UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _________ to ___________
Commission File Number
(Exact name of registrant as specified in its charter) |
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(Registrant’s telephone number, including area code)
_________________________________________________________________
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☒ | Smaller reporting company | ||
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
NORTHERN MINERALS EXPLORATION LTD.
FORM 10-Q
For the Period ended January 31, 2022
TABLE OF CONTENTS
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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| Table of Contents |
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
NORTHERN MINERALS EXPLORATION LTD.
Condensed Consolidated Balance Sheets as of January 31, 2022 (unaudited) and July 31, 2021 (audited) |
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Notes to Condensed Consolidated Financial Statements (unaudited) |
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| Table of Contents |
NORTHERN MINERALS EXPLORATION LTD. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) |
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ASSETS | ||||||||
Current Assets: |
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Cash |
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Total Current Assets |
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TOTAL ASSETS |
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LIABILITIES STOCKHOLDERS’ DEFICIT | ||||||||
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Current Liabilities: |
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Accounts payable |
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Accounts payable – related party |
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Accrued liabilities |
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Convertible debt |
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Loans payable |
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Loans payable – related party |
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Total Current Liabilities |
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TOTAL LIABILITIES |
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Commitments and Contingencies |
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Stockholders’ Deficit: |
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Preferred stock, $ |
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Common stock, $ |
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Common stock to be issued |
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Additional paid-in-capital |
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Accumulated deficit |
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Total Stockholders’ Deficit |
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TOTAL LIABILITIES STOCKHOLDERS’ DEFICIT |
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
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| Table of Contents |
NORTHERN MINERALS EXPLORATION LTD. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) |
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| For the Six Months Ended January 31, |
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Revenue, net |
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Operating expenses: |
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Officer compensation |
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Consulting |
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Consulting – related party |
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Professional fees |
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Mineral property expenditures |
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General and administrative |
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Total operating expenses |
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Loss from operations |
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Other income (expense): |
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Interest expense |
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Other income |
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Gain on forgiveness of debt |
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Total other income |
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Loss before provision for income taxes |
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Provision for income taxes |
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Net Loss |
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Loss per share, basic diluted |
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Weighted average shares outstanding, basic diluted |
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
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| Table of Contents |
NORTHERN MINERALS EXPLORATION LTD. CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT) FOR THE THREE AND SIX MONTHS ENDED JANUARY 31, 2021 AND 2022 (Unaudited) |
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Balance, July 31, 2020 |
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Common stock issued for cash |
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Net loss |
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Balance, October 31, 2020 |
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Common stock issued for cash |
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Net loss |
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Balance, January 31, 2021 |
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Balance, July 31, 2021 |
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Common stock issued for cash |
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Common stock issued for cash – related party |
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Common stock issued for conversion of debt and accrued interest |
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Net loss |
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Balance, October 31, 2021 |
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Common stock issued for cash |
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Common stock issued for cash – related party |
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Common stock issued for conversion of debt and accrued interest – related party |
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Contributed capital |
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Net loss |
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Balance, January 31, 2022 |
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
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| Table of Contents |
NORTHERN MINERALS EXPLORATION LTD. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) |
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Cash Flows from Operating Activities: |
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Net loss |
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Adjustments to reconcile net loss to net cash used in Operating activities: |
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Gain on forgiveness of debt |
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Changes in Operating Assets and Liabilities: |
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Accounts receivable |
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Accounts payables and accrued liabilities |
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Accounts payable – related party |
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Accrued liabilities |
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Net cash used in operating activities |
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Cash Flows used in Investing Activities: |
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Cash Flows from Financing Activities: |
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Repayment of loan payable |
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Proceeds from the sale of common stock |
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Net cash provided by financing activities |
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Net increase in cash |
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Cash at beginning of the period |
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Cash at end of the period |
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Cash paid during the period for: |
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Interest |
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Taxes |
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Supplemental disclosure of non-cash activity: |
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Conversion of debt and accrued interest |
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
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Northern Minerals Exploration Ltd.
