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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-KSB

[ x ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
  SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2005

[]
  TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGEACT OF 1934

For the transition period from________________________ to
________________________

COMMISSION FILE NUMBER 000-50180

URANERZ ENERGY CORPORATION(Exact Name of Registrant as Specified in Its Charter)

|NEVADA                                   | 98-0365605                          
|---------------------------------------- | ------------------------------------
|(State or Other Jurisdiction of          | (I.R.S. Employer Identification No.)
|Incorporation or Organization)           |                                     
|                                         |                                     
|Suite 1410  800 West Pender Street,     |                                     
|Vancouver, B.C.                          | V6C 2V6                             
|(Address of Principal Executive Offices) | (Zip Code)                          

(604) 689-1659(Issuers Telephone Number)

Securities registered under Section 12(b) of the Exchange
Act:None

Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $0.001 per share

Check whether the Issuer (1) filed all reports required to be
  filed by Section 13 or 15(d) of the Securities 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 []

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.
  [ x ]

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

State issuers revenues for its most recent fiscal year.
Nil

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.
$50,717,300 as at April 6, 2006

State the number of shares outstanding of each of the issuers
classes of common equity, as of the latest practicable date:29,425,750
Shares of Common Stock as at April 12, 2006

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URANERZ ENERGY CORPORATION FORM 10 -KSBTABLE
OF CONTENTS

|PART 1     |          | 3                                                                                                                    
|---------- | -------- | ---------------------------------------------------------------------------------------------------------------------
|           | ITEM 1.  | DESCRIPTION OF BUSINESS                                                                                              
|           | ITEM 2.  | DESCRIPTION OF PROPERTIES                                                                                            
|           | ITEM 3.  | LEGAL PROCEEDINGS                                                                                                    
|           | ITEM 4.  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY
      HOLDERS                                                            
|           |          |                                                                                                                      
|PART II    |          | 19                                                                                                                   
|           | ITEM 5.  | MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
      MATTERS                                                       
|           | ITEM 6.  | MANAGEMENTS DISCUSSION AND ANALYSIS
      OR PLAN OF OPERATION                                                      
|           | ITEM 7.  | FINANCIAL STATEMENTS                                                                                                 
|           | ITEM 8.  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
      ON ACCOUNTING AND FINANCIAL DISCLOSURE                           
|           | ITEM 8A  | CONTROLS AND PROCEDURES                                                                                              
|           |          |                                                                                                                      
|PART III   |          | 26                                                                                                                   
|           | ITEM 9.  | DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
      COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
|           | ITEM 10. | EXECUTIVE COMPENSATION                                                                                               
|           | ITEM 11. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                                                       
|           | ITEM 12. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                                       
|           | ITEM 13. | EXHIBITS                                                                                                             
|           | ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                                                               
|           |          |                                                                                                                      
|SIGNATURES | 40      

2

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PART 1

ITEM
1.               
DESCRIPTION OF BUSINESS

FORWARD-LOOKING STATEMENTS

The information in this Annual Report on Form 10-KSB contains
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. These forward-looking statements involve risks and uncertainties,
including statements regarding our capital needs, business plans and
expectations. Such forward-looking statements involve risks and uncertainties
regarding the market price of uranium and commodities, availability of funds,
government regulations, common share prices, operating costs, capital costs,
outcomes of ore reserve development and other factors. Forward-looking
statements are made, without limitation, in relation to operating plans,
property exploration and development, availability of funds, environmental
reclamation, operating costs and permit acquisition. Any statements contained
herein that are not statements of historical facts may be deemed to be
forward-looking statements. In some cases, you can identify forward-looking
statements by terminology such as may, will, should, expect, plan,
intend, anticipate, believe, estimate, predict, potential or
continue, the negative of such terms or other comparable terminology. Actual
events or results may differ materially. In evaluating these statements, you
should consider various factors, including the risks outlined below, and, from
time to time, in other reports we file with the SEC. These factors may cause our
actual results to differ materially from any forward-looking statement. We
disclaim any obligation to publicly update these statements, or disclose any
difference between our actual results and those reflected in these statements.
Given these uncertainties, readers are cautioned not to place undue reliance on
such forward-looking statements.

CORPORATE ORGANIZATION

We were incorporated under the laws of the State of Nevada as
Carleton Ventures Corp. on May 26, 1999. On July 5, 2005, we changed our name
from Carleton Ventures Corp. to Uranerz Energy Corporation.

INTRODUCTION

We are engaged in the acquisition, exploration and development
of uranium properties. We own interests in properties in Wyoming, USA;
Saskatchewan, Canada; and Mongolia. We have entered into joint venture
agreements for each of our Saskatchewan and Mongolia properties whereby the
joint venture partner for each property can earn an ownership interest in the
property. Our plan of operations for the next twelve months is to conduct
exploration of our mineral properties located in the State of Wyoming. We
anticipate that our joint venture partners will conduct exploration of our
Saskatchewan and Mongolian mineral properties.

We are an exploration stage company. All of our projects are
  at the exploration stage and there can be no assurance that a commercially viable
  mineral deposit, or reserve, exists on any of our properties until appropriate
  exploratory work is done and a comprehensive evaluation based on such work concludes
  legal and economic feasibility. Further exploration beyond the scope of our
  planned exploration activities will be required before a final evaluation as
  to the economic and legal feasibility of mining of any of our properties is
  determined. There is no assurance that further exploration will result in a
  final evaluation that a commercially viable mineral deposit exists on any of
  our mineral properties. We anticipate that we will require additional financing
  in order to pursue full exploration of these claims. We do not have sufficient
  financing to undertake full exploration of our mineral claims at present and
  there is no assurance that we will be able to obtain the necessary financing.
  Because of the long lead times for environmental permitting of mining operations
  in North America, we will start collecting environmental baseline data on two
  or three of our properties in Wyoming that we feel have the potential, based
  on data in our possession, of being developed into commercial in-situ leach
  uranium mines.

3

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MINERAL PROPERTIES AND PLAN OF OPERATIONS

We hold interests in the following mineral properties as
described below:

Name of Property
    LocationCochrane River Property
    Saskatchewan, CanadaEight Exploration Licenses
    MongoliaState Mineral Leases and Federal Mining
      Claims
    Wyoming, USA


Our plan of operation is for us (or our partners in case of
Canada and Mongolia) to carry out exploration on our mineral properties at the
locations indicated in the above table. Our specific exploration plan for each
of our mineral properties, together with information regarding the location and
access, history of operations, present condition and geology of each of our
properties, is presented in Item 2 of this Annual Report on Form 10-KSB under
the heading Description of Properties. Most of our exploration programs are
preliminary in nature in that their completion will not result in a
determination that our properties contain commercially exploitable quantities of
mineralization.

Our exploration program in Wyoming will be directed by our
management and will be supervised by Mr. George Hartman, our vice-president of
mining. We will engage contractors to carry out our exploration programs under
Mr. Hartmans supervision. Contractors that we plan to engage include project
geologists, drilling companies and geophysical logging companies, each according
the specific exploration program on each property. Exploration of our
Saskatchewan and Mongolian mineral properties will be undertaken by our
partners, Triex Minerals Corporation and Bluerock Resources Ltd., respectively.
Our budgets for our exploration programs are set forth in Item 2 of this Annual
Report on Form 10-KSB under the heading Description of Properties.

Our board of directors will make determinations as to whether
to proceed with the additional exploration of our Wyoming mineral properties
based on the results of the preliminary exploration that we undertake. In
completing these determinations, we will make an assessment as to whether the
results of the exploration are sufficiently positive to enable us to achieve the
financing that would be necessary for us to proceed with more advanced
exploration. On our Saskatchewan and Mongolian mineral properties our partners
are committed to certain minimum exploration expenditures over a four year
period. The management of Triex Minerals and Bluerock Resources will be
responsible for overseeing the exploration in Saskatchewan and Mongolia,
respectively, and to submit annual exploration plans to us for our review. They
are also required to submit annual reports on the results of their exploration
efforts in these two countries.

We plan to continue exploration of our mineral properties for
so long as the results of the geological exploration that we complete indicate
that further exploration of our mineral properties is warranted, and we are able
to obtain the additional financing necessary to enable us to continue
exploration. Exploration activities are subject to various national, state,
foreign and local laws and regulations in the United States, Canada, and
Mongolia. All exploration activities on our mineral properties are presently
preliminary exploration activities. Advanced exploration activities, including
the completion of drilling programs, will be necessary before we are able to
complete any feasibility studies on any of our mineral properties.

The agreements pursuant to which we acquired our interests in
  properties provide that we must make a series of cash payments over certain
  time periods, expend certain minimum amounts on the exploration of the properties,
  contribute our share of ongoing expenditures, or make annual maintenance payments
  to the governments. If we fail to make such payments or expenditures in a timely
  fashion, we may lose our interest in those properties. Further, even if we do
  complete exploration activities, we may not be able to obtain the necessary
  licenses to conduct mining operations on the properties, and thus would realize
  no benefit from our exploration activities on the properties.

4

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The business of mineral exploration and extraction involves a
  high degree of risk. Few properties that are explored are ultimately developed
  into production. At present, none of our properties has a known body of commercial
  ore. Unusual or unexpected formations, formation pressures, fires, power outages,
  labor disruptions, flooding, explosions, cave-ins, landslides and the inability
  to obtain suitable or adequate machinery, equipment or labor are other risks
  involved in extraction operations and the conduct of exploration programs. Although
  we intend to carry liability insurance with respect to our mineral exploration
  operations, we may become subject to liability for damage to life and property,
  environmental damage, cave-ins or hazards against which we cannot insure or
  against which we may elect not to insure. There are also physical risks to the
  exploration personnel working in the rugged and remote terrain of all three
  countries, often in poor climate conditions. Previous mining operations may
  have caused environmental damage at certain of our properties. It may be difficult
  or impossible to assess the extent to which such damage was caused by us or
  by the activities of previous operators, in which case, any indemnities and
  exemptions from liability may be ineffective. If any of our properties is found
  to have commercial quantities of ore, we would be subject to additional risks
  respecting any development and production activities. Most exploration projects
  do not result in the discovery of commercially mineable deposits of ore.

COMPETITION

We are a junior mineral resource exploration company. We
compete with other mineral resource exploration companies for financing and for
the acquisition of new mineral properties. Many of the mineral resource
exploration companies with whom we compete have greater financial and technical
resources than those available to us. Accordingly, these competitors may be able
to spend greater amounts on acquisitions of mineral properties of merit, on
exploration of their mineral properties and on development of their mineral
properties. In addition, they may be able to afford more geological expertise in
the targeting and exploration of mineral properties. This competition could
result in competitors having mineral properties of greater quality and interest
to prospective investors who may finance additional exploration and development.
This competition could adversely impact on our ability to achieve the financing
necessary for us to conduct further exploration of our mineral properties.

We will also compete with other junior mineral exploration
companies for financing from a limited number of investors that are prepared to
make investments in junior mineral exploration companies. The presence of
competing junior mineral exploration companies may impact on our ability to
raise additional capital in order to fund our exploration programs if investors
are of the view that investments in competitors are more attractive based on the
merit of the mineral properties under investigation and the price of the
investment offered to investors.

Competition and unforeseen limited sources of supplies in the
industry could result in occasional spot shortages of supplies, such as cement,
drilling mud, and certain equipment such as gamma ray detectors, drilling rigs,
and logging trucks that we might need to conduct exploration. In Wyoming we have
identified a drilling contractor and a logging contractor to work for us during
the 2006 field season, and our partner in Saskatchewan has been successful to
date in obtaining necessary contract services. In Mongolia, our partner is
currently attempting to secure the necessary exploration contractors. We will
continually attempt to locate products, equipment and materials as needed. If we
cannot find the products and equipment we need, we will have to suspend our
exploration plans until we do find the products and equipment we need.

GOVERNMENT REGULATIONS

Exploration and development activities are subject to various
  national, state, foreign and local laws and regulations in the United States,
  Canada and Mongolia, which govern prospecting, development, mining, production,
  exports, taxes, labor standards, occupational health, waste disposal, protection
  of the environment, mine safety, hazardous substances and other matters. We
  plan to complete our exploration programs in compliance in all material respects
  with applicable mining, health, safety and environmental statutes and the regulations
  passed thereunder in the United States, Canada and Mongolia.

5

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Mineral Property Interests

We are required to maintain our ownership interests in the
various mineral claims and leases that comprise our mineral properties in
accordance with applicable government regulation. Information regarding our
obligations is set forth in detail in this Annual Report in Item 2  Description
of Properties.

Environmental Regulation

Exploration activities are subject to various federal, state
and local laws and regulations governing protection of the environment. These
laws are continually changing and, as a general matter, are becoming more
restrictive. Changes to current local, state or federal laws and regulations in
the jurisdictions where we operate could require additional capital expenditures
and increased operating and/or reclamation costs. Although we are unable to
predict what additional legislation, if any, might be proposed or enacted,
additional regulatory requirements could render certain exploration activities
uneconomic.

EMPLOYEES

Currently we have two full-time contract employees and three
part-time contract employees. An additional full time employee is contracted to
start working for us in May 2006.

SUBSIDIARIES

As of January 9, 2006, we own one subsidiary which is a
Mongolian limited liability company with the name Rolling Hills Resources, LLC.
Six of our Mongolian exploration licenses are held in the name of our subsidiary
company. It is planned that the other two Mongolian exploration licenses, one
currently in the name or our president and one in the name of our consulting
geologist, will be transferred into our Mongolian subsidiary company within the
next two months (by the end of May 2006).

ITEM
2.               
DESCRIPTION OF PROPERTIES

We maintain our head office at Suite 1410  800 West Pender
Street, Vancouver, B.C., V6C 2V6 and an exploration office at 1701 East E
Street, Casper, Wyoming, 82601.

We currently have properties that are prospective for Uranium
mineralization located in Saskatchewan, Mongolia and Wyoming.

COCHRANE RIVER PROPERTY

1.Location and
Access

The Cochrane River property is a single contiguous block of
irregular outline, extending for approximately 62 km in a northeast-southwest
direction and approximately 15 km in a northwest-southeast direction. The centre
of the property is approximately 102< 40 W, 58< 45 N. The property
occupies portions of NTS map sheets 64 L/9, 10, 15 and 16.

The property extends to the northeast of the northern portion
  of Wollaston Lake. The closest community is the Village of Wollaston Lake which
  is located 50 km to the south. This community is served by a year-round scheduled
  air link to the cities of Saskatoon and Prince Albert in central Saskatchewan.
  A winter road (during January, February and March) links the Wollaston Lake
  community with Provincial Highway 905 (and the provincial road network) on the
  west side of Wollaston Lake.

6

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There is presently no road access to the Cochrane River
property. Numerous lakes within the property can be accessed by float- and
ski-equiped light aircraft which are available for charter at Points North
Landing (75 km to the southwest) and at the Town of La Ronge (400 km to the
south-southwest).

Property Location Map



7

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2.      Ownership Interest

Our Saskatchewan property, called the Cochrane River property
consists of two Mineral Prospecting Permits (MPP 1237 and MPP 1238) with a
combined total areal extent of 67,480 ha (166,747 acres). The property is
located in northern Saskatchewan. Ubex Capital Inc. (Ubex) filed an
application with Saskatchewan Industry and Resources (SIR) to acquire the
permits on 31st January, 2005, and certificates confirming title were
subsequently issued by SIR on 4th March, 2005. The permits are
registered in the name of Ubex Capital Inc. with 100% unencumbered ownership.

Permit application fees which were submitted by Ubex, payable
to SIR, were as follows:

For each permit, a refundable deposit of $15,000, and a
recording fee of $0.15 per hectare.

