes drilled during the 2,500-metre program initiated on December 6, 2005. In all, 10 holes were drilled for a total of 2,547 metres. The holes intersected the Cameron structure at vertical depths of between -100 and -290 metres with anomalous gold values for most of the holes.  [form10ksba017.jpg]  OTHER PROPERTY  QUéNONISCA PROPERTY  ZN, PB, CU, AG OPTION TO EARN A 50% INTEREST  The Quénonisca property consists of 33 claims for a total area of 1,799 hectares. It lies 180 kilometres northwest of Chibougamau, Québec, Canada.  On February 26, 1996, Altavista obtained an exclusive, irrevocable option from SOQUEM to acquire a 50% undivided interest in the Quénonisca property as consideration for exploration work to be carried out under SOQUEMs direction for a total of $75,000, plus an undertaking by Altavista to subsequently finance a minimum of $127,500 in exploration work by February 28, 1997.  In 1997, stripping and drilling were carried out on the property. In 1998, three sulfide occurrences in stockworks were discovered on the Montagnes-Nord grid by SOQUEM.  Drill HoleLocalisation (m)Lenght (m)ResultsFrom:To:1187-97-01116.6118.11.50.12% Zn136.1137.61.50.16% Zn1187-97-02110.5111.10.60.15% Zn, 0.16 g/t Ag113.5114.40.90.28% Zn, 2.4 g/t Ag120.4124.94.50.20% Zn, 1.2 g/t Ag1187-97-0337.538.71.20.25% Zn, 1.9 g/t Ag65.172.37.20.18% Zn, 2.6 g/t Agincluding68.169.61.50.26% Zu, 3.5 g/t Ag, 0.12% Cu1187-97-0496.398.82.50.34% Zn, 6.0 g/t Ag, 0.17% Pb102.4103.51.10.32% Zn, 5.9 g/t Ag, 0.57% Pb112.0113.51.50.21% Zn, 3.0 g/t Ag, 0.13% Pb120.8123.83.00.19% Zn, 2.3 g/t Ag, 0.12% Pb1187-97-0579.483.23.81.08% Za, 7.5 g/t Ag, 0.44% Pbincluding81.081.90.92.00% Zn, 7.0 g/t Ag, 0.53% Pb1187-97-06No significant value1187-97-0760.961.50.66.58 g/t Au1187-97-0822.122.80.70.48 g/tAu  In 1999, SOQUEM carried out a linear 19.6 line-kilometre magnetometer and Max-Min survey on the Montagnes-Nord grid. Various conductors were detected by this survey.  In the fall of 2000, SOQUEM conducted a 1,050-metre, eight-hole drilling program in order to test the best conductors detected in 1999. Numerous sections of mineralized cherts were intersected. Several lenses of pyrrhotite-rich massive sulfides were identified. The Company contributed 50% of the total $201,173 program cost for 2000.  No significant work was carried out on the Quénonisca property since 2001. The mining claims have been renewed.     Item 3:  Legal proceedings.  There are no legal proceedings pending against the Company.  Item 4: Submission of Matters to a Vote of Security Holders.  There were no new matters submitted to a Vote of Security Holders since the filing of Form 10-QSB as of  September 30, 2006  PART 11  Item 5: Market for Registrants Common Equity and Related Stockholder Matters                         (a) Market information  CURRENCY AND EXCHANGE RATES  All dollar amounts set forth in this report are in Canadian dollars, except where otherwise indicated.  The following table sets forth (i) the rates of exchange for the Canadian dollar, expressed in the U.S. dollars, in effect at the end of each of the periods indicated; (ii) the average exchange rates in effect on the last day of the end of each such period; (iii) the high and low exchange rate during such periods, in each case based on the noon buying rate in cable transfers in Canadian dollars as certified for customs purposes by the Federal Reserve Bank of New York. Prices based on the period January 1 to December 31 yearly, and quoted in U.S. Dollars.  200620052004Rate at end of Period1.16521.16561.2034Average Rate During Period1.1311.21151.3016High Rate1.1721.27031.3970Low Rate1.0991.15071.1775  The high and low exchange rates for each month during the previous six months are as follows:  SeptemberOctoberNovemberDecemberJanuaryFebruary200620062006200620072007High rate$        1,1272$        1,1384$        1,1474$        1,1652$        1,1824$              1,1852Low rate$        1,1052$        1,1154$        1,1275$        1,1415$        1,1647$              1,1609  On March 15, 2007 the noon buying rate in New York City for cable transfer in Canadian dollars as certified for customs purposes by the Federal Reserve Bank of New York was$ 1.00 USD=$1.17CND.  The Companys securities were traded in Canada as Strateco Resources Inc. (RSC) on the Bourse de Montréal Inc. from November 7, 2000 to September 30, 2001, from October 1, 2001 to May 15, 2002 on Canadian Venture Exchange (CDNX) and from May 15, 2002 to this date on TSX Venture Exchange.                          (b) Prior sales of common shares in Canada  Bourse de Montréal Inc.  From November 7, 2000 to September 30th, 2001 the Companys shares were listed as Strateco Resources Inc. (RSC) at the Bourse de Montréal  (Montreal Exchange).  HighLowVolume2000November 7, 2000
to December 31, 2000$                  0.40$                                      0.111,458,3752001First Quarter$                  0.28$                                      0.11646,741Second Quarter$                  0.25$                                      0.12446,125Third Quarter$                  0.18$                                      0.10216,750     Canadian Venture Exchange (CDNX) now called TSX Venture Exchange  The Companys shares are listed on the Canadian Venture Exchange (CDNX), from October 1, 2001 to May 15, 2002 as Strateco Resources inc. (RSC). Since May 1, 2002 Canadian Venture Exchange (CDNX) is called TSX Venture Exchange.  HighLowVolume2001Fourth Quarter$                                    0.350$0.1101,317,8052002First Quarter$                                    0.300$                                    0.1201,724,608Second Quarter$                                    0.290$                                    0.1402,494,500Third Quarter$                                    0.210$                                    0.140704,700Fourth Quarter$                                    0.190$                                    0.1202,227,0002003First Quarter$                                    0.210$                                    0.1003,268,900Second Quarter$                                    0.140$                                    0.0701,825,600Third Quarter$                                    0.155$                                    0.0902,908,500Fourth Quarter$                                    0.190$                                    0.1207,377,6002004First Quarter$                                    0.220$                                    0.1307,652,400Second Quarter$                                    0.200$                                    0.1252,795,600Third Quarter$                                    0.180$                                    0.1201,551,000Fourth Quarter$                                    0.140$                                    0.0903,672,2002005First Quarter$                                    0.145$                                    0.0751,613,000Second Quarter$                                    0.150$                                    0.0701,682,900Third Quarter$                                    0.125$                                    0.0602,260,400Fourth Quarter$                                    0.195$                                    0.0759,092,0112006First Quarter$                                    0.920$                                    0.16555,573,549Second Quarter$                                    1.800$                                    0.88081,566,000Third Quarter$                                    1.330$                                    0.92028,079,772Fourth Quarter$                                    3.120$                                    0.700124,821,7692007January 1, 2007 to March 15, 20072.173.8953,810,058   On March 15, 2007, the closing bid price of the Common Shares on the TSX Venture Exchange was $2.87 per share. At March 15, 2007, 798,101 Common Shares were held by 1 registered holder Depository Trust Company (DTC) on behalf of approximately 13 holders residing in the United States, representing an aggregate of 0.70 %of the Companys total issued and outstanding Common Shares. The Company is not listed for trading on any securities exchange in the United States, and there has been no active market in the United States for the Common Shares.  Price Fluctuations, Share Price Volatility  Securities markets in Canada have experienced a high level of price and volume volatility in recent years, with many resource companies experiencing wide price fluctuations not necessarily related to operating performance or underlying asset values of such companies. The Companys shares traded between $0.06 and $0.195 during 2005 and between $0.165 and $3.12 during 2006. The Companys shares traded between $0.92 and $1.33 during the third quarter of 2006, between $0.70 and $3.12 during the fourth quarter and between $2.17 and $3.89 from January 1, 2007 to March 15, 2007. No assurance can be made that the Companys share price and volume will not continue to fluctuate materially.                   (c) Private offerings in Quebec, Canada  During the fourth quarter of the year ending December 31, 2006, the Company closed four private placements in Québec, Canada as detailed in the following table and obtained a statutory exemption from the prospectus requirements from the Quebec Securities Commission now called Autorité des marchés financiers in filing required documents pursuant to new Regulation 45-106 in Canada and in obtaining the authorizations from the TSX Venture Exchange for each offering:  Date of offering in Canada and foreign countries(8)OfferingAmount of offeringNumber of sharesPrice per share/UnitsNumber of warrants to purchase shares or remuneration optionsPrice of exercise of warrantsDates of expiry2006-01-18 (1)Accredited investors$       210,0001,500,000$            0.141,500,000$              0.2008-01-172006-02-09 (2)Accredited investors$    1,200,0006,000,000$      0.20 per unit6,000,000$              0.2608-02-082006-02-09Quest Securities Corporation1 broker warrant (3)$        0.20 per broker unit08-02-082006-04-18(4)Accredited Investors in Germany and Sweden$       350,0001,000,000$            0.35500,000$              0.5007-10-182006-05-31(5)Accredited investors in Canada and Europe$    9,000,0007,200,000$            1.253,600,000 (5)$              1.5007-11-30Total 2006$  10,760,00015,700,00011,600,0012007-01-31(6)Accredited Investors through syndicate of underwriters$  25,012,0009.620,000$            2.60