Notes to Consolidated Financial Statements
January 31, 2022
(Unaudited)
NOTE 1 - ORGANIZATION AND BUSINESS OPERATIONS
Northern Minerals Exploration Ltd. (the “Company”) is an emerging natural resource company operating in oil and gas production in central Texas and exploration for gold and silver in northern Nevada.
The Company was incorporated in Nevada on December 11, 2006 under the name Punchline Entertainment, Inc. On August 22, 2012, the Company’s board of directors approved an agreement and plan of merger to effect a name change of the Company from Punchline Entertainment, Inc. to Punchline Resources Ltd. On July 12, 2013, the stockholders approved an amendment to change the name of the Company from Punchline Resources Ltd. to Northern Mineral Exploration Ltd. FINRA approved the name change on August 13, 2013.
On November 22, 2017, the Company created a wholly owned subsidiary, Kathis Energy LLC (“Kathis”) for the purpose of conducting oil and gas drilling programs in Texas.
On December 14, 2017, Kathis Energy, LLC and other Limited Partners, created Kathis Energy Fund 1, LP, a limited partnership created for raising investor funds.
On May 7, 2018, the Company created ENMEX LLC, a wholly owned subsidiary in Mexico, for the purposes of managing and operating its investments in Mexico including but not limited to the Joint Venture opportunity being negotiated with Pemer Bacalar on the 61 acres on the Bacalar Lagoon on the Yucatan Peninsula. There was no activity from inception to date.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The Company’s unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The accompanying unaudited condensed financial statements reflect all adjustments, consisting of only normal recurring items, which, in the opinion of management, are necessary for a fair statement of the results of operations for the periods shown and are not necessarily indicative of the results to be expected for the full year ending July 31, 2022. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended July 31, 2021.
Use of estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates.
Cash and Cash Equivalents
The Company considers all cash accounts, which are not subject to withdrawal restrictions or penalties, and all highly liquid debt instruments purchased with a maturity of three months or less as cash and cash equivalents. The carrying amount of financial instruments included in cash and cash equivalents approximates fair value because of the short maturities for the instruments held. The Company had no cash equivalents as of January 31, 2022 and July 31, 2021.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Kathis Energy LLC, Kathis Energy Fund 1, LLP and Enmex Operations LLC. All financial information has been prepared in conformity with accounting principles generally accepted in the United States of America. All significant intercompany transactions and balances have been eliminated.
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Revenue Recognition
Revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration that an entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amount of revenue that is recorded reflects the consideration that the Company expects to receive in exchange for those goods. The Company applies the following five-step model in order to determine this amount: (i) identification of the promised goods in the contract; (ii) determination of whether the promised goods are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.
The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. Once a contract is determined to be within the scope of ASC 606 at contract inception, the Company reviews the contract to determine which performance obligations the Company must deliver and which of these performance obligations are distinct. The Company recognizes as revenues the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied or as it is satisfied. Generally, the Company’s performance obligations are transferred to customers at a point in time, typically upon delivery.
Mineral Property Acquisition and Exploration Costs
Mineral property acquisition and exploration costs are expensed as incurred until such time as economic reserves are quantified. Cost of lease, exploration, carrying and retaining unproven mineral lease properties are expensed as incurred. We have chosen to expense all mineral exploration costs as incurred given that it is still in the exploration stage. Once our company has identified proven and probable reserves in its investigation of its properties and upon development of a plan for operating a mine, it would enter the development stage and capitalize future costs until production is established. When a property reaches the production stage, the related capitalized costs will be amortized over the estimated life of the probable-proven reserves. When our company has capitalized mineral properties, these properties will be periodically assessed for impairment of value and any diminution in value.
Oil and Gas Properties
The Company follows the successful efforts method of accounting for its oil and gas properties. Under this method of accounting, all property acquisition costs and costs of exploratory and development wells are capitalized when incurred, pending determination of whether the well found proved reserves. If an exploratory well does not find proved reserves, the costs of drilling the well are charged to expense. The costs of development wells are capitalized whether those wells are successful or unsuccessful. Other exploration costs, including certain geological and geophysical expenses and delay rentals for oil and gas leases, are charged to expense as incurred. Maintenance and repairs are charged to expense, and renewals and betterments are capitalized to the appropriate property and equipment accounts. Depletion and amortization of oil and gas properties are computed on a well-by-well basis using the units-of-production method. Although the Company has recognized minimal levels of production and revenue, none of its property have proved reserves. Therefore, the Company’s properties are designated as unproved properties.