The legal description of the permits consists of a listing of
corner coordinates (NAD 27), as follows:

Permit MPP 1237

| | 1. | 102< 47 19.68 W 58< 45 00 N
| | -- | -------------------------------
| | 2. | 102< 34 58.80 W58< 40 30 N 
| | 3. | 102< 52 08.40 W 58< 30 00 N
| | 4. | 103< 00 00 W 58< 30 00 N   
| | 5. | 103< 00 00 W 58< 39 19.08 N

Permit MPP 1238

| | 1. | 102< 47 19.68 W 58< 45 00 N         
| | -- | ----------------------------------------
| | 2. | 102< 34 58.80 W 58< 40 30 N         
| | 3. | 102< 25 01.20 W58< 46 16.32 N       
| | 4. | 102< 27 52.20 W 58< 47 44.88
      N
| | 5. | 102< 15 34.20 W58< 54 11.16 N       
| | 6. | 102< 17 14.28 W 58< 55 02.64
      N
| | 7. | 102< 34 00 W58< 49 55.56 N          
| | 8. | 102< 40 22.08 W58< 48 05.94 N       

Title to MPP1237 and MPP 1238 has been sold to us by Ubex. We
have entered into a mineral property purchase agreement with Ubex dated April
26th, 2005, to acquire an undivided 100% right, title and interest in
the two mineral exploration properties. The agreement is subject to Ubex
retaining a 2% royalty. Total consideration for this acquisition consists of a
cash payment in the amount of CDN $40,756.95, which is Ubexs cost of
acquisition of the two permits. The sale of the properties to us has been
completed.

Ubex Capital Inc. is 100% owned by Dennis Higgs, one of our
directors. Ubex will retain a royalty of 2% on the property and will split the
royalty (1% each) with Darcy Higgs, Dennis Higgs brother, who is a greater than
5 % shareholder of our common stock.

On October 20, 2005 an amendment to this agreement was signed
that allows us the one time right exercisable for 90 days following completion
of a bankable feasibility study to buy up to one half (50.0%) of Ubexs royalty
interest (i.e. an amount equal to 1% Royalty) for $1,000,000 (Canadian
currency), leaving Ubex to retain not less than a 1% Royalty.

Saskatchewan mineral dispositions including permits are administered
  by SIR on behalf of the Crown of Canada in accordance with The Mineral Disposition
  Regulations, 1986. The holder of a permit is granted the exclusive right
  to explore for minerals (though not to extract, recover or produce minerals
  except for testing and scientific purposes) within the permit outline. A permit
  is valid for a period of 2 years and may not be renewed. While in compliance
  with the requirements of the regulations, a permit holder is entitled to convert
  any portion of a permit to mineral claims which may be held indefinitely. A
  claim holder may subsequently convert his claim into a mineral lease which allows
  for commercial extraction of minerals.

8

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To maintain a mineral prospecting permit in good standing, SIR
requires the filing of reports documenting acceptable exploration expenditures
of $1.25 per hectare in the first permit year, and $4.00 per hectare in the
second permit year. Reports and statements of expenditures must be filed not
later than 90 days following the permit anniversary dates.

Excess expenditures may be carried over and applied to the
following permit year and/or claim year. Annual expenditure requirements to
maintain mineral claims in good standing are $12 per hectare for the first 10
years and $25 per hectare thereafter. In the case of claims converted from
exploration permits, the deemed effective dates are the effective dates of the
permits.

After the first permit year, and subject to acceptance of the
required filing of exploration expenditures, a permit may be reduced in size to
a single block not less than 10,000 ha in size.

The deposit of $15,000 per permit is refundable to the
registered holder after the first or second permit years if acceptable
exploration expenditures have been filed. The deposit would normally be rolled
over to apply to the second permit year unless the holder elected to surrender
the permit after the first year.

In November, 2005, we signed an agreement to joint venture our
Cochrane River property located in northern Saskatchewan, Canada, with Triex
Minerals Corporation (Triex). Triex can earn a 60% interest in the Cochrane
River property by making payments to us of Cdn$75,000 and spending Cdn$1,500,000
on the property by May 1, 2008. After completing the 60% earn-in phase, Triex
can elect to earn an additional 10% interest in the project by spending an
additional Cdn$1,500,000 by November 1, 2009.

3.      History of Operations

No exploration work has been conducted by us on the Cochrane
River property. No mineralized material is known to exist.

4.      Present Condition of the
Property and Proposed Exploration Program

Our Saskatchewan mineral properties are undeveloped and do not
contain any open-pit or underground mines. There is no plant or equipment
located on our Saskatchewan mineral properties.

Since we have signed an agreement to joint venture our Cochrane
River property with Triex Minerals Corporation, Triex will be the operator of
the exploration programs for this joint venture. Any exploration undertaken by
Triex will be at its expense under the terms of the joint venture agreement.
There is no assurance that Triex will make the cash payments or undertake the
full amount of the exploration expenditures necessary for it to earn an interest
in our Saskatchewan properties.

A compilation and analysis of prior exploration was prepared by
Robertshaw Geophysics Ltd. of Saskatoon, Saskatchewan. Previous exploration on
the Cochrane River property has identified several electromagnetic conductors.
As of January 2006, Triex has completed a detailed airborne geophysics survey on
the Cochrane River properties. Fugro Airborne Surveys completed helicopter-borne
DIGHEM V geophysical surveys (EM and magnetic) over four grids on the Cochrane
River property for a total of 1,949 line kilometres. All the grids were flown at
100 metre line spacing to produce high resolution data. The grid areas covered
major boundary zones on regional airborne magnetic maps, and on the location of
known mineral occurrences, geochemical anomalies and previously defined
conductors.

Follow-up with ground geophysics will be considered for the end
  of this winter season pending complete processing and interpretation of data
  and integration with regional data sets. A follow-up exploration program including
  prospecting, mapping and geochemistry, as well as ground-based geophysics, is
  anticipated for the summer field season.

9

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5.Geology

The property is underlain by highly deformed Paleoproterozoic
Wollaston Group metasediments and Archean age granites which form part of a 60
km wide, northeast trending fold-thrust belt known as the Wollaston Domain. The
Cochrane River property is located within the western portion of the Wollaston
Domain where the metasediments contain abundant graphitic horizons.

The Athabasca Basin, which extends for some 425 km east-west x
220 km north-south, hosts several world class uranium deposits (McArthur River,
Cigar Lake, Key Lake, and others). These deposits occur at and around the
contact between western Wollaston Group metasediments and overlying Athabasca
Group sandstone units and are generally termed unconformity-type deposits.
Although much of the uranium ore is generally hosted by the overlying Athabasca
Group sandstones, significant uranium mineralization commonly extends vertically
beneath into the Wollaston Group rocks. This is particularly evident at the
McArthur River deposit, where the majority of the uranium ore and the highest
grades of mineralization occur in the underlying basement rocks.

The Athabasca Group sandstone rocks are approximately 1.7
billion years in age, and there is evidence that these rocks were once thicker
(by probably 2 km or more) and much more extensive in area. The Cochrane River
property may have been overlain by Athabasca Group sandstones for a significant
portion of its geological history. Unconformity-type uranium deposits could have
formed within the property at that time. Although now eroded to below the level
of Athabasca Group coverage, any underlying basement-hosted or root zones of
mineralization should be preserved. These are the targets of the present
exploration program at the Cochrane River property.

Faults, particularly the common northeast-oriented strike slip
faults of this region, tend to be localized within the soft, graphitic horizons
of the Wollaston Group sediments, particularly where adjacent to relatively
rigid basement units such as Archean granites. Fault movements, particularly
strike-slip movements, enhance the electrical conductivity of graphitic horizons
by aligning the graphite grains and promoting electrical continuity. Reactivated
basement faults also provide enhanced fluid permeability in the basement which
facilitates fluid flow and mixing which are thought to be key components in the
formation of the uranium deposits of the Athabasca Basin region. Thus, faults
and particularly graphitic conductors are commonly sought as exploration targets
for uranium mineralization. Graphitic conductor horizons which are in close
proximity to Archean granite bodies are thought to be particularly favorable.

MONGOLIA

1.Location and
Access

Our eight exploration licenses in Mongolia are spread out across
  the country into four regional areas that we call the North Gobi Project, the
  East Gobi Tamtsag Project, the Central Gobi Project, and the West Central Highland
  Project. A tabulation of the eight licenses is presented below that includes
  location coordinates. A location map follows the table. Generally speaking,
  access to all eight licenses is by vehicles departing from the capital city
  of Ulaan Baatar. Roads, except in the immediate vicinity of Ulaan Baatar, are
  unimproved dirt/gravel and often just two track. Four wheel drive vehicles are
  the standard means of travel by western field crews on the Mongolian road system.
  Access to the capital city of Ulaan Baatar from outside of the country is by
  commercial air.

10

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Table of Mongolian Licenses

No.
    LicenseNo
    Name Of licence
    Coordinates
    Aimag* and Soum
      (Province)
    Area (Hectares)1
    **8560X**
    Ulaankhush uu
      (Khavtsal)
    109 01 20 10911 20 109
      11 20 109 01 20
    45 34 10 45 34 10 45 27
      30 45 27 30
    DG
      (Airag)
    160912
    10166X
    Ovor bel
    116 01 00 116 19 00 116
      19 00 116 01 00
    47 20 10 47 20 1046 50
      30 46 50 30
    DO Matad
    1245273
    10167X
    Tasarkhai
    115 30 00 116 00 00 116
      00 00 115 30 00
    47 00 00 47 00 0046 54
      00 46 54 00
    DO Matad
    423254
    10165X
    Khudgiin us
    109 20 00 109 29
      50 109 29 50 109 20 00
    45 42 40 45 42 40
      45 40 00 45 40 00
    DG
      Airag
    63085
    10168X
    Khartolgoi
    105 05 00 105 25
      00 105 25 00 105 05 00
    45 00 00 45 00 00
      44 51 30 44 51 30
    DU
      *Khuld,* Delger khangai
    414306
    10169X
    Chuluut
    105 55 00 106 08
      00 106 08 00 106 05 40 106 05 40 106 08 00 106 08 00
      105 55 00
    45 00 00 45 00 00
      44 58 50 44 58 50 44 56 40 44 56 40 44 47 00 44 47
      00
    DU
      Khuld, Olziit
    399877
    10241X
    Chuluut
    100 27 00 100 30
      00 100 30 00100 36 00 100 36 00 100 27 00
    48 17 00 48 17 00
      48 17 10 48 17 10 48 11 30 48 11 30
    AR
      *Ondor* ulaan, Tariat
    115898
    10315X
    Tolgod
    109 00 00 109 05
      20109 05 20 109 00 00
    45 54 00 45 54 00
      45 52 00 45 52 00
    DG
      Dalan jargalan
    2558


DG  Dornogobi, DU  Dundgobi, AR  Arkhangai, DO  Dornod

11

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Location Map of the Uranerz Mongolian Exploration Licenses



Khavtsal Location Map



12

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The Khavtsal property (license no. 8560X), our most advanced
exploration property in Mongolia, is 321 kilometers south-southeast of Ulaan
Baatar, the capital city of Mongolia in the Dornogovi province and Armag sub
province. The approximate geographic center of the property is at 45°3242 and
109°0708. Access to the property is by surfaced and undeveloped roads that
head southerly from Ulaan Baatar. These roads parallel the main railway between
Ulaan Baatar and southern Mongolia. The property is 30 kilometers south from the
station Khar Armag along this railway.

License numbers 10168X and 10169X are located 108km southwest
and 80km southwest respectively from the city of Mandalgobi in the Dungovi
province of Mongolia. Access is by primary improved and secondary roads.

License numbers 10165X and 10315X are located 108km southeast
from the city of Sumber in the Dornogovi province of Mongolia. Access is
provided by primary and secondary roads that parallel the central Mongolia
railway between the capital of Ulaan Baatar and the border with China to the
south.

License number 10241X is within an area known as Chuluut,
approximately 102km northwest of the city of Tsetserleg in the province of
Arhangav of Mongolia.

License numbers 10167X and 10166X are located 139km and 145km
southeast respectively southeast of Choibalsan. Access is by primary and
secondary roads.

**2.****Ownership Interest**

In May 2005, Glenn Catchpole, our president, acquired a 100%
interest in the Khavtsal property through a purchase of an exploration license
legally recorded and transferred in accordance with the Mongolian Mining Law.
The Khavtsal property is recorded at the OGMC by license number #8560X and
covers 16,091 hectares.

Mongolia allows for the application of a mineral exploration
license through the Office of Geological and Mining Cadastre Office (OGMC), an
agency of the Mineral Resource Authority of Mongolia. Exclusive rights to
explore are granted to individuals or companies, subject to approval of a
correctly submitted license application and exploration conducted in compliance
with specified mineral law.

Glenn Catchpole entered into a purchase agreement, subject to
due diligence and confirmation of title, to purchase a 100% interest in the
Khavtsal project including the historical files of data on past work on the
project, and commissions, for a total purchase price of $105,945. No additional
payments or work commitments will be required subsequent to closing of the sale.
The permit is recorded in the name of Glenn Catchpole because we had not set up
a Mongolian corporation at the time the transaction was negotiated. Glenn
Catchpole has not provided us with a signed or executed bill of sale in our
favor. However, it is intended that he will transfer ownership of the property
to our subsidiary corporation, Rolling Hills Resources, during his next trip to
Mongolia in April 2006.

The exploration license currently held by our consulting
geologist, Dr. Tumenbayar, is license number 10315X. It is also intended that
this license will be transferred into Rolling Hills Resources in the near
future. There is no known previous exploration for uranium on this license
area.

The legal status of exploration licenses are maintained by the
payment of $0.10 per hectare in annual fees (for the second and third years) on
or before the anniversary dates of the issuance of the licenses, and by
submitting exploration plans and reports annually.

We will maintain all our exploration licenses in good standing
  by paying the annual license fees on or before the license issuance anniversary
  dates, and by filing suitable exploration plans and reports to the OGMC of Mongolia.
  Exploration Licenses may be held for seven years during which the exclusive
  right to obtain a mining license within the boundary of the license is held
  by the owner.

13

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3.      History of Operations

In late September and early October of 2005 we had two contract
geologists visit the properties covered by four of our exploration licenses
(8560X, 10315X, 10165X & 10241X), and perform a limited amount of surface
exploration. No other exploration by Uranerz has occurred on our eight
exploration licenses up to this point in time. With the exception of the
Khavtsal license (8560X) discussed below, we do not have in our possession any
prior geologic information on our Mongolian exploration licenses except that of
a general nature discussed below.

Previous occupiers of the Khavstal property have conducted some
exploration activity. A summary report on file at the Geologic Information
Center within the offices of the Mineral Resource Authority of Mongolia (MRAM)
provides the following summary of exploration work completed on the Khavtsal
property:

|1. | Geologic and radiometric exploration.                                   
|-- | ------------------------------------------------------------------------
|2. | Gamma Spectrometry Mapping.                                             
|3. | Surface trenching totaling 3046m3                                       
|4. | Drilling totaling 1808 meters (44 holes
  estimated)                    
|5. | Channel sampling of 43.25 meters                                        
|6. | Rock sampling totaling 625 samples                                      
|7. | Magnetic Survey at 100m by 20m stations over
      12.4km2              
|8. | Electric (geophysical) profiles on 100m by 20m stations
      over 10km2

The Khavtsal property was the subject of historic work
completed and reported on by the Russian-Mongolian Survey in 1987.

Exploration on Khavtsal was conducted by the Russian-Mongolian
Geologic Survey. This work consisted of an airborne gamma spectrometry survey in
1981 that identified a significant anomaly and the work described above that was
conducted in 1987. No other exploration work is recorded in information acquired
by us.

We have acquired two Russian-Mongolian Survey reports from the
Geologic Information Center in the offices of the Mineral Resource Authority of
Mongolia. Translations and additional data searches are being provided to us by
a Mongolian consultant based in Ulaan Baatar, Mongolia.