per unit4,810,000$              3.5009-01-312007-01-31Underwriters remuneration options577,200$2.60 per unit09-01-31   (1)  In exchange of a private offering of $210,000, the Company issued 1,500,000 common shares at the price of $0.14 per share to two accredited investors one being a company in Quebec, Canada with which the Company has a services contract that is discussed in Item 6: Management Discussion and Analysis of Financial Position and Results of Operations: Related Party Transactions, Item 10: Executive Compensation and Item 12: Certain Relationships and Related Transactions and the other being a resident of the Carribeans. For each share the subscribers received a warrant to purchase share giving right to its holder to purchase a common share at the price of $0.20 per share for a period of 24 months until January 17, 2008.  (2)  On February 9, 2006, the Company completed a private placement of $1,200,000 through a broker, Quest Securities Corporation who made the placement with 33 subscribers residing in the provinces of Ontario and British Columbia in Canada, in United Kingdom and in the Barbados. In exchange of this offering, the Company issued 6,000,000 units at the price of $0.20 per unit. Each unit consisted of one common share and one warrant to purchase share giving right to its holder to purchase a share at the price of $0.26 per share for a period of 24 months until February 8, 2008.  If the closing price of the common Shares on the TSX Venture Exchange is equal or higher than $0.50 per common share for a period of 20 consecutive trading days at any time after June 10, 2006, the Company may accelerate the expiry date of the warrants by giving notice to the holder thereof and in such case the warrants will expire on the 30th calendar day after the date on which such notice is given by the Company.  (3)  As broker for this placement, Quest Securities Commission received a commission of $96,000 in cash and one broker warrant giving it the right to purchase 600,000 units at the price of $0.20 per unit. Each unit is composed of one common share and one warrant to purchase a share at the price of $0.26 per share for a period of 24 months until February 8, 2008.  If the closing price of the common shares on the TSX Venture Exchange is equal or higher than $0.50 per common share for a period of 20 consecutive trading days at any time after June 10, 2006, the Company may accelerate the expiry date of the warrants by giving notice to the holder thereof and in such case the warrants will expire on the 30th calendar day after the date on which such notice is given by the Company.  (4)  On April 18, 2006, the Company completed a private placement for an amount of $350,000 with five accredited investors from Germany and Sweden. The Company issued 1,000,000 common shares at the price of $0.35 per share. Each share was sold with a half warrant. Each whole warrant gives the right to its holder to purchase a common share at the price of $0.50 per share for a 18 month-period. Pursuant to this placement, at any time after August 19, 2006, the Company may notify holders of warrants of its intention to force the exercise of warrants should the shares of the issuer trade on the TSX Venture Exchange at a price equal to or greater than $0.70 per share for a period of 20 consecutive trading days. On receipt of such notice, the holder will have 30 calendar days to exercise the warrants, after which they will expire. Pursuant to this placement, the Company paid to Lockwood Financial Ltd finders fees of $28,000 in cash.  (5)  This private placement resulted in a financing in the amount of $9,000,000. The Company sold 7,200,000 units at the price of $1.25 per unit. Each unit was composed of one common share and one half of one warrant. Each whole warrant gave the right to purchase one common share at the price of $1.50 per share until November 30, 2007. Pursuant to this placement, as of October 21, 2006, the Company may notify holders of warrants of its intention to force the exercise of warrants should the shares of the issuer trade on the TSX Venture Exchange at a price equal to or greater than $1.70 per share for a period of 20 consecutive trading days. On receipt of such notice, the holder will have 30 calendar days to exercise the warrants, after which they will expire.  (6)  On January 31, 2007, in the context of a private placement with a syndicate of underwriter led by Orion Securities Inc. and including Dundee Securities Corporation, Blackmont Capital and Sprott Securities Inc., the Company has sold 9,620,000 units at $2.60 per unit. Each unit consists of a common share and half of one warrant. The Company has issued 9,620,000 common shares and a total of 4,810,000 warrants for total proceeds of $25,012,000. Each whole warrant entitles its holder to purchase one common share at $3.50 for a 24-month period following the closing date. As part of the private placement, the underwriters received a cash fee equal to 6% of the gross proceeds of the financing ($1,500,720). The underwriters also received remuneration options equal to 6% of the total number of units sold under the offering (577,200 units). Each remuneration option enables the underwriters to purchase one unit at the issue price until January 31, 2009.  At any time after June 1, 2007, the Company may notify holders of warrants and remuneration options of its intention to force the exercise of warrants and remuneration options should its shares trade on the TSX Venture Exchange at a price equal to or greater than $4.50 per share for a period of 20 consecutive trading days. The net proceeds of the private placement will be used to finance additional exploration work on the Companys Matoush and Mont-Laurier projects in Québec and for general working capital purposes.  These private placements were exempted from registration in the United States pursuant to sections 4 (2) and 5 of the Securities Act 1933.                          (d) Public offering in Quebec, Canada  The Company did not realize any public offering in 2006.                          (e) Use of proceeds  The proceeds of the private placements during the period consisting of non flow-through proceeds realized in the year 2006, in the amount of $10,760,000. Part of this sum has been used in the last quarter of the period of the following manner: $2,222,517 has been spent on exploration of Matoush, Mont-Laurier Uranium and Eclat Properties and 433,312 on working capital expenses. The Company anticipates possibly using the proceeds for another project if the results obtained do not justify further expenses and the Company reserves the right to reallocate the use of proceeds as it deems appropriate in the best interests of the Company and its shareholders.  The Company conducted during the last quarter of 2006 exploration works on Matoush Property in the amount of $2,102,430 representing 21% of the issuers net offering proceeds. A summary of exploration works conducted during this reporting period on the Matoush Property can be consulted in the sections Report to Shareholders and Management Discussion and Analysis of Financial Position in PART 1.  The Company also spent during that period exploration related expenses in the amount of $30,842, on Eclat Property and $45,497 on Mont-Laurier Property representing less than 5 % of the issuers net offering proceeds.  The Company paid payments in the last quarter to independent directors fixed fees for their presence to the Board of Directors Meetings and Audit committee meetings in the amount of $18,600.                          (f) Holders  As of March 5, 2007, the Company has no holder of debentures and had 73 holders of record of which 1 is holder of record in the United States. C.D.S. & Co. represents several unidentified holders in Canada and DTC several unidentified holders in the United States of America. According to Computershare of Canada, approximately 13 shareholders of common shares are known to be residents of the United States.                         (g) Dividends  The Company has not paid any dividends since its incorporation and does not anticipate as of March 5, 2007, the payment of dividends in the foreseeable future. At present, the Companys policy is to retain earnings, if any, to finance exploration on its properties. The payment of dividends in the future will depend upon, among other factors, of the Companys earnings, capital requirements and operating financial conditions.                      (h) Equity compensation plan information as at December 31, 2006  Plan CategoryNumber of securities to be issued upon exercise of outstanding options, warrants and rightsWeighed-average exercise price of outstanding options, warrants and rightsNumber of securities remaining available for future issuance under equity compensation plan (excluding securities reflected in column (a))Stock option plan
Equity compensation plans approved by security holders928,000$0.37348,000Equity compensation plans not approved by security holdersN.A.N.A.N.A.Total:928,000$0.37348,000  Item 6. Managements Discussion and Analysis of Financial Condition and Results of Operation  (a) Plan of operation  The Company believes it can satisfy its cash requirements through December 31, 2007 since it completed four private offerings in the provinces of in Canada and in other foreign countries in 2006 for a total amount of financing of $10,760,000. Furthermore on January 31, 2007, the Company obtained financing in the amount of $25,012,000. Of this total, $16,633,000 will be used to fund exploration commitments through to December 31, 2007 and through June 2008.  For 2007, the Company will concentrate its efforts on the uranium exploration sectors in Canada. The Company is already engaged in and will continue during this period exploration works on Matoush, Eclat and Mont-Laurier Uranium properties. Following the industry trends and demands, the Company is also considering the acquisition of properties to conduct exploration works. To that end, a new public offering in Quebec, Canada, might be needed and completed during that period.  At December 31, 2006, the Company also obtained $532,800 from the exercise of 2,524,000 stock options and, $3,616,889 from the sale of 15,878,110 warrants to purchase for an amount additional applicable to working capital of $4,149,689  The Company does not expect any changes or more hiring of employees since the contracts are given to consultants and sub-contractors specialized in specific fields of expertise for the exploration works.  (b) Managements Discussion and Analysis of Financial Condition and Results of Operations.  Nature of the Company  The Company was incorporated under the Canadian Business Corporations Act on April 13, 2000.  The Company is primarily engaged in the exploration of mining properties with a view to commercial production. The Company does not presently have any properties in production. The Company owns or has interest in various mining properties in Québec.  Recovery of the cost of mining assets is subject to the discovery of economically recoverable reserves, the Companys ability to obtain the financing required to pursue exploration and development of its properties and profitable future production or the proceeds from the sale of properties.  The Company must periodically obtain additional funds to pursue its exploration activities, and its ability to do so in the past is no guarantee of its success in doing so in the future.  Exploration Activities  Fourth quarter exploration activities amounted to $2,222,517 ($330,487 in 2005). Expenses were higher than in 2005 as the Company conducted more extensive exploration on its properties during the period.    Selected Annual Information                                                          December 31, 2006
(12 months)
$December 31, 2005
(12 months)