We have not completed any exploration work on the other seven
properties except as noted above. All our licenses fall within areas that the
Russian-Mongolian Survey completed airborne radiometric surveys during regional
uranium exploration in the 1980s. Some properties will have summary reports on
file at the Geologic Information Center within the offices of the Mineral
Resource Authority of Mongolia (MRAM). These reports will be researched to
determine the extent of ground work completed by the Russian-Mongolian survey in
following up selected radiometric anomalies that may fall on our license areas.
The license acquisitions are for the purpose of uranium exploration and do not
have proven reserves. Some of the licenses may have limited
drill-indicated or trench-sampled uranium mineralization suggesting favorable
exploration potential but this is not yet substantiated by a thorough review of
data files and reports at the Geologic Information Center of MRAM or other
sources.

Exploration work on these seven license areas in some cases is
limited to airborne radiometric surveys conducted by the Russian-Mongolian
Geologic Survey. The extent of other ground work conducted, if any, is still
under review by us.

We have acquired only very preliminary summaries (brief translations)
  of Russian-Mongolian Survey reports from the Geologic Information Center in
  the offices of the Mineral Resource Authority of Mongolia that may have information
  useful for exploring on our license areas. Most of these reports are of a general
  nature, and regional studies are not necessarily property specific. Translations
  and additional data searches are being provided to us by a Mongolian geologic
  consultant based in Ulaan Baatar, Mongolia.

14

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4.      Present Condition of the
Property and Current State of Exploration

Our Mongolian mineral properties are undeveloped and do not
contain any open-pit or underground mines. There is no plant or equipment
located on our Mongolian mineral properties.

Subsequent to the year end we signed a letter agreement to
joint venture our eight Mongolian exploration licenses with Bluerock Resources
Ltd. (Bluerock). Under the terms of the agreement, which is subject to
approval by the TSX Venture Exchange (Canada), Bluerock is to issue 150,000
Bluerock Resources Ltd. shares to Uranerz and make cash payments of $205,000
over a four-year earn-in period. Bluerock has the option to earn a 55% interest
in these projects by spending $3,000,000 on the properties over four years. The
required cash payments and exploration expenditures required in order to enable
Bluerock to acquire a 55% interest are summarized as follows:

| | (a) | Cash and Shares Consideration
| | --- | -----------------------------
| |     |                              
| |     | (i)                          
| |     | (ii)                         
| |     | (ii)                         
| |     | (iii)                        
| |     | (iv)                         
| |     | (v)                          
| |     |                              
| | (b) | Expenditures as follows:     
| |     |                              
| |     | (i)                          
| |     | (ii)                         
| |     | (iii)                        
| |     | (iv)                         

The work program during this period will be managed by
Bluerock. Uranerz retains the right to earn back 6% of the joint venture by
spending US $300,000, at which time a Joint Venture would be formed with Uranerz
holding 51% and Bluerock holding 49%.

The joint venturing of the exploration of these Mongolian
projects will allow Uranerz to focus on its Wyoming projects.

Bluerock expects to focus an aggressive drilling and trenching
campaign on the Khavtsal Property, while conducting more reconnaissance level
work on the other seven licenses. It is hoped that the drilling and trenching
campaign will validate the historical work and give a clearer view of the
economic potential of the Khavtsal project. The exploration team will consist of
both Bluerock and Uranerz employees and consultants, combining the strengths of
both companies to deliver an effective and efficient exploration program. Any
exploration undertaken by Bluerock will be at its expense under the terms of the
joint venture agreement. There is no assurance that Bluerock will make the cash
payments or undertake the full amount of the exploration expenditures necessary
for it to earn an interest in our Mongolian properties.

Exploration license fees are established by law and paid
annually on or before the anniversary of license issue as:

|Per hectare: | $0.05 for the first year, and $0.10 for each of
      the second and third years.
|------------ | ---------------------------------------------------------------------------------
|Per hectare: | $1.00 for each of the fourth and fifth year of
      the license.                
|Per hectare: | each of the sixth and seventh year of the
      license.                         

15

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5.      Geology

Khavtsal is one of approximately sixty significant
sediment-hosted uranium occurrences identified and explored by the
Russian-Mongolian Survey during the 1980s. The local geologic setting is
referred to as the Ulaan Nuur depression. Uranium occurs within a sedimentary
sequence that includes significant amounts of organic and carbonaceous material.

The geology of the area includes a basement of Proterozoic to
Paleozoic metamorphic igneous rocks that are covered by Jurassic basalts and
quartz-porphyries. This sequence of Jurassic igneous rocks is covered by Upper
Jurassic and Lower Cretaceous conglomerates and sandstones which are covered by
young alluvial deposits.

All of our license areas have prospective characteristics that
indicate favorability for hosting sediment-hosted, near-surface uranium deposits
including a proximity to known sandstone-hosted uranium occurrences as
identified by Russian-Mongolian survey work, radiometric anomalies and/or
favorable geology. The licenses fall within areas surface mapped as or inferred
to contain Upper Jurassic to Lower Cretaceous sedimentary sequences, and
generally occur within basins framed by uplands comprised of crystalline rocks
likely to provide a source for secondary transport of uranium into the basin by
groundwater flow. These geologic setting in Mongolia have demonstrated uranium
deposit potential by comparison to known deposit occurrences. Similar geologic
settings in China, the Commonwealth of Independent States (CIS) and Russia,
countries surrounding Mongolia, have demonstrated economic uranium production as
well.

WYOMING

1.      Location and Access

WyomingState Mineral Leases

We have applied for and received approval from the State of
Wyoming for the 16 mineral leases covering 14,200 surface acres. Seven of these
leases are located in the Power River Basin and nine are located in the northern
part of an area generally referred to as the Great Divide Basin (or Red Desert).
There are 31 separate parcels of land on these 16 state mineral leases.

The fee for the applications is a flat $25 per application plus
$1 per acre for the first year rental making the total $665 per state section.
The total amount paid for leasing of the seventeen plus sections is $11,530. The
owner of a mineral lease on state land has the right to explore for and extract
any solid mineral lying on or below the surface of the land.

The above mentioned state mineral leases are in the name of
either Glenn J. Catchpole, our President, or George J. Hartman, our
Vice-President, Mining or Uranerz Energy Corporation. The leases that are in the
name of our President or Vice-President are held in trust for us. We expect that
legal title to these leases will be transferred to us in the near future.

Wyoming Mining Claims (federal mineral)

We have staked 198 federal lode mining claims on federal and
private surface lands in the state of Wyoming where the mineral rights are owned
by the federal government. In general, the claim staking is either in the Powder
River Basin or the northern Great Divide Basin. We have staked 198 individual
mining claims covering approximately 2,025 hectares (5,000 acres) and they have
been recorded with the county and federal governments. It is our objective to
purchase additional mineral claims and fee minerals directly from current
private owners during the next twelve months, although there is no assurance
that any acquisitions will be completed.

A typical claim will have the dimensions of 1,500 feet by 600
  feet and approximately 20 acres in size. The county fee for filing a mineral
  claim varies between counties but is typically about $8 per claim. The federal
  fee for filing

16

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a mineral claim is $35 per claim. The applications for the
above mentioned mineral claims will be made in our corporate name.

In addition to the 198 federal mining claims mentioned above,
we have acquired through purchase or agreement from third parties the rights to
54 additional federal mining claims, all located within the Powder Basin of
Wyoming. This brings our total claim holdings in Wyoming at this time to 252
claims.

2. **Ownership
Interest**

Wyoming State Mineral Leases

The annual rental fee is $1 per acre for the first five years,
and $2 per acre for years six through ten. If any uranium is produced from these
state leases a mineral royalty will have to be paid to the State of Wyoming.
There are no minimum annual work requirements. The owner of the mineral lease
must conduct his activities in a manner that is consistent with all applicable
environmental laws and regulations.

Wyoming Mining Claims (federal mineral)

The annual maintenance fee is $125 per claim payable to the
federal Bureau of Land Management. There are no minimum annual work
requirements. The owner of the mineral claim must conduct his activities in a
manner that is consistent with all applicable environmental laws and
regulations.

3.      History of Operations

Wyoming State Mineral Leases

No exploration work has taken place by us on any of our state
mineral leases.

Wyoming Mining claims (federal mineral)

No exploration work has taken place by us on any of the lands
we have staked. On most of the lands where we are staking the property reflects
previous exploration work

4.      Present Condition of the
Property and Proposed Exploration Program

Our Wyoming mineral properties are undeveloped and do not
contain any open-pit or underground mines. There is no plant or equipment
located on our Wyoming mineral properties.

Wyoming State Mineral Leases

Our plan of operations for exploration of our Wyoming state
mineral leases is generally as follows:

Year 1  obtain all possible existing geologic information and
evaluate the information. Describe surface geology. Review all available
regional information and information that may be available from neighbors.
Identify those state leases with best potential and design exploration programs
that may include some drilling. Prepare summary geologic report on each state
section for management.

Year 2  conduct either exploration by surface sampling and/or
exploration by drilling on those state leases identified as having the best
potential. Evaluate the results of the drilling program and prepare summary
reports for management. At the end of the year drop those state leases that have
been identified as having low potential. Design exploration drilling programs
for the next year on those state leases continuing to show significant uranium
potential.

Year 3  conduct exploration drilling program on the state
  leases with best potential. Evaluate results of the drilling program. At end
  of the year drop any of the state leases that have been identified from the
  drilling to have low potential. Prepare summary report for management including
  an assessment of mineralization and recommendations for development using in-situ
  leach mining.

17

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Our budget for exploration of our Wyoming state mineral leases
  is generally as follows:

Year 1 - $10,000 (2006)Year 2 - $100,000 (2007)Year 3 - $200,000 (2008)


Wyoming Mining Claims (federal mineral)

Our plan of operations for exploration of our Wyoming federal
mining claims is generally as follows:

Year 1  obtain all possible existing geologic information and
evaluate the information. Describe surface geology. Review all available
regional information and information that may be available from neighbors.
Identify those claim areas with best potential and design exploration programs
that include some drilling. Prepare summary geologic report on each mining
claim.

Year 2  conduct exploration by drilling on those claim areas
identified as having the best potential. Evaluate the results of the drilling
program and prepare summary reports for management including reserve
calculations where appropriate. At the end of the year drop those claims that
have been identified as having low potential. Design exploration drilling
programs for the next year on those areas continuing to show significant uranium
potential.

Year 3  conduct exploration drilling program on the claims
with best potential. Evaluate results of the drilling program. At end of the
year drop any of the claims that been identified from the drilling to have low
potential. Prepare summary report for management including an assessment of
mineralization and recommendations for development using ISL mining.

Our budget for exploration of our Wyoming federal mining claims
is generally as follows:

Year 1 - $200,000 (2006)Year 2 - $400,000 (2007)Year 3 - $400,000 (2008)


5.      Geology

Wyoming State Mineral Leases

We do not have detailed geology on any of our state mineral
leases. In general, we have applied for state leases located in sandstone basins
of Cretaceous or Tertiary age with known uranium mineralization.

Wyoming Mining claims (federal mineral)

We do have some geologic information on most of the mining
claims we have staked or acquired or are currently being staked. In general, we
are staking claims on ground located in sandstone basins of Cretaceous or
Tertiary age with known uranium mineralization.

In 2005 we acquired a total of 54 contiguous federal mining claims
  in located in Wyoming in the Powder River Basin from two private parties. We
  have geologic information on some of these claims in the form of a geologic
  drill hole map with grade and thickness information and, in some cases, drill
  logs. This information is under review by our geologic consultants.

18

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ITEM
3.               
LEGAL PROCEEDINGS

There are no material pending legal proceedings to which the
Company or any of its subsidiaries is a party or to which any of their property
is subject.

ITEM
4.               
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

During this period covered by the Form 10-KSB, the Company did
not submit any matters to the Companys security holders to be voted upon.

PART II

ITEM
5.               
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market Information

The Company began trading May 6, 2004 on the OTC BB and now
trades under the symbol URNZ. The following table lists the high and low bid and
closing sales prices of the Companys common shares for the last eight fiscal
quarters:

For the Period Ending
    High
    Low
    Close12/31/05
    $1.36
    $0.84
    $1.1009/30/05
    $1.79
    $0.55
    $1.3606/30/05
    $1.05
    $0.50
    $1.0503/31/05
    $1.20
    $0.51
    $0.5112/31/04
    -0-
    -0-
    -0-09/30/04
    -0-
    -0-
    -0-06/30/04
    $0.10
    $0.10
    $0.10


The source of the high and low bid information is the NASD OTC
Bulletin Board. The market quotations provided reflect inter-dealer prices,
without retail mark-up, markdown or commission and may not represent actual
transactions.

Holders of Our Common Stock

As February 3, 2006 there were 120 registered shareholders of
the Companys common stock. As of February 12, 2006 there were an additional
1,158 beneficial shareholders with their shares held in banks and brokerage
accounts.

Dividends

There are no restrictions in our articles of incorporation or
bylaws that prevent us from declaring dividends. The Nevada Revised Statutes,
however, do prohibit us from declaring dividends where, after giving effect to
the distribution of the dividend:

| | 1. | We would not be able to pay our debts as they become due
      in the usual course of business; or
| | -- | --------------------------------------------------------------------------------------------------

19

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| | 2. | Our total assets would be less than the sum of our total
      liabilities plus the amount that would be needed to satisfy the rights of
      shareholders who have preferential rights superior to those receiving the
      distribution.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We have not declared any dividends and we do not plan to
declare any dividends in the foreseeable future.

Recent Sales of Unregistered Securities

We have reported sales of securities without registration under
the Securities Act of 1933 during our fiscal year ended December 31, 2005 on the
following Quarterly Reports on Form 10-QSB and Current Reports on Form 8-K that
we have filed with the Securities and Exchange Commission.

Report
    Date of Filing with SECCurrent Report on Form 8-K
    April 21, 2005Current Report on Form 8-K
    September 9, 2005Current Report on Form 8-K
    October 18, 2005Current Report on Form 8-K
    November 21, 2005


We have not completed any sales of securities without
registration pursuant to the Securities Act of 1933 during the fiscal year ended
December 31, 2005 that were not reported on the Current Reports on Form 8-K
described above.

ITEM
6.               
MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

PLAN OF OPERATIONS

Our plan of operations for the next twelve months is to
continue with exploration of our Wyoming properties while our joint venture
partners carry out exploration activities in Saskatchewan and Mongolia under the
terms of the joint venture agreements. Our planned geological exploration
programs are described in Item 2 of this Annual Report on Form 10-KSB entitled
Description of Properties. Our planned exploration expenditures for the next
twelve months on our Wyoming mineral properties, together with amounts due to
maintain our interest in these federal claims and state leases, are summarized
as follow:

Property
    Planned Exploration Program
      Expenditures for the Next Twelve Months:
    Amount of Annual Claim/Lease
      Maintenance Fees due;
    Amount of Property Payment
      Due:Powder River Basin
    $200,000
    $32,180
    $30,000Great Divide Basin
    $10,000
    $13,520
    $Nil


In addition to our planned exploration expenditures, we
anticipate spending approximately $95,000 in ongoing general and administrative
expenses per month for the next twelve months, for total anticipated
expenditures $1,425,700. over the next twelve months. The general and
administrative expenses for the year will consist primarily of salaries for our
senior officers, consulting fees, and professional fees for the audit and legal
work relating to our regulatory filings throughout the year, as well as transfer
agent fees and general office expenses.

We had cash in the amount of $1,925,021 and a working capital
  in the amount of $1,775,579 as of December 31, 2005. Subsequent to December
  31, 2005, we completed a private placement financing for gross proceeds of $7,245,000.
  Accordingly, we have sufficient financing with which to pursue our plan of operations
  over the next twelve months.

20

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During the twelve month period following the date of this annual
  report, we anticipate that we will not generate any revenues. We anticipate
  that any additional funding will be in the form of equity financing from the
  sale of our common stock. There is no assurance that we will be able to achieve
  additional sales of our common stock.

Our exploration and development plans will be continually evaluated
  and modified as exploration and environmental results become available. Modifications
  to our plans will be based on many factors, including: results of exploration,
  assessment of data, weather conditions, exploration costs, the price of uranium
  and available capital. Further, the extent of our exploration programs that
  we undertake will be dependent upon the amount of financing available to us.

RESULTS OF OPERATIONS

Our general and administrative and our exploration expenditures
increased substantially to $4,482,133 for fiscal 2005 compared to $18,227 for
fiscal 2004, resulting in a significantly increased loss for fiscal 2005. Our
loss for fiscal 2005 increased to $5,002,225 or $0.38 per share, compared to
$20,096, or $0.00 per share in fiscal 2004. These increases are attributable
largely to our acquisition of mineral properties which were initially
capitalized and then fully impaired during fiscal 2005, our increased
exploration activities during fiscal 2005, as described in detail in Item 2 of
this Annual Report on Form 10-KSB entitled Description of Properties, and a
stock compensation expense in the amount of $3,808,975. We anticipate that our
exploration expenses will continue to increase throughout the 2006 fiscal year
in comparison with 2005 as a result of our planned exploration activities and as
a result of payments required to maintain our interests in our mineral
properties. In addition, we anticipate continued increased professional fees as
we comply with our obligations as a reporting company under the Securities
Exchange Act of 1934. We anticipate that we will not earn any revenues during
the current fiscal year or in the foreseeable future as we are presently engaged
in the exploration of our mineral properties.

LIQUIDITY AND CAPITAL RESOURCES

Our cash position at December 31, 2005 was $1,925,021 compared
to $7,470 as of December 31. 2004. We had working capital of $1,775,579 as of
December 31, 2005 compared to a working capital deficit of $57,631 as of
December 31, 2004.

Plan of Operations

We estimate that our total expenditures over the next twelve
months will be approximately $1,425,700 as outlined above under the heading
Plan of Operations. We intend to focus most of our exploration efforts on our
Wyoming leases.

If we are unable to achieve the necessary additional financing,
then we plan to reduce the amounts that we spend on our exploration and
development activities and administrative expenses in order to be within the
amount of capital resources that are available to us. Specifically, we
anticipate that we would defer drilling programs pending our obtaining
additional financing. Given our plan to scale back our operations if we do not
achieve additional financing, we anticipate that our current cash and working
capital will be sufficient to enable us to sustain our operations and our
interests in our mineral properties for the next twelve months.

Subsequent to the year end, we completed a private placement
  financing for gross proceeds of $7,245,000. The private placement financing
  was comprised of an aggregate of 7,245,000 units at a price of $1.00 per unit
  to an aggregate of 134 purchasers. Each unit is comprised of one share of our
  common stock and one-half share purchase warrant. Each full warrant entitles
  the holder to purchase one additional share of our common stock for a period
  of two years from the date of issue at an exercise price of $1.75 per share
  in the first year and at an exercise price of $2.50 in the second year. We paid
  a commission equal to 7.5% on a portion of the funds raised from the sale of
  the units.

21

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April 15, 2005 Private Placement Financing

We completed a private placement financing in April, 2005 for gross proceeds of $695,950.  The private placement financing was comprised of an aggregate of 6,959,500 shares at a price of $0.10 per share to an aggregate of 21 purchasers.

October 17, 2005 Private Placement Financing

We completed a private placement financing in October, 2005 for gross proceeds of $2,098,000.  The private placement financing was comprised of an aggregate of 5,245,000 units at a price of $0.40 per unit to an aggregate of 81 purchasers.
Each unit was comprised of one share of our common stock and one-half share purchase warrant. Each full warrant entitles the holder to purchase one additional share of our common stock at an exercise price of $0.60 per share for a period of one
year from the date of issue.

November 17, 2005 Private Placement Financing

We completed a private placement financing in November, 2005 for gross proceeds of $70,000. The private placement financing was comprised of an aggregate of 175,000 units at a price of $0.40 per unit to an aggregate of 2 purchasers. Each
unit was comprised of one share of our common stock and one-half share purchase warrant. Each full warrant entitles the holder to purchase one additional share of our common stock at an exercise price of $0.60 per share for a period of one year
from the date of issue.

Issuance of Shares to Directors, Officers and Advisory Board Members

On August 31, 2005, the Company issued 3,775,000 shares of common stock at $0.001 per share as compensation to directors, officers and members of the Companys Advisory Board. The Company received cash proceeds of $3,775, and recorded
stock-based compensation of $3,808,975 based on the fair value of the shares issued.

Going Concern

Our financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has never generated revenues since
inception and has never paid any dividends and is unlikely to pay dividends or generate earnings in the immediate or foreseeable future. The continuation of the Company as a going concern is dependent upon the continued financial support from its
shareholders, the ability of the Company to obtain necessary equity financing to continue operations and to determine the existence, discovery and successful exploitation of economically recoverable reserves in its resource properties, confirmation
of the Companys interests in the underlying properties, and the attainment of profitable operations. As at December 31, 2005, the Company has working capital of $1,775,579, and has accumulated losses of $5,150,531 since inception.
These factors raise substantial doubt regarding the Companys ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and
classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Future Financings

We may require additional financing in order to proceed with the exploration and development of our mineral properties. We plan to complete private placement sales of our common stock in order to raise the funds necessary to pursue our plan of
operations and to fund our working capital. Issuances of additional shares will result in dilution to our existing shareholders. There is no assurance that we will be successful in completing any private placement financings.

Off-Balance Sheet Arrangements

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

22

---

CRITICAL ACCOUNTING POLICIES

Mineral Property Costs

We have been in the exploration stage since our formation on May 26, 1999 and have not yet realized any revenues from our planned operations. We are primarily engaged in the acquisition and exploration of mining properties. Mineral property
exploration costs are expensed as incurred. Mineral property acquisition costs are initially capitalized when incurred using the guidance in EITF 04-02, Whether Mineral Rights Are Tangible or Intangible Assets. We assess the
carrying costs for impairment under SFAS 144, Accounting for Impairment or Disposal of Long Lived Assets at each fiscal quarter end. Payments received from options for mineral properties are applied against mineral property costs.
When we have been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs incurred to develop such property, are capitalized. Such costs will be amortized using the
units-of-production method over the estimated life of the probable reserve. If mineral properties are subsequently abandoned or impaired, any capitalized costs will be charged to operations.

Stock-based Compensation

We record stock-based compensation in accordance with SFAS
  No. 123, Accounting for Stock-Based Compensation. All transactions
  in which goods or services are provided to us in exchange for the issuance of
  equity instruments are accounted for based on the fair value of the consideration
  received or the fair value of the equity instrument issued, whichever is more
  reliably measurable. Equity instruments issued to employees and the cost of
  the services received as consideration are measured and recognized based on
  the fair value of the equity instruments issued. Weadopted a Stock Option
  Plan dated November 7, 2005 under which we are authorized to grant options to
  acquire up to a total of 10,000,000 shares of common stock. As at December 31,
  2005, no options had been granted. Stock options have been granted subsequent
  to December 31, 2005.

23

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ITEM
7.               
FINANCIAL STATEMENTS

Our audited financial statements, as set forth below, are
included with this Annual Report on Form 10-KSB.

PAGEReport of Independent Registered Public Accounting Firm
      F-1Balance
      Sheets, December 31, 2005 and 2004
    F-3Statements of Operations for the years ended December 31,
          2005 and 2004 and for the period from inception (May 26, 1999) to December
          31, 2005
    F-4Statements of Cash Flows for the years ended December 31,
          2005 and 2004 and for the period from inception (May 26, 1999) to December
          31, 2005
    F-5Statements of Stockholders Equity for the period
          from inception (May 26, 1999) to December 31, 2005
    F-6Notes
      to Financial Statements
    F-7 24


---

Uranerz Energy Corporation (formerly Carleton Ventures
Corporation) (An Exploration Stage Company) Notes to the Financial
Statements September 30, 2005 (Expressed in US dollars)



Report of Independent Registered Public Accounting Firm

To the Directors and StockholdersUranerz Energy Corporation
(formerly Carleton Ventures Corp.) (An Exploration Stage Company)

We have audited the accompanying balance sheet of Uranerz
Energy Corporation (formerly Carleton Ventures Corp.) as of December 31, 2005,
and the related statements of operations, cash flows and stockholders' equity
for the year 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 audit. The accompanying balance sheet of
Uranerz Energy Corporation as of December 31, 2004 and the related statements of
operations, cash flows and stockholders' deficit for the year then ended and
accumulated for the period from May 26, 1999 (Date of Inception) to December 31,
2004, were audited by other auditors in their report dated March 18, 2005. Those
auditors expressed an unqualified opinion on those financial statements and
included an explanatory paragraph describing the substantial doubt about the
Company's ability to continue as a going concern.

We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
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
audit provides 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 Uranerz
Energy Corporation as of December 31, 2005, and the results of its operations
and its cash flows for the year then ended in conformity with accounting
principles generally accepted in the United States.

The accompanying financial statements have been prepared
assuming the Company will continue as a going concern. As discussed in Note 1 to
the financial statements, the Company has not generated any revenue and has
incurred significant operating losses since inception. These factors raise
substantial doubt about the Companys ability to continue as a going concern.
Managements plans in regard to these matters are also discussed in Note 1. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.

/s/ Manning Elliott LLP

CHARTERED ACCOUNTANTS

Vancouver, Canada

March 23, 2006

F-1

---



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Directors of Carleton Ventures
Corp. (An exploration stage company)

We have audited the accompanying balance sheet of Carleton
Ventures Corp. (an exploration stage company) as at December 31, 2004 and the
related statements of operations, cash flows, and stockholders deficiency for
the year ended December 31, 2004, and for the cumulative period from May 26,
1999 (date of inception) to December 31, 2004. 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 audit.

We conducted our audit 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
audit provides a reasonable basis for our opinion.

In our opinion, these financial statements present fairly, in
all material respects, the financial position of the Company as at December 31,
2004 and the results of its operations and its cash flows for the periods
indicated in conformity with United States generally accepted accounting
principles.

The accompanying financial statements have been prepared
assuming the Company will continue as a going concern. As discussed in Note 1 to
the financial statements, the Company incurred a net loss of $148,306 since
inception, has not attained profitable operations and is dependent upon
obtaining adequate financing to fulfil its exploration activities. These factors
raise substantial doubt that the Company will be able to continue as a going
concern. Managements plans in regard to these matters are also discussed in
Note 1. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

|Vancouver, Canada | Morgan & Company   
|----------------- | ---------------------
|                  |                      
|March 18, 2005    | Chartered Accountants

|Tel: (604) 687-5841 |                                     | P.O. Box 10007 Pacific Centre
|------------------- | ----------------------------------- | -----------------------------
|Fax: (604) 687-0075 | Sute 1488 - 700 West Georgia Street
|www.morgan-cas.com  | Vancouver, B.C. V7Y 1A1            

F-2

---

Uranerz Energy Corporation (formerly Carleton Ventures
Corporation) (An Exploration Stage Company) Balance Sheets
(Expressed in US dollars)

|                                                                           |  | December 31, |   |  | December 31, |  
|-------------------------------------------------------------------------- |  | ------------ | - |  | ------------ | -
|                                                                           |  | 2005         |   |  | 2004         |  
|                                                                           |  | $            |   |  | $            |  
|ASSETS                                                                     |  |              |   |  |              |  
|                                                                           |  |              |   |  |              |  
|Current Assets                                                             |  |              |   |  |              |  
|                                                                           |  |              |   |  |              |  
|Cash                                                                       |  | 1,925,021    |   |  | 7,470        |  
|Prepaid expenses (Note 5(a) and (b)                                        |  | 20,686       |   |  |             |  
|Advances to related party
      (Note 5(d))                                |  | 23,358       |   |  |             |  
|                                                                           |  |              |   |  |              |  
|Total Current Assets                                                       |  | 1,969,065    |   |  | 7,470        |  
|                                                                           |  |              |   |  |              |  
|Property and Equipment (Note 3)                                            |  | 9,278        |   |  |             |  
|                                                                           |  |              |   |  |              |  
|Total Assets                                                               |  | 1,978,343    |   |  | 7,470        |  
|                                                                           |  |              |   |  |              |  
|                                                                           |  |              |   |  |              |  
|LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)                             |  |              |   |  |              |  
|                                                                           |  |              |   |  |              |  
|Current Liabilities                                                        |  |              |   |  |              |  
|                                                                           |  |              |   |  |              |  
|Accounts payable                                                           |  | 27,699       |   |  | 14,278       |  
|Accrued liabilities                                                        |  | 22,087       |   |  |             |  
|Due
      to related parties (Note 5)                                      |  | 143,700      |   |  | 50,823       |  
|                                                                           |  |              |   |  |              |  
|Total Liabilities                                                          |  | 193,486      |   |  | 65,101       |  
|                                                                           |  |              |   |  |              |  
|Commitments and Contingencies (Notes 1, 4 and 8)                           |  |              |   |  |              |  
|Subsequent Events (Note 10)                                                |  |              |   |  |              |  
|                                                                           |  |              |   |  |              |  
|Stockholders Equity (Deficit)                                             |  |              |   |  |              |  
|                                                                           |  |              |   |  |              |  
|Preferred Stock, 10,000,000 shares
      authorized, $0.001 par value;     |  |              |   |  |              |  
|Nil shares issued and outstanding                                          |  |             |   |  |             |  
|                                                                           |  |              |   |  |              |  
|Common Stock, 100,000,000 shares authorized, $0.001 par
      value;       |  |              |   |  |              |  
|21,995,000 and 5,640,500 shares issued and
      outstanding, respectively |  | 21,995       |   |  | 5,641        |  
|                                                                           |  |              |   |  |              |  
|Additional Paid-in Capital                                                 |  | 6,913,393    |   |  | 85,034       |  
|                                                                           |  |              |   |  |              |  
|Deficit Accumulated During the Exploration Stage                           |  | (5,150,531   | ) |  | (148,306     | )
|                                                                           |  |              |   |  |              |  
|Total Stockholders Equity (Deficit)                                       |  | 1,784,857    |   |  | (57,631      | )
|                                                                           |  |              |   |  |              |  
|Total Liabilities and Stockholders Equity (Deficit)                       |  | 1,978,343    |   |  | 7,470        |  

(The accompanying notes are an integral part of these financial
statements)

F-3

---

Uranerz Energy Corporation(formerly Carleton Ventures
Corporation) (An Exploration Stage Company) Statements of Operations
(Expressed in US dollars)

|                                               |  | Accumulated From    |   |  |              |   |  |           |  
|---------------------------------------------- |  | ------------------- | - |  | ------------ | - |  | --------- | -
|                                               |  | May 26, 1999        |   |  |              |   |  |           |  
|                                               |  | (Date of Inception) |   |  | Years Ended  |  
|                                               |  | to December 31,     |   |  | December 31, |  
|                                               |  | 2005                |   |  | 2005         |   |  | 2004      |  
|                                               |  | $                   |   |  | $            |   |  | $         |  
|                                               |  |                     |   |  |              |   |  |           |  
|                                               |  |                     |   |  |              |   |  |           |  
|Revenue                                        |  |                    |   |  |             |   |  |          |  
|                                               |  |                     |   |  |              |   |  |           |  
|Expenses                                       |  |                     |   |  |              |   |  |           |  
|                                               |  |                     |   |  |              |   |  |           |  
|Depreciation                                   |  | 1,207               |   |  | 1,207        |   |  |          |  
|Foreign exchange
      loss                    |  | 3,794               |   |  | 3,794        |   |  |          |  
|General and administrative (Notes 5 and 6)     |  | 4,590,652           |   |  | 4,482,133    |   |  | 18,227    |  
|Impairment loss on
      mineral properties    |  | 340,195             |   |  | 315,143      |   |  |          |  
|Mineral exploration                            |  | 103,850             |   |  | 89,115       |   |  | 1,869     |  
|                                               |  |                     |   |  |              |   |  |           |  
|Total Operating Expenses                       |  | 5,039,698           |   |  | 4,891,392    |   |  | 20,096    |  
|                                               |  |                     |   |  |              |   |  |           |  
|Operating Loss                                 |  | (5,039,698          | ) |  | (4,891,392   | ) |  | (20,096   | )
|                                               |  |                     |   |  |              |   |  |           |  
|Other Income (Expense)                         |  |                     |   |  |              |   |  |           |  
|                                               |  |                     |   |  |              |   |  |           |  
|Mineral
      property option payment received |  | 21,167              |   |  | 21,167       |   |  |          |  
|Loss on settlement of debt                     |  | (132,000            | ) |  | (132,000     | ) |  |          |  
|                                               |  |                     |   |  |              |   |  |           |  
|Net
      Loss                                 |  | (5,150,531          | ) |  | (5,002,225   | ) |  | (20,096   | )
|                                               |  |                     |   |  |              |   |  |           |  
|Net
      Loss Per Share  Basic and Diluted   |  |                     |   |  | (0.38        | ) |  |          |  
|                                               |  |                     |   |  |              |   |  |           |  
|Weighted Average Shares Outstanding            |  |                     |   |  | 12,995,000   |   |  | 5,640,500 |  