$IncomeInterest264,0082,246ExpensesGeneral and administrative expenses1,675,854639,050Write-off of deferred expenditures66,545561,020Future income tax (benefit)728,600(374,600)Net loss2,206,990823,224Net loss per share, basic and diluted0.030.02Total assets15,270,6414,731,443Current liabilities1,555,924700,951Shareholders equity13,714,7174,006,092  Results of Operations  The Company posted a net loss of $2,206,990 for fiscal year 2006 compared to $823,224 for fiscal year 2005. General and administrative expenses increased by $1,036,804 (162%) in 2006 relative to 2005. The increase in general and administrative expenses was mainly due to higher investor relations expenses of $552,891 (737%), stock-based compensation expenses of $164,941 (207%), professional fees and legal and audit expenses of $128,195 (44%) and shareholder communications expenses of $80,635 (146%).  Amounts for fiscal year 2006 were higher than in 2005 for the following reasons: 1) Beginning early in fiscal year 2006, the Company increased its public relations efforts in order to raise its profile, which permitted it to complete four private placements and ensure the exercise of warrants and stock options, thereby raising $14,909,689. 2) During the year, the Company granted 1,204,000 stock options to its directors, officers, employees and a group specializing in investor relations, which generated a charge related to the issuance of options, as well as an additional charge for professional fees and legal expenses.  The Company earned $264,008 in interest income to December 31, 2006, compared to $2,246 in 2005.  The Company did not record any sales as none of its properties are in production.  Quarterly Financial Information  The following table contains selected financial information for the last eight quarters.  20061st Quarter2nd Quarter3rd Quarter4th QuarterTotal revenue$                 7,456$             30,798$            111,752$          114,002Net loss$             401,072$           483,891$            274,118$       1,047,909Net loss per share$                   0.01$                 0.01$                  0.00$                0.01 - 16 -  20051st Quarter2nd Quarter3rd Quarter4th QuarterTotal revenue$                1,238$                  174$                   130$                  704Net loss$            167,095$           155,047$            100,134$           400,948Net loss per share$                  0.00$                 0.00$                  0.00$                 0.00  Cash Assets  The Companys working capital increased to $10,005,132 from $682,491 at the beginning of the year. This increase was mainly due to four private placements completed during the year for a total of $10,760,000 and the exercise of stock options for a total of $532,800 and of warrants for a total of $3,616,889. These funds will be used to carry out the exploration programs planned for 2007.  Sources of Financing  In the fourth quarter, $354,900 was raised through the exercise of warrants and $171,525 through the exercise of options. Consequently, the Company issued 2,167,000 common shares.  Dividend Policy  The Company has not declared any cash dividend on its outstanding common shares since its inception. Any future declaration of dividend will depend on the Companys financial requirements for its exploration programs and future growth, as well as any other factor that the Board of Directors may deem necessary under the circumstances. It is unlikely that any dividend will be paid in the near future.  Off Balance-Sheet Arrangements  The Company has no off balance-sheet arrangements.  Related-Party Transactions  During the year, Strateco Resources Inc. created a new company, Cadiscor Resources Inc., so as to separate its gold and uranium properties. The Company therefore transferred its Discovery, Cameron and Montbray properties along with deferred expenditures with respective carrying values of $312,750 and $3,112,422 in consideration of 20,000,000 shares of Cadiscor Resources Inc. valued at $3,200,172 and $225,000 in cash. The Company then transferred its investment in Cadiscor Resources Inc. to its shareholders through a $3,200,172 reduction in paid-up capital.  Following this operation, a future income tax benefit of $73,000 was credited to contributed surplus.  The Company conducted the following transactions with another company for which a Strateco director also serves as director.  20062005Expenses capitalized under deferred expendituresConsultants and subcontractors$                197,000$           120,000Management fees$                583,000$             65,000General and administrative expenses on the earnings statementProfessional fees$                228,000$           176,000Legal expenses$                  61,000$             67,000Investor relations$                123,000$             27,000Rent$                  39,000$             39,000Share issue costs accounted for in reduction of capital stock$                  57,000$             70,000  Accounting Value of Mining Properties  At the end of each year, work done is assessed to determine the future potential of each property, and write-offs are taken as appropriate.  Financial Instruments  Fair Value  The fair value of short term financial instruments is assumed to be equal to book value according to their next maturity and the normal market conditions that they entail.  Interest Rate Risk  In managements opinion, the Company was not exposed to any interest rate risk at December 31, 2006.  Outstanding Share Data  The Company had 96,373,367 shares issued and outstanding at December 31, 2006 (61,771,257 at December 31, 2005) for a value of $18,962,859 ($7,898,833 at December 31, 2005).  Share Capital  The Companys authorized share capital consists of an unlimited number of common shares, without par value.  At March 5, 2007, 106,545,863 shares were issued and outstanding.  Risks and Uncertainties  Exploration and Mining  The Company is at an exploration stage. Exploration and mining activities are subject to a high level of risk. Few exploration properties reach the production stage. Unusual or unexpected formations, fires, power failures, labour conflicts, floods, rockbursts, subsidence, landslides and the inability to locate the appropriate or adequate manpower, machinery or equipment are all risks associated with mining activities and the execution of exploration programs. The development of resource properties is subject to many factors, including the cost of mining, variations in the material mined, fluctuations in the commodities and exchange markets, the cost of processing equipment and other factors such as aboriginal claims, government regulations including in particular regulations on royalties, authorized production, importation and exportation of natural resources and environmental protection. Depending on the price of the natural resources produced, the Company may decide not to undertake or continue commercial production.. Most exploration projects do not result in the discovery of ore.  The probability of an individual prospect ever having reserves that meet the requirements of Industry Guide 7 is extremely remote in all probability the properties do not contain any reserves and any funds spent on exploration will probably be lost.  Even if the Company completes the current exploration program and it is successful in identifying a mineral deposit, the Company will have to spend substantial funds on further drilling and engineering studies before the Company knows if it has a commercially viable mineral deposit, a reserve.  Environmental and Other Regulations  Current possible or future environmental legislation, regulations and measures may entail unforeseeable additional costs, capital expenditures, restrictions or delays in the Companys activities. The requirements of the environmental regulations and standards are constantly re-evaluated and may be considerably increased, which could seriously hamper the Company or its ability to develop its properties economically. Before a property can enter into production, the Company must obtain regulatory and environmental approvals. The cost related to assessing changes in government regulations may reduce the profitability of the operation or altogether prevent a property from being developed. The Company considers itself to be in material compliance with the existing environmental legislation.  Financing and Development  The Company has incurred losses to date and does not presently have the financial resources required to finance its planned exploration and development programs. Development of the Companys properties therefore depends on its ability to obtain the additional financing required. There can be no assurance that the Company will succeed in obtaining the required funding. Failure to do so may lead to substantial dilution of its interests (existing or proposed) in its properties. Furthermore, the Company has limited experience in developing a resource property, and its ability to do so depends on the use of experienced people or in the signature of agreements with major resource companies that can produce such expertise.  Commodities Prices  The market for uranium, gold, diamonds, base metals or any other mineral discovered can be affected by factors beyond the Companys control. Resource prices have always fluctuated widely, particularly in recent years. The impact of these factors cannot be accurately predicted.  Insurance  The Company could become liable for subsidence, pollution and other risks against which it cannot insure itself or chooses not to insure itself due to the high cost of premiums or for some other reason. Payment of such liabilities could decrease or even eliminate the funds available for exploration or mining activities.  Outlook  The substantial $25,000,000 non-flow-through financing completed in late January 2007, along with funds raised by management in 2006, places your Company in a solid financial position, with over $30,000,000 in cash. The operating budget for fiscal 2007 is $16,600,000.  Given the quality of the exploration and drill results on Matoush and a better understanding of the uranium industry, it is clearly in the shareholders best interest to finish assessing the Matoush resource and begin the process of obtaining a mining permit and conducting a feasibility study as of the spring of 2006.  Due to repairs and construction on the winter road leading to the Matoush property, the Matoush camp now has all the fuel it requires for 2007. All the materials required for the construction and operation of the new 45-person camp has been brought to the site. Two additional drills have also been transported to the site via the winter road.  With the three drills now on site, 30,000 metres of drilling will be completed in about 80 holes, including several deep holes that will test the sedimentary/bedrock contact.  Two drills will be used to delineate the AM-15 zone resource. Work on a 43-101 compliant resource estimate should begin in June 2007, to be used as a basis for a scoping study to be done in the summer of 2008.  Shareholder and investor relations will continue to be a priority in 2007, which promises to be as interesting as was 2006.  Information Disclosure Controls and Procedures  The Chief Executive Officer and the person performing similar functions to a Chief Financial Officer are responsible for assessing the effectiveness of information disclosure controls and procedures. They have concluded that such controls and procedures are effective and reliable at the end of the period covered by the annual documents.  Additional Information and Continuous Disclosure  This management discussion and analysis was prepared as of March 5, 2007. Updated information disclosed through press releases or financial statements can be found on the SEDAR (www.sedar.com) and EDGAR (www.sec.gov/edgar.shtml) websites.  FINANCIAL SUMMARIES  The following tables provide selected financial information for the past three financial years. FOR THE PAST THREE FINANCIAL YEARS  200620052004Total income$                  264,008$                      2,246$                      4,886Net loss$               2,206,990$                  823,224$                  556,238Net loss per share$                        0.03$                        0.02$                        0.01Exploration expenses$               3,176,756$                    71,294$                  880,414Total assets$             15,270,641$               4,731,443$               3,878,400Shareholders equity$             13,714,717$               4,006,092$               3,677,752  (c) Legal proceedings  None of the directors and executive officers mentioned above in ITEM 5 has been involved in the following legal proceedings in the last five years:  1.   