(The accompanying notes are an integral part of these financial
statements)

F-4

---

Uranerz Energy Corporation (formerly Carleton Ventures
Corporation) (An Exploration Stage Company) Statements of Cash Flows
(Expressed in US dollars)

|                                                                              |  | Accumulated From  |   |  |              |   |  |         |  
|----------------------------------------------------------------------------- |  | ----------------- | - |  | ------------ | - |  | ------- | -
|                                                                              |  | May 26, 1999(Date |   |  |              |   |  |         |  
|                                                                              |  | of Inception)     |   |  | Year Ended   |  
|                                                                              |  | to December 31,   |   |  | December 31, |  
|                                                                              |  | 2005              |   |  | 2005         |   |  | 2004    |  
|                                                                              |  | $                 |   |  | $            |   |  | $       |  
|Operating Activities                                                          |  |                   |   |  |              |   |  |         |  
|Net loss                                                                      |  | (5,150,531        | ) |  | (5,002,225   | ) |  | (20,096 | )
|Adjustments to reconcile
      net loss to cash used in operating activities: |  |                   |   |  |              |   |  |         |  
|Depreciation                                                                  |  | 1,207             |   |  | 1,207        |   |  |        |  
|Impairment loss on mineral properties                                         |  | 340,196           |   |  | 315,143      |   |  |        |  
|Loss on settlement of debt                                                    |  | 132,000           |   |  | 132,000      |   |  |        |  
|Stock-based compensation                                                      |  | 3,823,975         |   |  | 3,808,975    |   |  |        |  
|Changes
      in operating assets and liabilities:                            |  |                   |   |  |              |   |  |         |  
|Prepaid expenses                                                              |  | (20,686           | ) |  | (20,686      | ) |  |        |  
|Accounts payable and accrued liabilities                                      |  | 169,909           |   |  | 115,508      |   |  | 16,819  |  
|Due to related
      parties                                                  |  | 69,519            |   |  | 69,519       |   |  |        |  
|Net Cash Used in Operating Activities                                         |  | (634,411          | ) |  | (580,559     | ) |  | (3,277  | )
|Investing Activities                                                          |  |                   |   |  |              |   |  |         |  
|Acquisition of mineral properties                                             |  | (340,196          | ) |  | (315,143     | ) |  |        |  
|Purchase of property, plant and
      equipment                               |  | (10,485           | ) |  | (10,485      | ) |  |        |  
|Net Cash Flows Used In Investing Activities                                   |  | (350,681          | ) |  | (325,628     | ) |  |        |  
|Financing Activities                                                          |  |                   |   |  |              |   |  |         |  
|Advances
      from related party                                             |  | 10,700            |   |  |             |   |  | 10,700  |  
|Proceeds from issuance of common stock                                        |  | 2,899,413         |   |  | 2,823,738    |   |  |        |  
|Net Cash Flows Provided By Financing Activities                               |  | 2,910,113         |   |  | 2,823,738    |   |  | 10,700  |  
|Increase In Cash                                                              |  | 1,925,021         |   |  | 1,917,551    |   |  | 7,423   |  
|Cash - Beginning of Period                                                    |  |                  |   |  | 7,470        |   |  | 47      |  
|Cash
      - End of Period                                                    |  | 1,925,021         |   |  | 1,925,021    |   |  | 7,470   |  
|                                                                              |  |                   |   |  |              |   |  |         |  
|Non-cash Investing and Financing Activities                                   |  |                   |   |  |              |   |  |         |  
|Common
      stock issued for services                                        |  | 3,808,975         |   |  | 3,808,975    |   |  |        |  
|Common stock issued to
      settle debt                                      |  | 212,000           |   |  | 212,000      |   |  |         |  
|Common stock issued for mineral property                                      |  | 15,000            |   |  |             |   |  |        |  
|                                                                              |  |                   |   |  |              |   |  |         |  
|Supplemental Disclosures                                                      |  |                   |   |  |              |   |  |         |  
|Interest paid                                                                 |  |                  |   |  |             |   |  |        |  
|Income taxes paid                                                             |  |                  |   |  |             |   |  |        |  

(The accompanying notes are an integral part of these financial
statements)

F-5

---

Uranerz Energy Corporation 
  (formerly Carleton Ventures Corporation) 
  (An Exploration Stage Company) 
  Statements of Stockholders Equity (Deficit) 
  For the Period from May 26, 1999 (Date of Inception) to December 31, 2005
  (Expressed in US dollars)

|                                                      |              |  |         |  |             |  | Deficit     |   |            |  
|----------------------------------------------------- | ------------ |  | ------- |  | ----------- |  | ----------- | - | ---------- | -
|                                                      |              |  |         |  |             |  | Accumulated |   |            |  
|                                                      |              |  |         |  | Additional  |  | During the  |   |            |  
|                                                      | Common Stock |  | Paid-in |  | Exploration |  |             |  
|                                                      | Shares       |  | Amount  |  | Capital     |  | Stage       |   | Total      |  
|                                                      | #            |  | $       |  | $           |  | $           |   | $          |  
|Balance, May 26, 1999 (Date of inception)             | -            |  | -       |  | -           |  | -           |   | -          |  
|Net loss for the
      period                         | -            |  | -       |  | -           |  | (2,465      | ) | (2,465     | )
|Balance, December 31, 1999                            | -            |  | -       |  | -           |  | (2,465      | ) | (2,465     | )
|Net loss for the
      year                           | -            |  | -       |  | -           |  | -           |   | -          |  
|Balance, December 31, 2000                            | -            |  | -       |  | -           |  | (2,465      | ) | (2,465     | )
|Shares issued for cash at $0.001 per share            | 1,500,000    |  | 1,500   |  | -           |  | -           |   | 1,500      |  
|Shares issued for cash at $0.01 per share             | 2,500,000    |  | 2,500   |  | 22,500      |  | -           |   | 25,000     |  
|Shares issued to acquire mineral property interest    |              |  |         |  |             |  |             |   |            |  
|at $0.01 per share                                    | 1,500,000    |  | 1,500   |  | 13,500      |  | -           |   | 15,000     |  
|Shares issued for cash at $0.35 per share             | 90,500       |  | 91      |  | 31,584      |  | -           |   | 31,675     |  
|Net loss for the year                                 | -            |  | -       |  | -           |  | (47,158     | ) | (47,158    | )
|Balance, December 31, 2001                            | 5,590,500    |  | 5,591   |  | 67,584      |  | (49,623     | ) | 23,552     |  
|Shares issued for cash at $0.35 per share             | 50,000       |  | 50      |  | 17,450      |  | -           |   | 17,500     |  
|Net loss for the
      year                           | -            |  | -       |  | -           |  | (51,671     | ) | (51,671    | )
|Balance, December 31, 2002                            | 5,640,500    |  | 5,641   |  | 85,034      |  | (101,294    | ) | (10,619    | )
|Net loss for the
      year                           | -            |  | -       |  | -           |  | (26,916     | ) | (26,916    | )
|Balance, December 31, 2003                            | 5,640,500    |  | 5,641   |  | 85,034      |  | (128,210    | ) | (37,535    | )
|Net loss for the
      year                           | -            |  | -       |  | -           |  | (20,096     | ) | (20,096    | )
|Balance, December 31, 2004                            | 5,640,500    |  | 5,641   |  | 85,034      |  | (148,306    | ) | (57,631    | )
|Shares issued for cash at $0.10 per share,            |              |  |         |  |             |  |             |   |            |  
|net of issue costs of $911                            | 6,959,500    |  | 6,959   |  | 688,080     |  | -           |   | 695,039    |  
|Shares issued for cash at $0.40 per unit,             |              |  |         |  |             |  |             |   |            |  
|net of issue costs of $43,076                         | 5,420,000    |  | 5,420   |  | 2,119,504   |  | -           |   | 2,124,924  |  
|Shares issued to settle debt                          | 200,000      |  | 200     |  | 211,800     |  | -           |   | 212,000    |  
|Shares issued for cash at $0.001 per share
      with |              |  |         |  |             |  |             |   |            |  
|stock-based compensation of $3,808,975                | 3,775,000    |  | 3,775   |  | 3,808,975   |  | -           |   | 3,812,750  |  
|Net loss for the year                                 | -            |  | -       |  | -           |  | (5,002,225  | ) | (5,002,225 | )
|Balance, December 31, 2005                            | 21,995,000   |  | 21,995  |  | 6,913,393   |  | (5,150,531  | ) | 1,784,857  |  

(The accompanying notes are an integral part of these financial
statements)

F-6

---

Uranerz Energy Corporation (formerly Carleton Ventures
Corporation) (An Exploration Stage Company) Notes to the Financial
Statements December 31, 2005 (Expressed in US dollars)

|1. | Nature of Operations and Continuance of
Business                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | Uranerz Energy Corporation (the Company) was
      incorporated in the State of Nevada, U.S.A. on May 26, 1999 under the name
      Carleton Ventures Corp. Effective July 5, 2005 the Company changed its
      name to Uranerz Energy Corporation. The Company has acquired mineral
      property interests in Canada, Mongolia and United States.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | The Company is an Exploration Stage Company, as defined
      by Statement of Financial Accounting Standard (SFAS) No.7 Accounting
      and Reporting by Development Stage Enterprises. The Companys
      principal business is the acquisition and exploration of uranium and
      mineral resources. The Company has not presently determined whether its
      properties contain mineral reserves that are economically
    recoverable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | These financial statements have been prepared on a going
      concern basis, which implies the Company will continue to realize its
      assets and discharge its liabilities in the normal course of business. The
      Company has not generated any revenue since inception and has never paid
      any dividends and is unlikely to pay dividends or generate earnings in the
      immediate or foreseeable future. The continuation of the Company as a
      going concern is dependent upon the continued financial support from its
      shareholders, the ability of the Company to obtain necessary equity
      financing to continue operations and to determine the existence, discovery
      and successful exploitation of economically recoverable reserves in its
      resource properties, confirmation of the Companys interests in the
      underlying properties, and the attainment of profitable operations. As at
      December 31, 2005, the Company has working capital of $1,775,579, and has
      accumulated losses of $5,150,531 since inception. These factors raise
      substantial doubt regarding the Companys ability to continue as a going
      concern. These financial statements do not include any adjustments to the
      recoverability and classification of recorded asset amounts and
      classification of liabilities that might be necessary should the Company
      be unable to continue as a going concern.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | Subsequent to year end, the Company issued 7,245,000
      units at $1.00 per unit to raise cash proceeds of $7,245,000, before issue
      costs. Refer to Note 10(d).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|2. | Summary of Significant Accounting Policies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | d)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

F-7

---

Uranerz Energy Corporation (formerly Carleton Ventures
Corporation) (An Exploration Stage Company) Notes to the Financial
Statements December 31, 2005 (Expressed in US dollars)

|2. | Summary of Significant Accounting Policies
    (continued)
|-- | ----------------------------------------------------------
|   |                                                           
|   | e)                                                        
|   |                                                           
|   |                                                           
|   |                                                           
|   | f)                                                        
|   |                                                           
|   |                                                           
|   |                                                           
|   | g)                                                        
|   |                                                           
|   |                                                           
|   |                                                           
|   | h)                                                        
|   |                                                           
|   |                                                           
|   |                                                           
|   | i)                                                        
|   |                                                           
|   |                                                           
|   |                                                           
|   |                                                           
|   |                                                           
|   |                                                           
|   |                                                           
|   | j)                                                        
|   |                                                           
|   |                                                           

F-8

---

Uranerz Energy Corporation (formerly Carleton Ventures
Corporation) (An Exploration Stage Company) Notes to the Financial
Statements December 31, 2005 (Expressed in US dollars)

|2. | Summary of Significant Accounting Policies
    (continued)
|-- | ----------------------------------------------------------
|   |                                                           
|   | k)                                                        
|   |                                                           
|   |                                                           
|   |                                                           
|   | l)                                                        
|   |                                                           
|   |                                                           
|   |                                                           
|   |                                                           
|   |                                                           
|   |                                                           
|   |                                                           
|   |                                                           

F-9

---

Uranerz Energy Corporation (formerly Carleton Ventures
Corporation) (An Exploration Stage Company) Notes to the Financial
Statements December 31, 2005 (Expressed in US dollars)

|2. | Summary of Significant Accounting Policies
    (continued)
|-- | ----------------------------------------------------------
|   |                                                           
|   | m)                                                        
|   |                                                           
|   |                                                           
|   |                                                           
|3. | Property and Equipment                                    

| |                   |  |        |  |  |              |  |  | December 31, |  |  | December 31, | 
| | ----------------- |  | ------ |  |  | ------------ |  |  | ------------ |  |  | ------------ | 
| |                   |  |        |  |  |              |  |  | 2005         |  |  | 2004         | 
| |                   |  |        |  |  | Accumulated  |  |  | Net Carrying |  |  | Net Carrying | 
| |                   |  | Cost   |  |  | Depreciation |  |  | Value        |  |  | Value        | 
| |                   |  | $      |  |  | $            |  |  | $            |  |  | $            | 
| |                   |  |        |  |  |              |  |  |              |  |  |              | 
| | Computer hardware |  | 10,485 |  |  | 1,207        |  |  | 9,278        |  |  |             | 

|4. | Mineral Properties
|-- | ------------------
|   |                   
|   | a)                
|   |                   
|   | b)                
|   |                   
|   |                   
|   |                   
|   | c)                
|   |                   
|   | d)                
|   |                   
|   | e)                
|   |                   
|   | f)                
|   |                   
|   | g)                
|   |                   
|   | h)                

F-10

---

Uranerz Energy Corporation (formerly Carleton Ventures
Corporation) (An Exploration Stage Company) Notes to the Financial
Statements December 31, 2005 (Expressed in US dollars)

|5. | Related Party Transactions
|-- | --------------------------
|   |                           
|   | a)                        
|   |                           
|   | b)                        
|   |                           
|   | c)                        
|   |                           
|   | d)                        
|   |                           
|   | e)                        
|   |                           
|   | f)                        
|   |                           
|   | g)                        
|   |                           
|   | h)                        
|   |                           
|6. | Common Stock              
|   |                           
|   | a)                        
|   |                           
|   | b)                        
|   |                           
|   | c)                        
|   |                           
|   | d)                        
|   |                           
|   | e)                        

F-11

---

Uranerz Energy Corporation (formerly Carleton Ventures
Corporation) (An Exploration Stage Company) Notes to the Financial
Statements December 31, 2005 (Expressed in US dollars)

|7. | Share Purchase Warrants                                                                    
|-- | -------------------------------------------------------------------------------------------
|   |                                                                                            
|   | A summary of the changes in the Companys stock purchase
      warrants is presented below:

| |                                           |  |           |  |  | Weighted |  |  |  | 
| | ----------------------------------------- |  | --------- |  |  | -------- |  |  |  | 
| |                                           |  |           |  |  | Average  |  |  |  | 
| |                                           |  |           |  |  | Exercise |  |  |  | 
| |                                           |  | Number    |  |  | Price    |  |  |  | 
| |                                           |  |           |  |  |          |  |  |  | 
| | Balance, December 31, 2003
      and 2004 |  |          |  |  |         |  |  |  | 
| |                                           |  |           |  |  |          |  |  |  | 
| | Issued                                    |  | 2,710,000 |  |  | 0.60     |  |  |  | 
| |                                           |  |           |  |  |          |  |  |  | 
| | Balance, December 31, 2005                |  | 2,710,000 |  |  | 0.60     |  |  |  | 

As at the December 31, 2005, the
following share purchase warrants were outstanding:

Number ofWarrants
    Exercise Price
    Expiry Date2,622,500
    0.60
    October 17, 200687,500
    0.60
    November 17, 20062,710,000
    0.60


|8. | Commitments
|-- | -----------
|   |            
|   | a)         

2006
    $126,1002007
    126,1002008
    84,100$336,300


| | b) | The Company entered into an agreement with a company
      effective November 1, 2005 for public and investor relations services to
      be provided to the Company for an initial term of one year at $5,000 per
      month.                                                               
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                               
| | c) | The Company entered into an agreement with a company
      effective November 1, 2005 for public relations services to be provided to
      the Company for an initial term of three months. The Company agreed to pay
      $6,000 per month, and is to issue 100,000 shares of common
stock.
| |    |                                                                                                                                                                                                                                                                                               
| | d) | On July 1, 2005, the Company entered into an agreement
      with a company controlled by a director of the Company for consulting
      services to be provided to the Company at $8,598 (Cdn$10,000) per
      month.                                                                       
| |    |                                                                                                                                                                                                                                                                                               
| | e) | On May 24, 2005, the Company entered into an agreement to
      acquire certain uranium related data and receive consulting services. The
      Company must pay $24,000 for the data, payable $2,000 per month over
      twelve months.                                                     
| |    |                                                                                                                                                                                                                                                                                               
| | f) | On March 1, 2005, the Company entered into an agreement
      with a company controlled by the President of the Company for consulting
      services to be provided to the Company at $8,020 per
  month.                                                                                    

F-12

---

Uranerz Energy Corporation (formerly Carleton Ventures
Corporation) (An Exploration Stage Company) Notes to the Financial
Statements December 31, 2005 (Expressed in US dollars)

|9. | Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | Potential benefits of income tax losses are not
      recognized in the accounts until realization is more likely than not. The
      Company has net operating losses of approximately $1,194,000, which
      commence expiring in 2019. Pursuant to SFAS No. 109 the Company is
      required to compute tax asset benefits for net operating losses carried
      forward. The potential benefits of net operating losses have not been
      recognized in these financial statements because the Company cannot be
      assured it is more likely than not it will utilize the net operating
      losses carried forward in future years. For the years ended December 31,
      2005 and 2004, the valuation allowance established against the deferred
      tax assets increased by $371,300 and $7,000, respectively.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | The components of the net deferred tax asset at December
      31, 2005 and 2004, and the statutory tax rate, the effective tax rate and
      the elected amount of the valuation allowance are indicated
  below:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

2005
    2004$
    $Net Operating Losses Carried
      Forward
    1,194,000
    133,000Statutory Tax Rate
    35%
    35%Effective Tax Rate
    
    Deferred Tax Asset
    417,900
    46,600Valuation Allowance
    (417,900)
    (46,600)Net
      Deferred Tax Asset
    
    


|10. | Subsequent Events
|--- | -----------------
|    |                  
|    | a)               
|    |                  
|    | b)               
|    |                  
|    | c)               
|    |                  
|    |                  
|    |                  
|    |                  
|    |                  
|    |                  
|    |                  

In addition, the Optionee must make
the following expenditures:

| | (i)   | $400,000 in year 2006;    
| | ----- | --------------------------
| | (ii)  | $500,000 in year 2007;    
| | (iii) | $900,000 in year 2008; and
| | (iv)  | $1,200,000 in year 2009.  

Once the Optionee has earned a 55%
interest, the Company will have the right to earn back a 6% interest by spending
$300,000.

F-13

---

Uranerz Energy Corporation (formerly Carleton Ventures
Corporation) (An Exploration Stage Company) Notes to the Financial
Statements December 31, 2005 (Expressed in US dollars)

|10. | Subsequent Events (continued)
|--- | -----------------------------
|    |                              
|    | d)                           

F-14

---

ITEM
8.               
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.

Engagement of Manning Elliott LLP

Morgan & Company, Chartered Accountants ("Morgan &
Company") were dismissed as our principal independent accountant effective May
6, 2005. We engaged Manning Elliott LLP, Chartered Accountants as our principal
independent accountant effective May 6, 2005. The decision to change principal
independent accountants was approved by our board of directors.

The report of Morgan & Company dated March 18, 2005 on the
balance sheets of the Company as at December 31, 2004 and 2003, and the related
statements of operations, stockholders' deficiency and cash flows for the years
ended December 31, 2004, 2003 and 2002, and the period from May 26, 1999
(inception) to December 31, 2004 did not contain an adverse opinion or
disclaimer of opinion, nor was it modified as to uncertainty, audit scope, or
accounting principles, other than to state that there is a substantial doubt
that the Company will be able to continue as a going concern.

In connection with the audit of the years ended December 31,
2004, 2003 and 2002 and the period from May 26, 1999 (inception) to December 31,
2004 and the subsequent interim period through to May 6, 2005, there were no
disagreements with Morgan & Company on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedures,
which disagreements if not resolved to the satisfaction of Morgan & Company
would have caused them to make reference thereto in their reports on the
Companys audited financial statements.

We provided Morgan & Company with a copy of the foregoing
disclosures and requested in writing that Morgan & Company furnish us with a
letter addressed to the Securities and Exchange Commission stating whether or
not they agree with such disclosures. We received the requested letter from
Morgan & Company wherein they have confirmed their agreement to our
disclosures and a copy of Morgan & Companys letter has been filed as an
exhibit to our Current Report on Form 8-K filed on May 12, 2005.

ITEM
8A              CONTROLS
AND PROCEDURES

As required by Rule 13a-15 under the Securities Exchange Act of
1934 (the Exchange Act), we carried out an evaluation of the effectiveness of
the design and operation of our disclosure controls and procedures as of
December 31, 2005, being the date of our most recently completed fiscal year.
This evaluation was carried out under the supervision and with the participation
of our Chief Executive Officer, Mr. Glenn Catchpole and Ms. Aileen Lloyd, Chief
Financial Officer. Based upon that evaluation, our Chief Executive Officer and
Chief Financial Officer concluded that our disclosure controls and procedures
are effective to ensure that the information required to be disclosed by us in
the reports that we file or submit under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified by the
rules and forms of the Securities and Exchange Commission.

Disclosure controls and procedures are controls and other
procedures that are designed to ensure that information required to be disclosed
in our reports filed or submitted under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the Securities and
Exchange Commission's rules and forms. Disclosure controls and procedures
include, without limitation, controls and procedures designed to ensure that
information required to be disclosed in our reports filed under the Exchange Act
is accumulated and communicated to management, including our Chief Executive
Officer and Chief Financial Officer, to allow timely decisions regarding
required disclosure.

During our most recently completed fiscal year ended December
31, 2005 there were no changes in our internal control over financial reporting
that have materially affected, or are reasonably likely to affect, our internal
control over financial reporting.

25

---

The term internal control over financial reporting is defined
as a process designed by, or under the supervision of, the registrant's
principal executive and principal financial officers, or persons performing
similar functions, and effected by the registrant's board of directors,
management and other personnel, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting
principles and includes those policies and procedures that:

|(a) | Pertain to the maintenance of records that in reasonable
      detail accurately and fairly reflect the transactions and dispositions of
      the assets of the registrant;                                                                                                                                                                                                   
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                
|(b) | Provide reasonable assurance that transactions are
      recorded as necessary to permit preparation of financial statements in
      accordance with generally accepted accounting principles, and that
      receipts and expenditures of the registrant are being made only in
      accordance with authorizations of management and directors of the
      registrant; and
|    |                                                                                                                                                                                                                                                                                                                                                                                
|(c) | Provide reasonable assurance regarding prevention or
      timely detection of unauthorized acquisition, use or disposition of the
      registrant's assets that could have a material effect on the financial
      statement.                                                                                                                                               

ITEM
8B              OTHER
INFORMATION

None.

PART III

ITEM
9.               
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH
SECTION 16(a) OF THE EXCHANGE ACT

The directors and officers of the Company are as follows:

|Name                 | Age | Position with            | Served as a Director
|-------------------- | --- | ------------------------ | --------------------
|                     |     | Registrant               | or Officer Since    
|                     |     |                          |                     
|Dennis Higgs         | 48  | Chairman                 | May 26, 1999        
|                     |     |                          |                     
|Glenn Catchpole      | 62  | Director, President and  | March 1, 2005       
|                     |     | Chief Executive Officer  |                     
|                     |     |                          |                     
|George Hartman       | 66  | Director, Vice President | **May 9, 2005**     
|                     |     | Mining                   |                     
|                     |     |                          |                     
|Dr. Gerhard Kirchner | 75  | Director                 | March 13, 2005      
|                     |     |                          |                     
|Aileen Lloyd         | 53  | Secretary, Treasurer     | May 26, 1999        
|                     |     | Chief Financial Officer  |                     
|                     |     |                          |                     
|Paul Saxton          | 59  | Director                 | October 26, 2004    

Set forth below is a brief description of the background and
  business experience of each of our executive officers and directors for the
  past five years. References to Uranerz in this section below are to Uranerz
  Exploration and Mining Ltd., a company with which we have no affiliation:

26

---

Dennis L. Higgs, Chairman and Director

Mr. Dennis Higgs is a member of the board of directors. Mr.
Higgs was appointed to the board of directors as President and Chief Executive
Officer on May 26, 1999, and resigned as President and Chief Executive Officer
on March 1, 2005.

In 1981, Mr. Higgs graduated from the University of British
Columbia, Vancouver, B.C. with a Bachelor of Commerce degree. He then completed
the Canadian Securities Course conducted by the Canadian Securities Institute of
Toronto, Canada. In 1982, Mr. Higgs completed The Registered Representatives
Exam also conducted by the Canadian Securities Institute, Toronto, Canada. In
1983, Mr. Higgs completed the Canadian Options Course offered by the Canadian
Securities Institute, Canada.

Mr. Higgs has participated in the financial and venture capital
markets for over twenty years, and has been involved in the founding, financing
and initial public listing of several companies.

Mr. Higgs has been a director and officer of Senate Capital
Group Inc., a private venture capital and management consulting company, since
1990. In this position, Mr. Higgs provides management consulting and investor
relations services.

Mr. Higgs also serves as a director and officer of Miranda Gold
Corp., a Canadian public reporting gold exploration company which he founded,
since May 1993. In this position, Mr. Higgs provides management consulting
services to Miranda Gold Corp.

Glenn Catchpole, President, Chief Executive Officer and
Director

Mr. Glenn Catchpole was appointed to the Board March 1, 2005.
Mr. Catchpole is a licensed engineer who holds an M.S. in civil engineering from
Colorado State University. He has been active in the uranium solution mining
industry since 1978, holding various positions including well field engineer,
project manager, general manager and managing director of several uranium
solution mining operations.

In 1988 Mr. Catchpole joined Uranerz U.S.A., Inc. and Uranerz
Exploration and Mining and became Director of Regulatory Affairs, Environmental
Engineering and Solution Mining. Mr. Catchpoles responsibilities included the
monitoring and oversight of the environmental and regulatory aspects of two
large uranium mines in Canada and the operational aspects of one uranium
solution mine in the United States. In 1996 Mr. Catchpole was appointed General
Manager and Managing Director of the Inkai uranium solution mining project
located in the Republic of Kazakhstan (Central Asia). In 1998 Cameco Corporation
acquired Uranerz U.S.A. Inc., and Mr. Catchpole continued his post with the
Inkai project. Following his departure from Cameco in 2002, Mr. Catchpole has
been an independent consulting engineer providing project management to the oil
and gas, mining, and construction industries.

George Hartman, Vice President Mining, Director

Mr. George Hartmanwas appointed to the Board of Directors
  and the role of Vice-President, Mining. He has thirty-seven years experience
  in developing green field projects into mining production companies including
  both metals and industrial mineral projects. He has an M. S. degree in Mineral
  Economics (Colorado School of Mines) and a B. S. in Chemical Engineering (University
  of Denver). Four process patents have been granted in his name. His experience
  includes thirteen years managing several in-situ leach uranium mines from green
  field exploration sites through commercial production.

From 1990 to 2002, Mr. Hartman was General Manager for Fort
Cady Minerals Corporation where he had complete responsibility for solution
mining and process development, permitting, design, procurement, construction,
production and property management. Property management included federal mining
claims and private leases for a large deposit of borate mineral. He managed the
project from test stage through construction and operation of a demonstration
production facility. He was also involved with product marketing.

27

---

From 1982 to 1989 Mr. Hartman was General Manager, In Situ
Leach Projects, for Uranerz USA. During this period he managed the interests of
all in situ uranium projects which Uranerz USA owned including Ruth, Crow Butte,
and North Butte. Under his management, Uranerz USA served as the contract
operator for the successful test solution mining of the Christenson Ranch
uranium property now owned by Cogema. He was on the Uranerz USA acquisition team
that studied potential uranium and precious and base metal properties in
Nebraska, Colorado, Texas, New Mexico, Utah, California and Wyoming.

Prior to joining Uranerz USA, Mr. Hartman was president of Ogle
Petroleum Inc. where he was in overall operating charge of this uranium
production company that joint ventured with Duke Power on a commercial solution
mine in Wyoming. He was responsible for managing the project from green field
exploration through commercial production (shipped filtered yellowcake to the
converter). Mr. Hartman personally designed the processing plant facilities.

Previous to his work with Uranerz USA, Mr. Hartman was the
Texas Mines Manager for Wyoming Mineral Corporation (Westinghouse), where he was
responsible for the management of two production in situ uranium mines with ion
exchange processing plants in Bruni, and Three Rivers, Texas (shipped dried
yellow cake to the converter).

Dr. Gerhard Kirchner, Director

Dr. Gherhard F. Kirchnerwas appointed to the Board
March 13, 2005. Dr. Kirchner has 40 years of international mine development and
management experience including 20 years from 1975 to 1995with Uranerz
Exploration and Mining Ltd. At Uranerz, Dr. Kirchner spent nine years as General
Manager and 11 years as Senior Vice President. He and his team were responsible
for the Key Lake uranium discovery and the engineering and development of
projects such as the Midwest uranium deposit, Eagle Point North uranium deposit,
Star Lake gold deposit and the Crow Butte in-situ leach uranium deposit.

Previous to his work with Uranerz, Dr. Kirchner spent six years
developing and managing the Kamoto Mine in Kolwezi, Zaire; four years consulting
on mining and civil engineering projects in several countries including Surinam,
Nigeria and Congo; five years as a mine superintendent and exploration manager
in Greenland where he discovered the Molybdenum Porphyry Erzberg; and three
years as a project engineer on dams in Austria and Japan and road projects in
Saudi Arabia.

Dr. Kirchner received a multidisciplinary education in mining
engineering and economic geology and a Doctorate in Mining Sciences from the
University of Leoben, Austria.

Aileen Lloyd, Corporate Secretary, Chief Financial Officer,
Director

Ms. Aileen Lloydis the Secretary, Treasurer and Chief
Financial Officer and is a member of the board of directors. Ms. Lloyd was
appointed to the board of directors and as secretary, treasurer and chief
financial officer on May 26, 1999.