None of the directors and executive officers has been involved in any bankruptcy petition filed by or against any business of which a director or executive officer was a general partner or executive officer either at the time of bankruptcy or within two years prior to that time;  2.  None of the directors or executive officers of the Company has been subject to any conviction in a criminal proceeding or is being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);  3    None of the directors or executive officers of the Company has been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; and  4.  None of the directors or executive officers of the Company has been found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law and the judgment has not been reversed, suspended, or vacated.  Item 8A Controls and Procedures  The Companys management, including the Chief Executive Officer, Mr. Guy Hébert, President, has conducted an evaluation regarding the effectiveness of disclosure controls and procedures pursuant to Exchange Act Rule 13a-15 (e) as of the end of the period covered by the report, based on the evaluation of these controls and procedures required by paragraph (b) of §240.13a-15. The Chief Executive Officer concluded that the disclosure controls and procedures are effective. The Companys management did not identify changes in the internal control over financial reporting that have materially affected or are reasonably likely to materially affect the Companys internal control over financial reporting subsequent to the date the Chief Executive Officer completed his evaluation. The Company has no principal Financial Officer and therefore the Company has no other certifying officer than the Chief Executive Officer.  Item 9. Directors and Executive Officers, Promoters and Control persons; Compliance with section 16 (a) of the Exchange Act  At March 15, 2007, the Board of Directors consists of six directors who will serve until the next annual meeting and until they are re-elected or their successors will be elected. This Annual and Special meeting will be held on June 12, 2006 at 10.30 a.m. at Fairmount Hotel The Queen Elizabeth Hochelaga 6 Room 900 René-Lévesque Blvd. West Montreal, Québec, H3B 4A5 Canada  On February 18, 2004, the Board of directors adopted a Code of ethics. This Code of Ethics can be consulted on the Companys website at www.stratecoinc.com. And any interested person can receive copy of this Code of ethics without charge in addressing its request to the Companys head office mentioned on the Title page of this annual report. (a) Directors and executive officers  The board of directors of the Company is a multidisciplinary team with recognized practical experience in various fields of activity that enables them to practice good corporate management. The members of the board are:  Guy Hébert  President and Chief executive officer of the Company and director Jean-Pierre Lachance  Executive Vice President of the Company and director Jean-Guy Masse  President, Masvil Capital Inc. and director Robert Desjardins  President, Robert G. Desjardins et Associés and director Claude Hubert  Honorary professor and  director* Francine Bélanger  Accountant Consultant and director* Henri Lanctôt  Secretary and Director* Marcel Bergeron, CA Director and member of the Audit Committee*  * Mrs. Francine Bélanger, director and member of the Audit Committee deceased on November 8, 2006. Mr. Claude Hubert resigned as director and member of the Audit Committee as of January 18, 2007 and was replaced on January 24, 2007 by Mr. Henri Lanctôt who acts now as Secretary and director of the Company.  Mrs. Francine Bélanger has been replaced by Mr. Marcel Bergeron, CA on March 21, 2007, who acts now as director and member of the Audit Committee.  The mandate of the new directors named in replacement of other elected directors will expire at the date of the next Annual Assembly of shareholders unless they are elected at that time for a new mandate.  Mr. Guy Hébert has been President of BBH Géo-Management Inc. since October 1992.  Mr. Hebert has been a director Chief executive officer and President of the Company since April 13, 2000. He was also President of Lyon Lake Mines Ltd. from 1986 to 2001. From 1985 to 1992, he was President and Chief Executive Officer of Audrey Resources Inc. Mr. Hébert was also a director of Orleans Resources Inc. from 1993 to 1998 and President and Chief Executive Officer of Altavista Mines Inc. from 1995 to 2000.  Mr. Jean-Pierre Lachance is Executive Vice President of the Company. He has been a director of the Company since April 13, 2000. He has also been the president of Novontar S.A. from 1996 to 2002. He was also Vice President of Lyon Lake Mines Ltd. from 1996 to 2001, becoming Executive Vice President in May 1999. He has also been the president of Novontar S.A. from 1996 to 2002. From 1992 to 1994, he was a freelance consultant, and from 1991 to 1992 he was Technical Director of Corpomin Management Inc. From 1989 to 1991 he was Expert Co-coordinator with Consortium Sidam-Minorex, and prior to that he was Project Manager, Mines and Geology Division with Groupe-Conseil Roche Ltd.  Mr. Jean-Guy Masse is President of Northern Precious Metals Funds Inc. since 2003 and is President of Masvil Capital Inc. since 1992. He has been President of the Board of Directors of Metco Resources Inc. from 1999 to 2003 and President of Orléans Resources Inc. from 1992 to 1998. He was previously Executive Vice-President of Dundee Capital Inc. and President and Chief Executive Officer of CMP Fund Management Ltd. from 1984 to 1992. Mr. Masse is also a director of mining companies listed on the TSX Venture Exchange. Mr. Masse holds a B.Sc. A. from the École Polytechniqueof Montreal and an M. Sc from Stanford University, California U.S.A. He is a CFA and member of the Association since September 1975.  Mr. Robert Desjardins holds a Bachelors Degree in Commerce from the École des Hautes Études Commercialesand is a member of the Corporation des Administrateurs Agréés du Québec. Since 1989, Mr. Desjardins has been President of Robert G. Desjardins & Associates Inc., a firm specializing in corporate finance and the development of financial products. He is director of the Company since October 30, 2001.  Mrs. Francine Bélanger was a chartered accountant. Since December 2001 Mrs. Bélanger was an accounting consultant. Previously she was Vice-President and Chief Financial Officer of Datacom Wireless Corporation from May 2000 to December 2001. Between 1987 and April 2000 Mrs. Bélanger held various management positions as treasurer of mining exploration companies and as such has acquired a large experience in the preparation and analysis of financial statements of resources companies. Mrs. Bélanger deceased on November 8, 2006. She was a director of the Company from April 13, 2000 to October 30, 2001, and from June 2002 to November 8, 2006.  Mr. Claude Hubert is honorary professor at the University of Montreal, department of geology since 1999. Mr. Hubert holds a Ph.D. in geology. After his retirement as professor of geology, Mr. Hubert acted as geological consultant from 1997 to 2003. Mr. Hubert has directed many mining exploration campaigns and has been director of mining exploration companies. As such he has acquired the relevant financial experience in order to be a member of the audit committee. Mr. Hubert was a director of the Company since April 13, 2000. He resigned as director on January 18, 2007.  Mr. Henri Lanctôt  was appointed director on January 24, 2007 further to the resignation of Mr. Claude Hubert on January 18, 2007  Mr. Henri Lanctôt is a partner of Gowling Lafleur Henderson LLP and was admitted to the Quebec Bar in 1968 after graduating in 1967 from the Faculty of Law of the University of Montreal.  In 1984, Mr. Henri Lanctôt joined Lafleur Brown, the law firm that merged with Gowlings on July 1st, 2000.  Mr. Marcel Bergeron was appointed director and member of the Audit Committee on March 21, 2007 further to the death of Ms. Francine Bélanger on November 8, 2006. Marcel Bergeron acts as the General Director of Devimco Inc., a company specialized in the real estate development since June 2006. Between July 1990 and June 2006, Mr. Bergeron was an associate of Petrie Raymond LLP, Chartered Accountants. Between December 1995 and August 2005, he was on the board of directors of Fairstar Explorations Inc. He is a member of the Quebec Institute of Chartered Accountants and of the Quebec Institute of Certified Management Accountants.  (b) Compliance with section 16 (a) of the Exchange Act.  Section 16 (a) of the Securities Exchange Act of 1934, as amended, requires the Companys officers and directors, and persons who own more than ten percent of a registered class of the Companys equity securities, to file reports of ownership on Form 3 and changes in ownership on Form 4 or Form 5 with the Securities and Exchange Commission (SEC). Such officers and directors and 10% stockholders are also required by SEC rules to furnish the Company with copies of all section 16 (a) forms they file.  The directors and officers have since December 31, 2003 filed only with the Quebec Securities Commission now called Autorité des marchés financiers, the principal national securities exchange jurisdiction of the Company as allowed by Rule 16a-3 (c). All transactions by directors and officers have been deposited electronically and can be consulted at http://www.sedi.ca/.  Item 10 Executive Compensation.                          (a) General  During the year ended December 31, 2006, the Company did not pay any compensation to its executive officers, except for Jean-Pierre Lachance, who received an allowance of $ 200 per month for the use of his personal vehicle in relation with the Company's activities. During the year ended December 31, 2006, the Company incurred general and administrative expenses of $451,000 with BBH Géo-Management Inc. The Company also paid management fees of $583,000, consultant and subcontractor fees of $197,000, travel and lodging expenses of $ 235,116 and share issue costs of $57,000 to this same company. BBH Géo-Management Inc. is a company that provides the Company with project management and administrative services pursuant to a services agreement. Guy Hébert, the Companys president, is the sole director of BBH Géo-Management Inc. and controls another company that is the sole shareholder of BBH Géo-Management Inc. Services provided to the Company by executive officers Guy Hébert and Jean-Pierre Lachance are paid for by BBH Géo-Management Inc.     Annual remuneration (1)Long-term compensationAwardsPayoutsName and position
(a)Year
(b)Salary
$
(c)Bonus
$
(d)Other annual compensation
$
(e)Securities under option / SAR granted
(#)
(f)Restricted shares or restricted units
$
(g)LTIP Payouts (4)
$
(h)All other compensation
$
(i)Guy Hébert,(2)
Chef Executive Officer2006_______2005_______2004_______Jean-Pierre Lachance (3)
Executive Vice President2006_______2005_______2004_______ (1) The Company did not pay any salary or other form of compensation directly to its executive officers. (2) The Company paid $162,374 in 2006, $111,062 in 2005 and $132,125 in 2004 to BBH Géo-Management Inc. for the consulting services of Guy Hébert. These sums are not representative of the amounts actually received by Mr. Hébert from BBH Géo-Management Inc. as salary. (3) The Company paid $178,695 in 2006, $102,225 in 2005 and $95,678 in 2004 to BBH Géo-Management Inc. for the consulting services of Jean-Pierre Lachance. These sums are not representative of the amounts actually received by Mr. Lachance from BBH Géo-Management Inc. as salary. (4) The Company does not have a long-term incentive plan (LTIP).  During the financial year ended December 31, 2006, the Company granted 100,000 stock options to one executive officer under the terms of the stock option plan, as described in the following table: NameSecurities under optionPercentage of total options granted to key employees and consultants in the financial yearExercise priceMarket value of the securities under option on the eve of the awardExpiryJean-Pierre Lachance,
Executive Vice President100,0008%$0.40$35,000January 24, 2011  The following table shows the options exercised during the financial year by executive officers and the year-end value of unexercised options at December 31, 2006:  NameShares acquired on exercise of options
(#)Aggregate value realized ($) (1)Unexercised options at year-end
-------- // --------

Exercisable / unexercisableValue of unexercised in-the-money options at year-end
-------- // --------

Exercisable / unexercisableGuy Hébert,
President and Director200,000152,000 $300,000/ N.A.$705,000  / N.A.Jean-Pierre Lachance,
Executive Vice President and Director200,000152,000 $350,000 / N.A.$802,500 / N.A.100,00079,000 $50,00057,500 $ (1) Whenever an option is exercised, the aggregate value realized is the difference between the market value on the date of the exercise of the option and the exercise price, multiplied by the number of shares.  Mr. Henri Lanctôt, Secretary is also Partner of Gowling, Lafleur Henderson, LLP, a legal firm which receives payment for legal services and consultations from BBH Géo-Management Inc. on works and duties related to the Companys business in an amount that did not exceed $100,000 for the last fiscal year. Liability Insurance The Company has an insurance policy that provides directors and officers liability coverage of $5,000,000 per event. The Company paid an annual premium of $18,540 for the policy during the financial year. Termination of Employment, Change in Responsibilities and Employment Contract There are no employment contracts between the Company and its executive officers, nor is there any compensatory mechanism that may be triggered in the event of a change of control of the Company or a change in executive officers responsibilities pursuant to a resignation, retirement or any other termination of employment with the Company. Directors Fees The external directors receive fees for each board and audit committee meeting they attend with the exception of those directors who are also executive officers of the Company. Directors fees totalled $18,600 for the year ended December 31, 2006. Aside from stock options granted to directors under the stock option plan, directors do not receive any other fee or benefit from the Company. Loan to Directors and Officer At the date hereof, no director, nominee as director or officer or anyone associated with them owed any amount to the Company.  The Company does not have a long-term incentive plan (LTIP).  Stock Option Plan The Company has a stock option plan for its executive officers, directors and consultants. A total of 3,800,000 common shares are reserved for issuance under the plan. The maximum number of options that can be granted to any participant cannot exceed 5% of the issued and outstanding shares of the capital stock. The exercise price of the options granted may not be less than the discounted market price of the common shares on the TSX Venture Exchange at the time the options are granted. The options granted are valid for a period established by the Board of Directors, not to exceed ten years from the date the options are granted. The Company has no stock appreciation rights (SAR) plan. Equity Compensation Plan Information as at December 31, 2006 Plan CategoryNumber of securities to be issued upon exercise of outstanding options, warrants and rightsWeighed-average exercise price of outstanding options, warrants and rightsNumber of securities remaining available for future issuance under equity compensation plan (excluding securities reflected in column (a))Stock option plan
Equity compensation plans approved by security holders928,000$0.37348,000Equity compensation plans not approved by security holdersN.A.N.A.N.A.Total:928,000$0.37348,000  (b) Stock options granted during the last financial year  During the year ended December 31, 2006, the Company granted 1,204,000 stock options to officers, directors and key employees and consultants. On January 5, 2006, The Company granted 500,000 options to purchase a share at the exercise price of $0.14 per share until January 4, 2008 to Dresden Capital Inc., the new firm of investors relations for the Company.  On January 16, 2006, 50,000 options were granted to Robert Desjardins, a Companys director at the price of $0.30 per share until January 15, 2011 and on January 25, 2006, the Company granted a total of 400,000 options to purchase at the price of $0.40 per share with an expiry date of January 24, 2011 to directors, officers and collaborators.  As at  March 5, 2007, 2,564,000 options had been exercised by directors, officers, key employees and consultants for a total amount of $572,800.  For further details concerning the stock options granted and exercised during the last fiscal year please refer to NOTE 7 OF FINANCIAL STATEMENTS.  Item 11 Security Ownership of Certain Beneficial Owners and Management Related Stockholder Matters.  (a) Security ownership of certain beneficial owners  The Company is a publicly traded Canadian corporation, the shares of which are owned by Canadian residents, U.S. residents and other countries residents. The Company is not owned or controlled, directly or indirectly by any foreign government or any other companies. Ownership is based on information furnished to the Company by its Transfer Agent, Computershare Company of Canada. The Company does not know of any person owning more than 5% of any class of the small business issuers voting securities.  Title of className and address of beneficial ownerAmount and nature of beneficial ownership at March 5, 2007Percentage of classN.A.N.A.N.A.  (b) Security ownership of management  The following table sets forth the names and addresses of each of the directors and officers of the Company, their principal occupations and their respective date of commencement of their term with the Company. All directors and officers hold office until the next Annual General Meeting of Shareholders of the Company or until a successor is appointed.   1234Title of className and Position with the CompanyNumber of Common Shares of the Company Beneficially Owned or Directly/Indirectly Controlled (1)   (6)Percentage of Issued Share Capital (6)Common shares, escrowed shares, stock options to purchase common shares. common shares indirectly controlled and warrants to purchase shares indirectly controlled.GUY HEBERT(3)(6)
595 Marie-Victorin
Boucherville, Quebec, Canada J4B 1X4
President & Director 20004,436,114 shares
25,000 warrants
300,000 stock options (3)4.16%Common shares, escrowed shares and stock options to purchase common sharesJEAN-PIERRE LACHANCE,(4)(6)
5146 Nantel
St-Hubert, Québec J3Y 2Y4
Executive Vice President and Director 2000180,050 shares
350,000 stock options (4)0.16%Common shares and stock options to purchase common sharesROBERT DESJARDINS, (2)
236, Notre-Dame, apt. # 5
Repentigny, Quebec, Canada J6A 2R6
Director 2001200,000 shares0.18%Common shares and stock options to purchase common sharesJEAN-GUY MASSE, (2)(6)
775 Chemin Markham Montreal, Quebec, Canada H3P 3A6
Director  200068,000 shares
50,000 stock options0.63%Common shares and stock options to purchase common sharesHENRI LANCTOT,
247, Trenton ave., Montreal, Quebec, Canada H3P 1Z8
Corporate secretary and director 200750,375 shares0.04%Marcel Bergeron (2)00%Total Common shares, escrowed shares and stock options to purchase common shares and warrants to purchase shares indirectly controlled.4 934 539 shares
700,000 stock options
25,000 warrants4.63% (5)  (1) Information relating to the Shares over which control or direction is exercised was provided by the directors and officers as of March 5, 2007. Common Shares beneficially owned, directly or indirectly, or over which control or direction is exercised, as at the date hereof, based upon information furnished to the Company by individual directors and officers. Unless otherwise indicated, such shares are held directly.  (2) Member of the Audit Committee  (3) Includes 137,500 shares held under escrow for a total of 282,000 shares and 300,000 stock options held directly by Guy Hébert. 4,154,114 of the number of shares under the name of Mr. Guy Hébert are held by a company disclosed at Item 12: Certain relationships and related transactions of which Mr. Hébert is president and sole director and these shares are controlled by Mr. Hébert. That same company owns 25,000 shares purchase warrants at the price of exercise of $0.20 per share  (4) 50,000 of the 180,050 shares held by Mr. Lachance are under escrow.  (5) The directors, officers and other members of management of the Company, as a group beneficially own, directly or indirectly, common shares of the Company, representing 4.63% of the total issued and outstanding securities of the Company as of March 5, 2007.  (6) Of the number of common shares mentioned in Column 4 of the preceding table, the directors owned each a number of stock options with right to exercise within 60 days as follows: Mr. Hébert, 300,000; Mr. Lachance, 350,000; Mr. Masse, 50,000;  (c)   Changes in control  The Company does not anticipate at this time any changes in control of the Company.   Item 12. Certain Relationships and Related Transactions.  (a) Related parties transactions  During the year, Strateco Resources Inc. created a new company, Cadiscor Resources Inc., so as to separate its gold and uranium properties. The Company therefore transferred its Discovery, Cameron and Montbray properties along with deferred expenditures with respective carrying values of $312,750 and $3,112,422 in consideration of 20,000,000 shares of Cadiscor Resources Inc. valued at $3,200,172 and $225,000 in cash. The Company then transferred its investment in Cadiscor Resources Inc. to its shareholders through a $3,200,172 reduction in paid-up capital.  Following this operation, a future income tax benefit of $73,000 was credited to contributed surplus.  The Company conducted the following transactions with another company for which a Strateco director also serves as director. On August 1, 2005, the Company and BBH Géo-Management Inc. (BBH), a related company, signed an agreement under which BBH will provide the Company with the following services: office space, office and computer equipment, secretarial, management, accounting and legal, geological consulting, investor and regulatory relations and financing services. The agreement is valid for a three-year period ending on July 31, 2008, and provides for a fixed monthly charge of $3,200 for office rent, office equipment and computers that will be reviewed each year on July 31. The estimated amounts to be paid over the next two years are $38,400 in 2007 and $22,400 in 2008, for a total of $60,800.    .20062005Expenses capitalized under deferred expendituresConsultants and subcontractors$                    197,000$                  120,000Management fees$                    583,000$                    65,000General and administrative expenses on the earnings statementProfessional fees$                    228,000$                  176,000Legal expenses$                      61,000$                    67,000Investor relations$                    123,000$                    27,000Rent$                      39,000$                    39,000Share issue costs accounted for in reduction of capital stock$                      57,000$                    70,000  Mr. Henri Lanctôt, secretary and director of the Company, is a Partner of Gowling Lafleur Henderson LLP which is also the legal counsel of the Company.  (b) Transactions with Promoters  Mr. Guy Hébert, President and director of the Company can be considered as the promoter of the Company in consideration of his participation and managing of the business of the Company since its incorporation.  Mr. Hébert does not receive any salary or compensation for his services as Director and Chief Executive Officer from the Company but is entitled to receive stock options as an incentive. The Board of Directors of the Company has awarded Mr. Hébert 500,000 stock options since its incorporation.  (c) Conflict of interests  The directors and executive officers of the Company can have functions in other public mining companies or still to detain important assets in other public mining companies and to that effect enter into conflicting interests at the time of negotiation or to conclude the mode or scope related to that venture when these other mining companies can participate in the same joint venture.  In that case, at the Board of Directors meeting, that director will abstain himself or herself from voting on that subject matter and will leave the room. Joint ventures in acquiring and exploring and mining natural resources are frequent in that industry. According to the laws regarding companies in Quebec, Canada, a director of the Company must act honestly, in good faith and in the fundamental interests of the Company.  Item 13 Exhibits, Financial Statement Schedules and Reports on Form 8-K.  a) Exhibits  31. Certifications 32. Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.  b) Reports on Form 8-K.  June 22, 2006Item 1.01 Approval by shareholders of sale of gold assets to Cadiscor Resources Inc. and approval of Reduction of stated Capital and Distribution of shares to Cadiscor Resources Inc August 22, 2006. Item 1.01 Entry into a Material  Definitive Agreement for sale of gold assets to Cadiscor Resources Inc. and Reduction of stated Capital and Distribution of shares to Cadiscor Resources Inc.  February 5, 2007: Item 3.02 Unregistered sales of Equity: Private placement of $25,012,000 and Item 5.02 Departure of directors.  Item 14 Changes in Registrants Certifying Accountant  The mandate of PETRIE RAYMOND, LLP, Chartered Accountants  has been renewed on June 20, 2006.  a) Audit Fees  In the last two fiscal years, one firm of accountants rendered to the Company professional services for the total amount of $32,000 for auditing of annual financial statements included in Form 10-KSB, review of quarterly interim financial statements included in the previous Company's Form 10-Q-SB and other services that are normally provided by the accountants in connection with statutory and regulatory filings for that period ("reports").  Services provided by the principal accountant PETRIE RAYMOND, LLP, Chartered Accountants, for the year ending December 31, 2005 and December 31, 2006 services provided by Petrie Raymond LLP concerning the quarterly filings of March, June and September 2006 amounted to $17,000 and the Company estimates the fees to be paid for the annual report filings to $15,000.  March 31, 2005, June 30, 2005, September 30, 2005  and annual reports for year ending December 31, 2005PETRIE RAYMOND LLP$                                              31,350March 31, 2006, June 30, 2006 and September 30, 2006PETRIE RAYMOND LLP$                                              17,000Annual ReportsPETRIE RAYMOND LLP$                                              15,000  b) Audit-Related Fees  Petrie Raymond, LLP, Chartered Accountants has billed the Company for its registration on the PCAOB in the amount of $1,276.  c) Tax Fees  Aggregate fees billed for tax compliance, tax advice and tax planning in each of the two last fiscal years for professional services rendered by the principal accountants are as follows:  Year ending at December 31, 2005: $3,500. Year ending at December 31, 2006: $2,500.  d) All other Fees  Other fees: $825  e) Audit committees pre approval policies and procedures  The Company engages the accountant, to render audit services, once the Companys audit committee has approved the engagement.  With respect to the provision of services other than audit, review or attest services, the pre-approval by the audit committee is waived if the aggregate amount of all such services provided constitutes no more than five percent of the total amount of revenues paid by the Company to its accountant during the fiscal year in which the services areprovided. Such servicesare promptly brought to the attention of the Companys audit committee and approved prior to the completion of the audit by the audit committee or by one or more members of the audit committee who are members of the board of directors to whom authority to grant such approval has been delegated by the audit committee                                         SIGNATURE  In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.  STRATECO RESOURCES INC. Registrant  Dated: June 21, 2007 /s/ Guy Hébert _________________________________ Name: Guy Hébert Title: President and Chief Executive Officer       Auditors' Report To the Directors of Strateco Resources Inc.: We have audited the accompanying balance sheets of Strateco Resources Inc. as at December 31, 2005 and 2006 and the related statements of deferred expenditures, earnings and deficit and cash flows for the years then ended.  These financial statements are the responsibility of the Companys management.  Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as at December 31, 2005 and 2006 and the results of its operations and its cash flows for the years then ended in accordance with Canadian generally accepted accounting principles. Canadian generally accepted accounting principles vary in certain respects from the accounting principles generally accepted in the United States of America.  Information relating to the nature and aspect of such difference is presented in Note 15 to the financial statements. [form10ksba019.gif] Limited Liability Partnership Chartered Accountants  Montréal, Canada March 5, 2007 (June 21, 2007 for Note 15)





Financial Statements of  STRATECO RESOURCES INC.  an exploration stage company For the years ended December 31, 2006 and 2005                STRATECO RESOURCES INC,an exploration stage company    FINANCIAL STATEMENTS DECEMBER 31, 2006 AND 2005            Balance Sheets  Statements of Deferred Expenditures  Statements of Earnings and Deficit  Statements of Cash Flows  Notes to Financial Statements


Financial Statements STRATECO RESOURCES INC., an exploration stage company  BALANCE SHEETS DECEMBER 31, 2006 AND 2005  (in Canadian dollars)  20062005ASSETSCURRENT ASSETSCash and cash equivalents (Note 3)$                561,344$           768,6014.65% term deposit8,680,857-Tax credits receivable1,476,78516,984Sales tax recoverable315,63378,776Subscriptions receivable-501,900Deposits on exploration work500,000-Prepaid expenses26,43717,18111,561,0561,383,442MINING PROPERTIES (Note 4)459,000161,750DEFERRED EXPENDITURES (Note 5)3,250,5853,186,251$           15,270,641$        4,731,443LIABILITIESCURRENT LIABILITIESAccounts payable and accrued charges (Note 11)$             1,555,924$           590,951Term loans (Note 11)-110,0001,555,924700,951FUTURE INCOME TAXES (Note 12)-24,400SHAREHOLDERS EQUITYCapital stock (Note 6)18,962,8597,898,833Contributed surplus (Note 8)1,022,264170,675Deficit(6,270,406)(4,063,416)13,714,7174,006,092$           15,270,641$        4,731,443  See notes to financial statements.  ON BEHALF OF THE BOARD ____________________________________ ____________________________________
(Signed) Guy Hébert, Director (Signed) Robert Desjardins, Director         STRATECO RESOURCES INC., an exploration stage company  STATEMENTS OF DEFERRED EXPENDITURES YEARS ENDED DECEMBER 31, 2006 AND 2005  (in Canadian dollars)  20062005EXPLORATION EXPENSESConsultants and subcontractors$          3,362,528$             515,958Professional fees371,49714,536Management fees584,86565,030Travel expenses217,67718,407Supplies and equipment rental135,60413,232General exploration expenses43,5835,1514,715,754632,314Mining duties credits and other related exploration credits(1,472,454)-Write-off of deferred expenditures(66,544)(561,020)NET INCREASE IN EXPLORATION EXPENSES3,176,75671,294BALANCE, BEGINNING OF YEAR3,186,2513,114,957TRANSFERRED EXPLORATION EXPENSES (Note11)(3,112,422)-BALANCE, END OF YEAR$          3,250,585$          3,186,251   See notes to financial statements.         STRATECO RESOURCES INC., an exploration stage company  STATEMENTS OF EARNINGS AND DEFICIT YEARS ENDED DECEMBER 31, 2006 AND 2005  (in Canadian dollars)  20062005INTEREST INCOME$                  264,008$                2,246GENERAL AND ADMINISTRATIVE EXPENSESProfessional fees259,745176,340Legal and audit expenses159,563114,773Stock-based compensation244,54179,600Directors fees18,60019,000Shareholder communications135,93455,299Investor relations627,94775,056Listing and registrar fees25,55818,049Social benefits related to stock options53,582-Travel expenses9,1695,552Rent38,40037,000Insurance23,73417,404Office expenses24,36011,848Taxes and permits29,5172,742Part X11.6 penalty tax11,07513,915Interest, penalties and bank charges14,12912,4721,675,854639,050Write-off of deferred expenditures66,544561,0201,742,3981,200,070LOSS BEFORE INCOME TAXES1,478,3901,197,824FUTURE INCOME TAX (BENEFIT) (Note 12)728,600(374,600)NET LOSS2,206,990823,224DEFICIT, BEGINNING OF YEAR4,063,4163,240,192DEFICIT, END OF YEAR6,270,4064,063,416BASIC AND FULLY DILUTED NET LOSS PER SHARE$                        0.03$                  0.02WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUSTANDING82,855,37148,908,566  See notes to financial statements.


STRATECO RESOURCES INC. 1   STRATECO RESOURCES INC., an exploration stage company STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2006 AND 2005 (in Canadian dollars) 20062005CASH FLOW FROM (USED IN) OPERATING ACTIVITIES:Net loss$         (2,206,990)$             (823,224)Non-cash itemsStock-based compensation244,54179,600Write-off of deferred expenditures66,544561,020Future income tax728,600(374,600)Changes in non-cash working capital items:Tax credits receivable12,65360,516Sales tax recoverable(236,857)(20,213)Deposits on exploration work and prepaid expenses(509,256)4,575Accounts payable and accrued charges307,243163,467(1,593,522)(348,859)CASH FLOW FROM (USED IN) INVESTING ACTIVITIES:Term deposit(8,680,857)-Acquisition of mining properties(382,000)(42,000)Transfer of mining properties (Note 11)225,000-Increase in deferred expenditures(4,058,024)(405,478)(12,895,881)(447,478)CASH FLOW FROM (USED IN) FINANCING ACTIVITIES:Term loans(110,000)110,000Common share issuance15,411,5891,564,650Common share issue costs(1,019,443)(271,286)14,282,1461,403,364NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS(207 257)607,027CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR768,601161,574CASH AND CASH EQUIVALENTS, END OF YEAR$              561,344$               768,601  Additional information related to cash flows20062005Non-cash items related to operating, financing and investing activities:Acquisition of mining properties in exchange for common shares$           228,000$             32,000Deferred expenditures included in accounts payable$           952,377$           294,647Transfer of mining properties and deferred expenditures$        3,200,172$                   -Subscriptions receivable$                     -$           501,900Common share issue costs paid for through the issuance of warrants$           304,140$                   -Cost of future income taxes included in common share issue costs$                     -$           399,000 See notes to financial statements.