Ms. Lloyd has been an administrative assistant with Senate
Capital Group Inc., a private venture capital and management consulting company,
since October 1990. In this position she provides management services to
publicly traded companies.

Ms. Lloyd is a director of Miranda Gold Corp. a Canadian public
reporting gold exploration company since May 1993. In this position, Ms. Lloyd
provides management and administration services.

Paul Saxton, Director

Mr. Paul Saxtonwas appointed to the Board of Directors
on October 26, 2004. Mr. Saxton is a mining engineer who also holds an MBA from
the University of Western Ontario. He has been active in the mining industry
since 1969, holding various positions including mining engineer, mine
superintendent, and president and chief executive officer of numerous Canadian
mining companies.

28

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Following 10 years with Cominco, Mr. Saxton became
vice-president and president of Mascot Gold Mines Ltd., initially working on the
design and construction of the Nickel Plate mine in British Columbia, Canada.
Subsequently Mr. Saxton became a vice-president of Corona Corporation where he
was responsible for western operations and exploration for the company and was
instrumental in the reopening of the Nickel Plate Mine. In 1989, Mr. Saxton was
appointed senior vice-president of Viceroy Resource Corporation where he was
responsible for obtaining financing and the construction and operations of the
Castle Mountain mine in California. In 1994, Mr. Saxton was appointed president
of Loki Gold Corporation and Baja Gold Inc. where he was responsible for
arranging mine financing and bringing the Brewery Creek Gold mine into
production.

Following his departure from Viceroy in 1998, Mr. Saxton became
president of Standard Mining Corp., organizing the company and supervising its
exploration activities until 2001, when Standard Mining Corp. was merged with
Doublestar Resources Ltd. In March 2004, Mr. Saxton was appointed as a director
and president of Lincoln Gold Corporation, a company engaged in mineral
exploration in the State of Nevada.

Advisory Board

We have an advisory board that consists entirely of
professional geologists and includes Dr. Franz J. Dahlkamp, Dr. Gerhard
Ruhrmann, Kenneth Cunningham and Joe Hebert. Members of our advisory board are
not members of our board of directors. Our advisory board is available to
consult with our board of directors at the request of our board of
directors.

Dr. Franz J. Dahlkamp

Dr. Franz J. Dahlkamp has over 45 years experience as an
economic geologist, with specific emphasis in uranium. He started as an economic
geologist with several mining companies in Germany and abroad. In 1968 he began
working with the Uranerz group of companies and by 1974 he became the head of
their exploration department. While at Uranerz he organized and established the
Uranerz group of subsidiary companies for uranium exploration in Australia,
Canada, and the USA, and conducted reconnaissance surveys for uranium worldwide.

Since 1978 Dr. Dahlkamp has been consulting for mining
companies, utilities, national and international institutions (governments of
Germany, Austria, USA, Egypt, Iran, Mongolia; UN/IAEA, OECD/NEA). Also, since
1978 to 2002, Dr. Dahlkamp lectured at the Universities of Leoben and Salzburg,
Austria, and Munich, Germany (on uranium deposits: geology, economics, and
exploration).

Dr. Dahlkamp has published over fifty papers on uranium ore
deposits including six books (eg. Uranlagerstätten 1979, Uranium Ore Deposits
1993)

Dr. Dahlkamp has a PhD (1958), a Dr. of Science (Habilitation
1979), and is an Honorary Chair (Honorary-Professor) at Mining-University of
Leoben (1990).

Dr. Gerhard Ruhrmann

Dr. Gerhard Ruhrmann has close to 30 years experience in
uranium exploration, mining and mine waste management. From 1976 to 1981, Dr.
Ruhrmann was project geologist and exploration manager for Uranerz Exploration
and Mining (UEM) in Canada, supervising field work in the Otish Mountains of
Quebec, the Athabasca Basin in Saskatchewan, and the Thelon Basin in Nunavut. In
1982, Dr. Ruhrmann joined Key Lake Mining Corporation, to develop exploration
tools for high grade unconformity-related uranium deposits on the basis of
geological and mineralogical research at the Key Lake open pits and other mines
in the Athabasca Basin. This resulted in a number of papers published in a
variety of scientific periodicals including technical documents of the
International Atomic Energy Agency.

29

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In 1988, Dr. Ruhrmann became engaged in hydrogeological and
geotechnical work in Cameco's engineering division, assessing above-ground
uranium tailings management facilities and contributing to the in-pit tailings
disposal concept at the Deilmann open pit in Saskatchewan.

In 1993, Uranerzbergbau (UEB) in Germany called Dr. Ruhrmann to
join its consulting branch. Assignments included the assessment of exploration
and mining projects in central Asia and western Africa, managing a subsidiary
exploration company in Guinea, providing technical assistance to regulatory
agencies in Papua New Guinea, monitoring the reclamation work at the former
uranium mines in eastern Germany, designing reclamation concepts for closed-out
uranium mines in central Asia and eastern Europe as well as reviewing the mining
practice in Vietnam. On the basis of this experience, Dr. Ruhrmann co-authored a
book on environmental mine management, published in 2001.

Since 2003, Dr. Ruhrmann is practicing as an independent
consultant to the mining industry and international technical assistance
agencies. Assignments include a review of the mining industry in Mongolia,
enhancement of small-scale mining in Papua New Guinea, quality control at
uranium mine rehabilitation projects and the assessment of uranium prospects.

Dr. Ruhrmann has a diploma in geology and holds a doctor degree
in geology from the University of Tuebingen, Germany. Since 2001, Dr. Ruhrmann
is teaching mineral exploration at the University of Leoben, Austria.

Kenneth Cunningham

Mr. Kenneth Cunningham brings over thirty years of experience
from diversified mineral exploration and mining geology through to executive
management. Eighteen of these years have been focused in Nevada. Currently Mr.
Cunningham is the President and Chief Executive Officer of Miranda Gold Corp.
where he focused Mirandas exploration efforts in the Cortez Gold Trend and
successfully negotiated joint ventures with major mining companies including
Newmont, Placer Dome, Newcrest and Barrick. Previously, he was Exploration
Manager with Uranerz U.S.A. Inc. During his tenure with Uranerz Mr. Cunningham
led the exploration and acquisition effort that resulted in two Nevada gold
discoveries; a three-million-ounce discovery in the Battle Mountain trend and a
one-plus-million ounce discovery in the northern Carlin trend. Mr. Cunningham
has also been Vice President of Tenneco Minerals Company and a Resident Manager
with Echo Bay Mining Company.

Mr. Cunningham started his career with Houston Oil and Minerals
as a member of its uranium exploration team. In 1978 he was responsible for the
discovery of the Death Valley uranium deposit on Alaskas Seward Peninsula.

Joe Hebert

Mr. Joe Hebert is currently Vice President of Exploration for
Miranda Gold Corp. Most recently, Mr. Hebert was the senior exploration
geologist for the Cortez Joint Venture (Placer Dome and Kennecott Minerals)
located on the Battle Mountain Trend in North Central Nevada. He was a member of
the exploration team who discovered the 7.5 million ounce Cortez Hills gold
deposit. During his tenure at Cortez he directed all generative and acquisition
efforts within the joint venture area of interest.

From 1992 to 1999 Mr. Hebert consulted for Uranerz USA, Inc.
where he conducted project evaluations and generative programs primarily in
north central Nevada. The most significant result of this program was the
recognition of gold potential and acquisition recommendations of the
Nike-Converse property in Buffalo Valley where Uranerz discovered approximately
three million ounces of gold resource. He also recommended the REN property for
acquisition, where currently development drilling on a high-grade resource is
being conducted.

During the period when he was consulting, Mr. Hebert initiated
a countrywide evaluation of Mongolia, identifying essentially unexplored
epithermal systems from regional compilation and focused reconnaissance. He
focused his client in gold belts of NE Mongolia, acquiring for them two large

30

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concessions with multiple ore-grade showings in large
epithermal and intrusive-related alteration cells. This program required
interaction with high-level government officials, Mongolian junior companies,
the Mongolian Geological Survey and supervising native crews in remote camps.

Mr. Hebert is credited with team participation in multiple gold
discoveries in Nevada and Utah over the course of his career. He has also had
staff and contract positions with several US majors over the years including
Superior Oil, Tenneco, and Freeport Minerals.

Audit Committee

We do not have an audit committee financial expert on our board
of directors due to the fact that our operations are at a very early stage. The
composition of our board of directors reflects our focus on mineral exploration.
We will consider appointing an additional member to our board of directors who
would qualify as an audit committee financial expert within the definition of
the SEC as our operations expand and become more sophisticated.

Code of Ethics

The Company has not adopted a code of ethics as we are at a
very early stage. The Company will pursue adopting a written code of ethics that
will govern our senior officers and directors. To date, the Board of Directors
have conducted the affairs of the Company consistent with the applicable laws
and regulations of the United States.

Compliance with Section 16(a) of the Securities Exchange
Act.

Section 16(a) of the Exchange Act requires our executive
officers and directors, and persons who beneficially own more than ten percent
of our equity securities, to file reports of ownership and changes in ownership
with the Securities and Exchange Commission. Officers, directors and greater
than ten percent shareholders are required by SEC regulation to furnish us with
copies of all Section 16(a) forms they file. Based on our review of the copies
of such forms received by us, we believe that during the fiscal year ended
December 31, 2005 all such filing requirements applicable to our officers and
directors were complied with other than the following reports which were filed
late by the following persons:

Name and Principal Position
    Number of Late
      Reports
    Transactions Not
      Timely Reported
    Known Failures to
      File a Required FormDennis Higgs
    One
      One
    NoneGlenn Catchpole
    One
      One
    NonePaul Saxton
    One
      One
    NoneAileen Lloyd
    One
      One
    NoneGerhard Kirchner
    Two
      One
    None


ITEM
10.               
EXECUTIVE COMPENSATION

COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth compensation information as to
our Chief Executive Officer, Mr. Glenn Catchpole and our Chairman, Mr. Dennis
Higgs for the past three fiscal years. None of our executive officers earned
more than $100,000 during our most recently completed fiscal year.

31

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**SUMMARY
      COMPENSATION TABLE****ANNUAL COMPENSATION**
    **LONG TERM COMPERSATION**Name
    Title
    Year
    Salary
    Bonus
    Other Annual
      Compensation
    AWARDS
    PAYOUTSRestricted Stock
      Awarded
    Options/ SARs * (#)
    LTIP payouts ($)
    All Other Compen-
      sationDennis Higgs (1)
    Chairman, and Director
    2005 2004 2003
    $52,282(1)$Nil
      $Nil
    0 0 0
    0 0 0
    0 0 0
    0 0 0
    0 0 0
    0 0 0Glenn Catchpole
    President and CEO
    2005 2004 2003
    $80,000(2)$Nil
      $Nil


| | (1) | We have paid a management fee of $ 52,282 to a private
      holding company of Mr. Dennis Higgs during our fiscal year ended December
      31, 2005.    
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------
| | (2) | We have paid a management fee of $ $80,000 to a private
      holding company of Mr. Glenn Catchpole during our fiscal year ended
      December 31, 2005.

STOCK OPTION GRANTS

We did not grant any stock options to our directors and
officers, including our named executive officer, during our fiscal year ended
December 31, 2005.

Subsequent to December 31, 2005, we granted the following stock
options to our directors and officers. Each option was granted on January 6,
2006 and is immediately exercisable for a term of five years at a price of $0.75
per share:

Name of Officer or Director
    Number of Stock Options GrantedGlenn Catchpole
    350,000George Hartman
    350,000Dennis Higgs
    350,000Gerhard Kirchner
    275,000Aileen Lloyd
    250,000Paul Saxton
    150,000


We have also granted stock options at varying prices to the
following director for consulting services:

Name of Director
    Number of Options
    Date of Grant
    Price of OptionGeorge Hartman
    13,700
    January 6, 2006
    $0.5114,500
    January 6, 2006
    $0.5514,500
    January 6, 2006
    $0.5515,700
    January 6, 2006
    $0.702,900
    January 6, 2006
    $1.4011,400
    January 6, 2006
    $1.0510,900
    January 6, 2006
    $1.0112,800
    January 27, 2006
    $0.7014,400
      January 27, 2006
    $0.97


EXERCISES OF STOCK OPTIONS AND YEAR-END GRANTS

No incentive stock options were exercised by any of our directors
  and officers, including our named executive officer, during our fiscal year
  ended December 31, 2005. None of our directors or officers held any options
  to purchase shares of our common stock as at December 31, 2005.

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LONG-TERM INCENTIVE PLANS

We do not have any long-term incentive plans, pension plans,
  or similar compensatory plans for our directors or executive officers.

EMPLOYMENT CONTRACTS

We have entered into a consulting agreement with Catchpole
Enterprises Inc. Catchpole Enterprises is wholly owned by Glenn and Judy
Catchpole, our President. The Agreement states that we will pay a monthly
consulting fee of $8,020 in consideration of the provision of the services of
Mr. Catchpole as our chief executive officer.

We have entered into a consulting agreement with Ubex Capital
Inc. Ubex Capital is wholly owned by Dennis Higgs, our Chairman. The Agreement
states that we will pay a monthly consulting fee of CDN$10,000.

ITEM
11.               
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information concerning
the number of shares of our common stock owned beneficially as of March 25, 2006
by: (i) each person (including any group) known to us to own more than five
percent (5%) of any class of our voting securities, (ii) each of our directors,
(iii) each of our named executive officers; and (iv) officers and directors as a
group. Unless otherwise indicated, the shareholders listed possess sole voting
and investment power with respect to the shares shown.

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Title of Class
    Name and Address Of Beneficial
      Owner
    Number of Shares Common Stock
    Percentage ofCommon Stock
      (1)Directors and OfficersCommon Stock
    Dennis L. Higgs
      Director, Chairman 1410  800 West Pender Street Vancouver,
      British Columbia Canada, V6C 2V6
    4,551,501 (2)
    15.25%Common Stock
    Aileen Lloyd
      Director, Chief Financial Officer Secretary 1410  800 West
      Pender Street Vancouver, British Columbia Canada, V6C 2V6
    1,575,000 (3)
    5.30%Common Stock
    Glenn Catchpole
      Director, President 222 Carriage Circle Cheyenne, WY, 82009
    1,780,000 (4)
    5.97%Common Stock
    Paul Saxton
      Director 188 Stonegate Drive Furry Creek, British Columbia
      V0N 3G4
    250,000 (5)
    0.85%Common Stock
    Dr. Gerhard
      Kirchner Director 330  325 Keevil Crescent Saskatoon,
      Saskatchewan British Columbia, S7N 4R8
    750,000 (6)
    2.52%Common Stock
    George Hartman
      Director, Vice President P.O. Box 50850 Casper, Wyoming
      82605-0850
    960,800 (7)
    3.21%Common Stock
    All Directors and
      Officers as a group (6 persons)
    9,867,301
    31.38%5% StockholdersCommon Stock
    Darcy Higgs
      4756 Drummond Drive Vancouver, British Columbia Canada, V6T
      1B4
    1,955,000 (8)
    6.64%


|(1) | The percent of class is based on 29,425,750of
      common stock issued and outstanding as of April 12, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Includes 2,250,834 shares in the name of Dennis Higgs,
      375,000 shares held in the name of Senate Equities Corp., which is wholly
      owned by Menace Capital Corp., which is in turn wholly owned by Dennis
      Higgs, and 1,500,000 shares were acquired in the name of Senate Capital
      Group Inc. in exchange for the assignment of the mineral claims. Senate
      Capital is wholly owned by Dennis Higgs. Includes 75,667 shares that can
      be acquired upon the exercise of warrants and includes 350,000 shares that
      can be acquired upon the exercise of stock options.
|(3) | Includes 1,050,000 shares in the name of Aileen Lloyd and
      250,000 in the name of her husband, Gordon Lloyd.; includes 25,000 shares
      upon the exercise of warrants and 250,000 shares upon the exercise of
      stock options;                                                                                                                                                                                                                                                                                                                                                               

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|(4) | Includes 1,370,000 shares held in the name of Glenn
      Catchpole, 60,000 shares that can be acquired upon the exercise of
      warrants and 350,000 shares that can be acquired upon the exercise of
      stock options.             
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(5) | Includes 100,000 shares held in the name of Paul Saxton
      and 150,000 shares that can be acquired upon the exercise of stock
      options.                                                                                           
|(6) | Includes 450,000 shares held in the name of Gerhard
      Kirchner, 25,000 shares that can be acquired upon the exercise of warrants
      and 275,000 shares that can be acquired upon the exercise of stock
      options.              
|(7) | Includes 500,000 shares held in the names of George
      Hartman and 460,800 shares that can be acquired upon the exercise of stock
      options.                                                                                       
|(8) | Includes 1,605,000 shares held in the names of Darcy
      Higgs and 350,000 shares held in the name of Santorini Investments Ltd.
      Santorini Investments Ltd. Santorini is wholly-owned by Carleen Higgs,
      wife of Darcy Higgs.