STRATECO RESOURCES INC., an exploration stage company  Notes to Financial Statements YEARS ENDED DECEMBER 31, 2006 AND 2005  (in Canadian dollars)  1. INCORPORATION AND NATURE OF OPERATIONS  The Company is incorporated under the Canadian Business Corporations Act and is engaged in the exploration of properties.  Recovery of amounts indicated under mining properties and the related deferred expenditures are subject to the discovery of economically recoverable reserves, the Companys ability to obtain the financing required to complete development and profitable future production or the proceeds from the sale of such assets. At December 31, 2006, management determined the net accounting value of mining properties to be the best estimate of their net recoverable value. This value may nonetheless be reduced in the future.  2. SIGNIFICANT ACCOUNTING POLICIES  CASH AND CASH EQUIVALENTS  The Company considers cash and term deposits maturing three months or less from their acquisition date as cash and cash equivalents.  MINING PROPERTIES AND DEFERRED EXPENDITURES  Mining properties are recorded at cost. Exploration and development costs are deferred, net of related government assistance. However, when a project is abandoned, the corresponding costs are charged against earnings.  STOCK-BASED COMPENSATION AND OTHER STOCK-BASED PAYMENTS  The Company accounts for the allocation of share purchase options granted under the stock option plan and also accounts for the allocation of broker warrants as part of certain funding on a fair value basis. Stock options granted to non-salaried persons and broker warrants are accounted for on the basis of their fair value according to the Black-Scholes option price valuation model.  When options and broker warrants are granted, the compensation expenses are applied to the activity concerned and the consideration in contributed surplus.  Any consideration paid by the participants when options and broker warrants are exercised, as well as the contributed surplus created when options and broker warrants are allotted, are credited to capital stock.  INCOME TAXES  The Company records its income taxes using the balance sheet method. Future income tax assets and liabilities are recorded to take into account the impact on income taxes of variances between the accounting value of certain assets and liabilities shown on the balance sheet and their respective fiscal values. A valuation allowance is recorded as required to reflect an income tax asset that is more likely to be realized than not. The impact of any changes in income tax rates is recorded in the year in which the rates change.  BASIC AND FULLY DILUTED NET LOSS PER SHARE  The net loss per share is calculated based on the weighted-average number of common shares outstanding during the year. USE OF ESTIMATES  The preparation of consolidated financial statements in accordance with generally recognized accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the reported amounts of revenues and current expenditures, the recoverable values for mining property and deferred exploration expenses, the environmental liability provisions and the presentation of future liabilities. Actual results could differ from these estimates.  3. CASH AND CASH EQUIVALENTS  20062005Cash$           59 220$                    -Restricted cash-768 6014.19% term deposit502 124-$         561 344$        768 601  Restricted cash for exploration work is provided from flow-through public and private financings. In accordance with the financings realized as at December 31, 2005, the Company undertook to incur $1,288,200 in exploration expenses before December 31, 2006 on the gold projects Discovery and Cameron and on the uranium projects Matoush, Eclat and Mont-Laurier Uranium. All of this amount has been incurred as at June 30, 2006 ($12,667 during fiscal year 2005).  4. MINING PROPERTIES  20062005Discovery and Cameron$                  -$         87,750Mont-Laurier Uranium10,00010,000Matoush337,00047,000Eclat112,00017,000459,000161,750  5. DEFERRED EXPENDITURES  Balance at
December 31, 2005Exploration
expensesWrite-downBalance at
December 31, 2006Mining propertiesDiscovery$                   2,333,381$             54,294$      (2,387,675)$                                 -Cameron632,028156,963(788,991)-Mont-Laurier Uranium21,927131,135-153,062Matoush186,2362,804,229-2,990,465Beaver Lake Area2,300-(2,300)-Eclat4,86096,679-101,539Prospecting5,519--5,519$                   3,186,251$        3,243,300$      (3,178,966)$                   3,250,585   Balance at
December 31, 2004Exploration
expensesWrite-downBalance at
December 31, 2005Mining propertiesDiscovery$                   2,075,647$         257,734$                    -$                 2,333,381Cardinal559,0052,015(561,020)-Cameron475,811156,217-632,028Mont-Laurier Uranium-21,927-21,927Matoush-186,236-186,236Beaver Lake Area-2,300-2,300Eclat-4,860-4,860Prospecting4,4941,025-5,519$                   3,114,957$         632,314$        (561,020)$                 3,186,251   6. CAPITAL STOCK  AUTHORIZED  An unlimited number of common shares without par value.  An unlimited number of preferred shares without par value issuable in series with rights, privileges, restrictions and conditions to be determined by the board of directors.  December 31, 2006December 31, 2005Common sharesAmountCommon sharesAmountISSUED AND FULLY PAIDBalance, beginning of year61,771,257$7,898,83348,286,119$6,826,869In consideration of mining properties500,000228,000300,00032,000In cash-
Private placements15,700,00010,760,0008,778,274422,050-
Flow-through financings-
Exercise of warrants15,878,1103,616,889---
Exercise of stock options2,524,000532,8004,406,8641,288,200Reduction of paid-up capital (Note 11)-(3,200,172)--Amounts from contributed surplus (Note 8)-
Exercise of warrants-257,139---
Exercise of stock options-192,953--Issue costs-
Professional fees-(1,019,443)-(271,286)-
Attribution of warrants-(304,140)---
Future income taxes---(399,000)Balance, end of year (a)96,373,367$18,962,85961,771,257$7,898,833  (a) 187,500 common shares are escrowed and cannot be transferred, mortgaged, pledged or otherwise disposed of without the consent of the Autorité des Marchés financiers (Québec Securities Commission).  WARRANTS  At December 31, 2006, there were 5,143,500 warrants outstanding (8,842,009 in 2005), each entitling its holder to purchase one share of the Company. Changes to the warrants are shown in the following table:  20062005NumberWeighted-average strike priceNumberWeighted-average strike priceBalance, beginning of year8,842,009$                      0.204,005,816$                   0.23Issued12,800,000$                      0.616,763,276$                   0.18Exercised(15,878,110)$                      0.23-$                         -Expired(620,399)$                      0.24(1,927,083)$                   0.24Balance, end of year5,143,500$                      1.128,842,009$                   0.20  See notes to the following table.  The strike prices and the expiry dates of the warrants are shown in the following table:  Strike priceNumberExpiry$                                       1.503,600,000(1)November 30, 2007$                                       0.20523,500January 18, 2008$                                       0.261,020,000(2)February 8, 20085,143,500  (1) As of October 21, 2006, the Company may notify holders of warrants of its intention to force the exercise of warrants should the shares of the issuer trade on the TSX Venture Exchange at a price equal to or greater than $1.70 per share for a period of 20 consecutive trading days. On receipt of such notice, the holder will have 30 calendar days to exercise the warrants, after which they will expire. (2) As of September 10, 2006, the Company may notify holders of warrants of its intention to force the exercise of warrants should the shares of the issuer trade on the TSX Venture Exchange at a price equal to or greater than $0.50 per share for a period of 20 consecutive trading days. On receipt of such notice, the holder will have 30 calendar days to exercise the warrants, after which they will expire.  During the year ended December 31, 2006, 11,600,000 warrants (6,763,276 in 2005) were issued pursuant to private placements.  During the year ended December 31, 2006, 15,878,110 warrants (no warrants in 2005) were exercised.  During the year ended December 31, 2006, the Company granted 1,200,000 brokers warrants (none in 2005). The fair value of each warrant granted was determined using the Black-Scholes option pricing model. At the date of the grant, the weighted-average fair value of the warrants granted was $0.2534 per warrant.  The following weighted-average assumptions were used in the calculations:  20062005Risk-free interest rate2.68%2.3%Expected weighted average life1 year21 monthsExpected volatility102%76%Expected dividend0.0%0.0%  An amount of $304,140 was recognized in the share issue costs and credited to Contributed surplus..  7. STOCK OPTION PLAN  The Company has a stock option plan for its officers, directors and key employees. A total of 3,800,000 common shares are reserved for issuance under the plan. The maximum number of options that can be granted to any participant cannot exceed 5% of the issued and outstanding shares of the capital stock. The price of the options granted may not be less than the market price of the common shares on the TSX Venture Exchange at the time the options are granted. The options granted are valid for a period established by the board of directors, not to exceed five years from the date the options are granted.  Changes to the stock options under the plan are shown in the following table: 20062005Number of optionsWeighted-average strike priceNumber of optionsWeighted-average strike priceBalance, beginning of year2,248,000$                    0.192,298,000$                    0.19Granted(1)1,204,000$                    0.371,648,000$                    0.18Exercised(2,524,000)$                    0.21--Expired--(1,648,000)$                    0.18Cancelled--(50,000)$                    0.20Balance, end of year928,000-2,248,000$                    0.19  (1) 1,204,000 stock options were granted during the year ended December 31, 2006 at $0.14, $0.30, $0.38, $0.40, $0.85, $1.00 and $1.50 per share. These options must be exercised within five years from the date the options are granted or no later than November 21, 2011.  The outstanding stock options and the stock options exercisable as at December 31, 2006 are shown in the following table:  Options outstandingOptions exercisableWeighted-average strike priceNumberWeighted-average remaining contractual life (years)Weighted-average strike priceNumber$                   0.20569,0003.92$                     0.20569,000$                   0.3825,0004.17$                     0.3825,000$                   0.40175,0004.01$                     0.40175,000$                   0.85100,0004.65$                     0.85100,000$                   1.0050,0004.37$                     1.0050,000$                   1.509,0004.86$                     1.509,000$                   0.37928,000$                     0.37928,000  During the year ended December 31, 2006, the Company granted 1,204,000 stock options (1,648,000 stock options in 2005) to officers, directors and key employees. The fair value of each option granted was determined using the Black-Scholes option pricing model. At the date of the grant, the weighted-average fair value of the stock options granted was $0.2031 per option ($0.0483 per option in 2005).  The following weighted-average assumptions were used in the calculations:  20062005Risk-free interest rate2.64%2.0%Expected weighted average life1 year2 yearsExpected volatility127%93%Expected dividend0.0%0.0%  An amount of $244,541 ($79,600 in 2005) was recognized in earnings and credited to Contributed surplus.  8. CONTRIBUTED SURPLUS  20062005Balance, beginning of year$          170 675$        91 075Awards-Warrants (Note 6)304 140- Stock options (Note 7)244 54179 600Exercise of securities- Warrants(257 139)-- Stock options(192 953)-Related party transaction (note 11)753 000-Balance, end of year$       1 022 264$      170 675  9. COMMITMENTS AND CONTINGENCIES  MINING PROPERTIES  Quénonisca Property  On February 26, 1996, Altavista Mines Inc. signed an agreement with SOQUEM pursuant to which it owns a 50% undivided interest in the 78 claims making up the Quénonisca property in the Quénonisca and Salamandre Lake district north of Matagami, Québec.  Work is financed in proportion to the respective interests, failing which the undivided interest of the non-participating party is diluted. Any dilution of an interest to 10% entails the loss of that interest in consideration of a 1% net profits royalty (as defined in the agreement) from commercial production on the property.  In April 2000, the Company entered into an agreement undertaking to respect all Altavista Mines Inc.s rights and obligations in relation to the Quénonisca agreement with SOQUEM dated February 26, 1996.  The property now consists of 33 mining claims covering a total area of 1,799 hectares.  Eclat Property  On July 6, 2005, the Company signed a letter of intent with Vija Ventures Corporation granting the Company an option to acquire a 100% in the uranium Eclat property in the Otish Mountains of northern Québec.  The agreement provides for the Company to acquire its 100% interest in the Eclat property on all minerals except diamonds by making payments totalling $150,000 over four years, including $7,000 paid on signature of the agreement, $7,000 on the first anniversary, $20,000 on the second anniversary in 2007, $20,000 on the third anniversary in 2008 and $96,000 on the fourth anniversary in 2009; by incurring $500,000 in exploration expenditures over four years; and by issuing 600,000 common shares of the Company over three years, including 100,000 on approval of the agreement by the TSX Venture Exchange, 100,000 on the first anniversary, 200,000 on the second anniversary in 2007 and 200,000 on the third anniversary in 2008. The property is also subject to a 2% NSR.  SERVICES AGREEMENT  On August 1, 2005, the Company and BBH Géo-Management Inc. (BBH), a related company (Note 11), signed an agreement under which BBH will provide the Company with the following services: office space, office and computer equipment, secretarial, management, accounting and legal, geological consulting, investor and regulatory relations and financing services. The agreement is valid for a three-year period ending on July 31, 2008, and provides for a fixed monthly charge of $3,200 for office rent, office equipment and computers that will be reviewed each year on July 31. The estimated amounts to be paid over the next two years are $38,400 in 2007 and $22,400 in 2008, for a total of $60,800.  ROYALTIES  The Company is subject to royalty payments on commercial production from certain properties.  ENVIRONMENT  The Company's exploration activities are subject to various laws and regulations governing environmental protection. These laws and regulations are continually changing and generally tend to impose increasing restrictions. The Company conducts its operations so as to provide adequate protection for public health and the environment.  10. FAIR VALUE OF FINANCIAL INSTRUMENTS  The fair value of short term financial instruments is assumed to be equal to book value according to their next maturity and the normal market conditions that they entail.  11. RELATED-PARTY TRANSACTIONS  On August 17, 2006, Strateco Resources Inc. created a new company, Cadiscor Resources Inc., so as to separate its gold and uranium properties. The Company therefore transferred its Discovery, Cameron and Montbray properties along with deferred expenditures with respective carrying values of $312,750 and $3,112,422 in consideration of 20,000,000 common shares of Cadiscor Resources Inc. valued at $3,200,172 and $225,000 in cash. The Company then transferred its investment in Cadiscor Resources Inc. to its shareholders through a $3,200,172 reduction in paid-up capital.  Following this operation, a future income tax benefit of $753,000 was credited to contributed surplus. During the year, consultant and subcontractor fees of $197,000 ($120,000 in 2005) and management fees of $583,000 ($65,000 in 2005), included in the Statements of deferred expenditures, were paid to BBH Géo-Management Inc, an officer of which is also officer of the Company.  In the Statements of earnings, the general and administrative expenses of $451,000 ($309,000 in 2005) were paid to the same company.  In addition, share issue costs of $57,000 ($70,000 in 2005) were paid to the same company (Note 6).  In 2005, the Company had tow term loans to repay totalling $110 000, bearing interest at 8 %. Of the total, $50 000 must be paid to the same company, and $60,000 to another company belonging to an officer of the Company.  At December 31, 2006, accounts payable and accrued charges included an amount of $344,000 ($233,000 in 2005) to be paid to the same company.   12. INCOME TAXES  The income tax allowance differs from the amount resulting from the application of the combined Canadian statutory income tax rate as follows:  20062005Loss before income taxes$        1,478,390$     1,197,824Combined Canadian statutory income tax rate30.23%31.02%Income tax benefit at the combined Canadian statutory income tax rate(446,917)(371,565)Shares issue costs(186,700)(67,150)Stock-based compensation73,92524,691Change in valuation allowance1,469,500(140,791)Non-deductible expenses and others(181,208)180,215Future income tax benefit$           728,600$      (374,600) The combined Canadian statutory income tax rate of 30.23% consists of a federal tax rate of 22.12% and a provincial rate of 8.11% (22.12% federal tax rate and 8.9% provincial rate in 2005).  The tax effects of temporary differences giving rise to material future income tax assets and liabilities as at December 31, 2006 and 2005 are as follows:  20062005Future income tax asset:Net operating losses$         1,316,200$          901,600Financial expenses326,900140,2001,643,1001,041,800Less: valuation allowance1,469,500-Total future income tax asset$            173,600$       1,041,800Future income taxes:Mining properties and deferred expenditures$            173,600$       1,066,200Future income taxes$                    Nil$            24,400  As at December 31, 2006, the Company had losses other than capital losses and unused share issue costs that could be deferred to later periods and used to reduce future taxable income. These losses and share issue costs expire as follows:  FederalProvincialLosses other than capital losses:2007$             168,682$            168,6822008$             242,843$            218,8432009$             527,029$            479,0192010$             537,046$            516,9282011$             643,103$            643,0552015$             710,408$            654,4652026$          1,547,059$         1,612,832Share issue costs:2007$             335,940$            335,9402008$             299,067$            299,0672009$             242,382$            242,3822010$             203,887$            203,887   13. COMPARATIVE FIGURES  Certain comparative figures have been reclassified to conform to the financial statements presentation adopted in the current year. 14. SUBSEQUENT EVENTS  On January 9, 2007, the Company granted 45,000 stock options to a key employee at $2.38 per share.  On January 31, 2007, in the context of a private placement with a syndicate of underwriter led by Orion Securities Inc. and including Dundee Securities Corporation, Blackmont Capital and Sprott Securities Inc., the Company sold 9,620,000 units at $2.60 per unit. Each unit consists of a common share and half a warrant. The Company issued 9,620,000 common shares and 4,810,000 warrants for total proceeds of $25,012,000. Each whole warrant entitle its holder to purchase one common share at $3.50 for a 24-month period following the closing date. As part of the private placement, the underwriters received a cash fee equal to 6% of the gross proceeds of the financing ($1,500,720). The underwriters also received brokers options equal to 6% of the total number of units sold under the offering (577,200 units). Each brokers option enables the underwriters to purchase one unit at the issue price until January 31, 2009. At any time after June 1, 2007, the Company may notify holders of warrants and brokers options of its intention to force the exercise of warrants and brokers options should its shares trade on the TSX Venture Exchange at a price equal to or greater than $4.50 per share for a period of 20 consecutive trading days. The net proceeds of the private placement will be used to finance additional exploration work on the Companys Matoush and Mont-Laurier projects in Québec and for general working capital purposes.  On February 5, 2007, the Company granted 100,000 stock options to a consultant at a price of $2.60 per share.  As at March 5, 2007, 512,500 warrants and 40,000 stock options had been exercised, pursuant to which the Company had issued 552,500 common shares for a total of $385,250.  15.  THE EFFECT OF APPLYING UNITED STATES ACCEPTED ACCOUNTING PRINCIPLES  These financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) in Canada. The effect of applying United States generally accepted accounting principles (U.S. GAAP) on net earnings would be as follows:  20062005Net loss per Canadian GAAP, as reported$                 2,206,990$               823,224Properties and deferred expenditures (1)361,584145,294Deferred tax expenses (recovery) (2)(299,578)(296,418)Net loss and comprehensive income for the year,
according to U.S. GAAP$                 2,268,996$               672,100Net loss per share per Canadian GAAP, as reported$                          0.03$                     0.02Effect of adjustments:Properties and deferred expenditures (1)--Deferred tax expenses (recovery) (2)-(0.01)Loss per share, according to U.S. GAAP$                          0.03$                                0.01  (1) Properties and deferred expenditures are accounted for in accordance with Canadian GAAP as disclosed in note 2. Under Canadian GAAP, the propertys potential for development is sufficient to permit the capitalization of exploration expenditures incurred as property acquisition costs and deferred expenditures and the management intends to pursue the development. Under U.S. GAAP, a final feasibility study showing economically recoverable proven and probable reserves is required for capitalization of property acquisition costs and exploration expenditures. Accordingly, the property related costs must be expended as incurred.  (2)Under Canadian GAAP, shares issued as flow-through shares are recorded at their face value when issued. When the entity acquires assets the carrying value may exceed the tax basis as a result of the enterprise renouncing the deductions to the investors. The tax effect of the temporary difference is recorded as a share issue cost. Under US GAAP, the proceeds from issuance should be allocated between the offering of shares and the sale of tax benefits. The allocation is made based on the difference between the quoted price of the existing shares and the amount the investor pays for the shares. A liability is recognized for this difference. The liability is reversed when tax benefits are renounced and a deferred tax liability is recognized at that time. Income tax expense is the difference between the amount of the deferred tax liability and the liability recognized on issuance.  The effect of the application of the above adjustments on the balance sheet of the Company at December 31, 2006 would be to decrease properties by $459,000 to $0 ($161,750 in 2005 to $0), decrease deferred expenditures by $3,250,58

5


9

 to $0 ($3,186,251 in 2005 to $0), increase long-term liability by $163,208 ($380,843 in 2005) and decrease shareholders equity by $3,872,793 ($3,728,844 in 2005).  The effect on the statement of cash flows would be an increase of $761,742 (decrease of $447,478 in 2005) in cash flows from operating activities and an increase of $761,742 (decrease of $447,478 in 2005) in cash flows used in investing activities.