It is believed by us that all persons named have full voting
and investment power with respect to the shares indicated, unless otherwise
noted in the table. Under the rules of the Securities and Exchange Commission, a
person (or group of persons) is deemed to be a "beneficial owner" of a security
if he or she, directly or indirectly, has or shares the power to vote or to
direct the voting of such security, or the power to dispose of or to direct the
disposition of such security. Accordingly, more than one person may be deemed to
be a beneficial owner of the same security. A person is also deemed to be a
beneficial owner of any security which that person has the right to acquire
within 60 days, such as options or warrants to purchase our common stock. In
computing the percentage ownership of any person in the table above, the amount
of shares outstanding is deemed to include the amount of shares beneficially
owned by such person (and only such person) by reason of these acquisition
rights. As a result, the percentage of outstanding shares of any person as shown
in this table does not necessarily reflect the persons actual ownership or
voting power with respect to the number of shares of common stock actually
outstanding on March 25, 2006

CHANGE IN CONTROL

We are not aware of any arrangement that might result in a
change in control in the future.

EQUITY COMPENSATION PLAN INFORMATION

As at December 31, 2005, we had one equity compensation plan
under which our common shares have been authorized for issuance to our officers,
directors, employees and consultants, namely our 2005 Stock Option Plan. Our
2005 Stock Option Plan has not been approved by our shareholders. We do not have
any equity compensation plans that have not been approved by our shareholders.

The following summary information is presented for our 2005
Stock Option Plan as of December 31, 2005.

Number of Securities
      to be Issued Upon Exercise of Outstanding
      Options, Warrants and Rights
    Weighted Average
      Exercise Price of Outstanding Options,
      Warrants and Rights
    Number of Securities
      Remaining Available for Future Issuance Under
      Equity Compensation Plans (Excluding Securities
      Reflected in Column (a)Plan Category
    (a)
    (b)
    (c)Equity Compensation Plans Approved By
      Security Holders
    Not Applicable
    Not Applicable
    Not ApplicableEquity Compensation Plans Not Approved BySecurity
      Holders
    Nil
    Not Applicable
    10,000,000


35

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As disclosed above under Executive Compensation  Stock Option
Grants, we have granted options to purchase shares of our common stock under
our 2005 Stock Option Plan subsequent to December 31, 2005.

ITEM
12.               
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

None of the following parties has, since our date of
incorporation, had any material interest, direct or indirect, in any transaction
with us or in any presently proposed transaction that has or will materially
affect us, other than noted in this section:

- Any of our directors or officers;
- Any person proposed as a nominee for election as a director;
- Any person who beneficially owns, directly or indirectly, shares carrying
  more than 10% of the voting rights attached to our outstanding shares of
  common stock;
- Any of our promoters;
- Any relative or spouse of any of the foregoing persons who has the same
  house as such person.

Dennis Higgs

Mr. Dennis Higgs, President, Chief Executive Officer, and
director, acquired 375,000 shares of our common stock in his own name at a price
of $0.001 per share on February 26, 2001. Mr. Dennis Higgs paid a total purchase
price of $375 for these shares. Senate Equities Corp., a company that is wholly
owned and operated by Menace Capital Corp., acquired 375,000 shares of our
common stock at a price of $0.001 per share on February 26, 2001. Senate
Equities Corp. paid a total purchase price of $375 for these shares. Mr. Dennis
Higgs is the sole stockholder of Menace Capital Corp, which is the sole
shareholder of Senate Equities Corp.

In addition to this acquisition of stock, Mr. Dennis Higgs
acquired a beneficial interest in 1,500,000 shares of the Companys common stock
through the issuance of common stock to Senate Capital Group Inc. in exchange
for its assignment of the Burner Hills mineral claims. Mr. Dennis Higgs owns all
of the stock of Senate Capital Group. Senate Capital Group also received
$10,051.88 as part of this transaction. We terminated our interest in the Burner
Hills mineral claims in fiscal 2005.

In addition, Senate Capital Group has entered into an office
facilities and service contract with the Company in which it provides office
space, services, phones and equipment usage in exchange for a payment of $1,000
per month. Through December 31, 2004, $47,000 had been charged to the Company
under this agreement, of which $32,500 has been accrued and $14,500 has been
paid. We entered into a legally binding agreement with Senate Capital Group
effective September 30, 2002 whereby Senate Capital Group has agreed to defer
payment of accrued liabilities in the amount of $20,500 and its monthly
management fee of $1,000 per month until such time as the Company achieves
sufficient additional financing that would enable us to pay these accrued
liabilities without impeding its exploration plans.

In 2004 Senate Capital Group advanced $10,700 to enable us to
continue phase three of the exploration program on the Burner Hills mineral
claims. Of that amount, $7,470 was available at the 2004 year end to complete
this program. This commitment to advance funds was capped at a maximum of
$13,000, being the budgeted cost of phase three. Any funds that would be
advanced as a loan is repayable on demand without interest. These loans have not
yet been repaid to Senate Capital Group.

During fiscal 2005, we incurred $49,068 (2004 - $12,000) for
general and administrative expenses to Senate Capital Group. At December 31,
2005, $57,857 (2004  49,857) is owing to Senate Capital Group, which is
unsecured, non-interest bearing, and due on demand

36

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Aileen Lloyd

Ms. Lloyd, Secretary, Treasurer and Chief Financial Officer,
acquired 750,000 shares of the Companys common stock at a price of $0.001 per
share on February 26, 2001. Ms. Lloyd paid a total purchase price of $750 for
these shares. Gordon Lloyd, the husband of Aileen Lloyd, acquired 250,000 shares
of the Companys common stock at a price of $0.01 per share for a total cash
acquisition cost of $2,500 on March 12, 2001.

Ubex Capital

We entered into a mineral property purchase agreement with Ubex
Capital Inc. (Ubex) dated April 26th, 2005. We acquired an
undivided 100% right, title and interest in two mineral exploration properties
located in the Athabasca Basin area of Northern Saskatchewan. The agreement is
subject to Ubex retaining a 2% royalty. Total consideration for this acquisition
consists of a cash payment in the amount of CDN$40,756.95. Ubex Capital Inc. is
100% owned by Dennis Higgs, our director and Chairman. Ubex will retain a
royalty of 2% on the property and will split the royalty (1% each) with Darcy
Higgs, who is a greater than 5% shareholder.

On October 20, 2005 an amendment to this agreement was signed
that allows us the one time right exercisable for 90 days following completion
of a bankable feasibility study to buy up to one half (50.0%) of Ubexs royalty
interest (i.e. an amount equal to 1% Royalty) for CDN$1,000,000, leaving Ubex to
retain not less than a 1% Royalty.

As disclosed above under Executive Compensation  Employment
Agreements, we have entered into a consulting agreement with Ubex pursuant to
which the consultant services of Dennis Higgs, our chairman, are provided.
During fiscal 2005, we incurred $43,758 for consulting services (included in
general and administrative expenses) to Ubex. At December 31, 2005, $18,336 is
owing to Ubex, which is unsecured, non-interest bearing, and due on demand.

August 2005 Private Placement

On August 31, 2005, we completed a private placement of our
common stock. We sold a total of 3,775,000 restricted shares of our common stock
to 10 persons who are officers, directors and members of our advisory board. The
shares were sold at a price of $0.001 per shares for a total of $3,775. The
shares were issued as compensation to the ten individuals for acting as
officers, directors, and as members of our advisory board. There were no
commissions paid in connection with the private placement and no underwriters
were involved therein. The shares issued to U.S. residents were issued pursuant
to the exemption from registration contained in section 4(2) of the Securities
Act of 1933. These shares were acquired as follows:

Name of Officer, Director or
      Advisory Board Member
    Number of Shares Purchased
    Total Purchase PriceGlenn Catchpole
    1,200,000
    $1,200George Hartman
    500,000
    $500Dennis Higgs
    800,000
    $800Gerhard Kirchner
    400,000
    $400Aileen Lloyd
    150,000
    $150Paul Saxton
    100,000
    $100Franz Dahlkamp
    50,000
    $50Joe Hebert
    175,000
    $175Gerhard Ruhrman
    50,000
    $50Kenneth Cunningham
    350,000
    $350


37

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Stock Options

As disclosed above under Executive Compensation  Stock Option
Grants, we granted options to purchase shares of our common stock to our
officers and directors under our 2005 Stock Option Plan on January 6, 2006.

Glenn Catchpole

As disclosed above under Executive Compensation  Employment
Agreements, we have entered into a consulting agreement with Catchpole
Enterprises pursuant to which the services of Glenn Catchpole, our president,
are provided.

During the year ended December 31, 2005, the Company paid a
total of $80,000 in consulting services (included in general and administrative
expenses) to Mr. Catchpole and a company controlled by Mr. Catchpole. The
Company also reimbursed Mr. Catchpole $19,867 for general and administrative
expenses incurred on behalf of the Company. Mr. Catchpole was advanced $167,900
during the year for costs to be incurred on behalf of the Company. Of these
advances, $119,245 was used to acquire mineral licenses, $7,045 used for mineral
exploration expenses and $18,252 used for general and administrative expenses.
As at December 31, 2005, $23,358 of these advances remained owing to the
Company, which is unsecured, non-interest bearing, and due on demand.

In May 2005, Mr. Catchpole entered into an agreement to acquire
a 100% interest to a mineral license in Khavtsal, Mongolia, in consideration of
$105,945. Mr. Catchpole intends to transfer title to the property to a Mongolian
company, which became the Companys wholly owned subsidiary subsequent to the
year end.

George Hartman

We have entered into a consulting agreement with Mr. Hartman at
the base rate of $1,000 per day payable in stock equated to the fair market
value of the stock at the 15th of the month in which the services are
performed. The stock in lieu of salary will be awarded on a calendar quarter
basis.

ITEM
13.               
EXHIBITS

The following exhibits are attached to this Annual Report on
Form 10-KSB:

Exhibit Number
      Description3.1
      Articles of Incorporation (1)3.2
      Bylaws, as amended (1)3.3
      Articles
          of Amendment (3)4.1
      Share Certificate (1)10.1
      Office and Administration Services
          Agreement between the Company and Senate Capital Group Inc. dated September
          1, 2005 (2)10.2
      Agreement for Services between
          the Company and Highlands Capital, Inc. dated November 1, 2005(2)10.3
      Financial Public Relations
          Agreement between the Company and Accent Marketing Ltd. dated November
          1, 2005(2)10.4
      Mineral Property Purchase Agreement
          between the Company and Ubex Capital Inc. dated April 26, 2005(2)10.5
      Joint Venture Agreement between
          the Company and Triex Minerals Corporation dated November 4, 2005(2)


38

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10.6
      Consulting Agreement between
          the Company and Ubex Capital Inc. for management and consulting services
          (2)10.7
      Consulting
          Agreement between Catchpole Enterprises and the Company **(3)**10.8
      Joint
          Venture Agreement between the Company and Bluerock Resources Ltd. (3)10.9
      Option
          and Purchase Agreement for federal mining claims in Wyoming **(3)**10.10
      Agreement
          to Purchase ten mining claims in Wyoming (3)10.11
      2005 Stock Option Plan (4)10.12
      Hartman
          letter agreement. (3)31.1
      Certification
          of CEO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002; (3)31.2
      Certification
          of CFO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002; (3)32.1
      Certification
          of CEO Pursuant to 18 U.S.C. Sect ion 1350, as Adopted Pursuant to Section
          906 of the Sarbanes-Oxley Act of 2002. (3)32.2
      Certification
          of CFO Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
          906 of the Sarbanes-Oxley Act of 2002. (3)


|(1) | Previously filed with the Securities and Exchange
      Commission as an exhibit to the Registrants Form AB-2 filed March 15,
      2002
|--- | -----------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                          
|(2) | Previously filed as an exhibit to the Quarterly Report on
      Form 10-QSB filed November 21, 2005                                      
|    |                                                                                                                                          
|(3) | Filed as an exhibit to this Annual Report on Form
      10-KSB.                                                                          
|    |                                                                                                                                          
|(4) | Filed as an exhibit to our Registration Statement on Form
      S-8 filed with the SEC on November 21, 2005.                             

ITEM 14.                PRINCIPAL
  ACCOUNTANT FEES AND SERVICES

The following table sets forth information regarding the amount
billed to us by our independent auditor, Manning Elliott LLP for our last fiscal
year ended December 31, 2005, and by our previous auditor, Morgan & Company,
for our previous fiscal year ended December 31, 2004:

Years Ended December 312005
    2004Audit Fees
    $9,550
    $1,300Audit Related Fees
    $1,000
    $1,200Tax Fees
    Nil
    NilAll Other Fees
    $400
    NilTotal
    $10,950
    $2,500


Audit Fees

Audit Fees are the aggregate fees billed by our independent
auditor for the audit of our annual financial statements, reviews of interim
financial statements and attestation services that are provided in connection
with statutory and regulatory filings or engagements.

Policy on Pre-Approval by Audit Committee of Services
Performed by Independent Auditors

We presently do not have an audit committee. Our board of
directors approves all services provided by our independent accountant.

39

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.

URANERZ ENERGY CORPORATION

|By: | /s/ Glenn Catchpole        | 
|--- | -------------------------- | 
|    | Glenn Catchpole, President | 
|    | Director                   | 
|    | Date: April 12, 2006       | 

In accordance with the Securities Exchange Act, this report has
been signed below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated

|Per: | /s/ Glenn Catchpole                                                         | 
|---- | --------------------------------------------------------------------------- | 
|     | Glenn Catchpole, President, Director                                        | 
|     | Date: April 12, 2006                                                        | 
|     |                                                                             | 
|     |                                                                             | 
|Per: | /s/ Dennis Higgs                                                            | 
|     | Dennis Higgs, Chairman, Director                                            | 
|     | Date: April 12, 2006                                                        | 
|     |                                                                             | 
|     |                                                                             | 
|Per: | /s/ Dr. Gerhard Kirchner                                                    | 
|     | Dr. Gerhard Kirchner, Director                                              | 
|     | Date: April 12, 2006                                                        | 
|     |                                                                             | 
|     |                                                                             | 
|Per: | /s/ George Hartman                                                          | 
|     | George Hartman, Vice President Exploration, Director                        | 
|     | Date: April 12, 2006                                                        | 
|     |                                                                             | 
|     |                                                                             | 
|Per: | /s/ Aileen Lloyd                                                            | 
|     | Aileen Lloyd, Corporate Secretary, Chief Financial
      Officer, Director,
|     | Date: April 12, 2006                                                        | 
|     |                                                                             | 
|     |                                                                             | 
|Per: | /s/ Paul Saxton                                                             | 
|     | Paul Saxton, Director                                                       | 
|     | Date: April 12, 2006                                                        | 

40

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