Unproved property costs are not subject to amortization and consist primarily of leasehold costs related to unproved areas. Unproved property costs are transferred to proved properties if the properties are subsequently determined to be productive and are assigned proved reserves. Proceeds from sales of partial interest in unproved leases are accounted for as a recovery of cost without recognizing any gain until all cost is recovered. Unproved properties are assessed periodically for impairment based on remaining lease terms, drilling results, reservoir performance, commodity price outlooks or future plans to develop acreage.
Asset Retirement Obligation
Accounting Standards Codification (“ASC”) Topic 410, Asset Retirement and Environmental Obligations (“ASC 410”) requires an entity to recognize the fair value of a liability for an asset retirement obligation in the period in which it is incurred. The net estimated costs are discounted to present values using credit-adjusted, risk-free rate over the estimated economic life of the oil and gas properties. Such costs are capitalized as part of the related asset. The asset is depleted on the equivalent unit-of-production method based upon estimates of proved oil and natural gas reserves. The liability is periodically adjusted to reflect (1) new liabilities incurred, (2) liabilities settled during the period, (3) accretion expense and (4) revisions to estimated future cash flow requirements. To date, the Company has very few operating wells. Currently, the Company has one working well. Because there is only one active well on the Ritchie Lease with a 24% working interest, the Company estimates the asset retirement obligation to be trivial and has not recorded an ARO liability.
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| Table of Contents |
Basic and Diluted Earnings Per Share
Net income (loss) per common share is computed pursuant to ASC 260-10-45, Earnings per Share—Overall—Other Presentation Matters. Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock and potentially outstanding shares of common stock during the period.
For the three and six months ended January 31, 2022, the Company had
Recently issued accounting pronouncements
In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)—Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. ASU 2020-06 reduces the number of accounting models for convertible debt instruments and convertible preferred stock. For convertible instruments with conversion features that are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging, or that do not result in substantial premiums accounted for as paid-in capital, the embedded conversion features no longer are separated from the host contract. ASU 2020-06 also removes certain conditions that should be considered in the derivatives scope exception evaluation under Subtopic 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity, and clarify the scope and certain requirements under Subtopic 815-40. In addition, ASU 2020-06 improves the guidance related to the disclosures and earnings-per-share (EPS) for convertible instruments and contract in entity’s own equity. ASU 2020-06 is effective for public business entities that meet the definition of a Securities and Exchange Commission (SEC) filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Board specified that an entity should adopt the guidance as of the beginning of its annual fiscal year.
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
NOTE 3 - GOING CONCERN
The accompanying financial statements are prepared and presented on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Accordingly, they do not include any adjustments relating to the realization of the carrying value of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. Since inception to January 31, 2022, the Company has an accumulated deficit of $
NOTE 4 - OIL AND GAS PROPERTIES
The Company currently has one active lease. We hold a
NOTE 5 – WINNEMUCCA MOUNTAIN PROPERTY
On September 14, 2012, we entered into an option agreement with AHL Holdings Ltd., and Golden Sands Exploration Inc. (“Optionors”), wherein we acquired an option to purchase an 80% interest in and to certain mining claims, which claims form the Winnemucca Mountain Property in Humboldt County, Nevada (“Property”). This property currently is comprised of 138 unpatented mining claims covering approximately 2,700 acres.
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On March 25, 2019 the Company entered into a New Option Agreement with the Optionors. As stated in the New Option Agreement the Company has agreed to certain terms and conditions to have the right to earn an 80% interest in the Property, these terms include cash payments, issuance of common shares of the Company and work commitments.
The Company’s firm commitments per the March 25, 2019 option agreement total $
The Company has received notice, effective October 27, 2020, that its Option Agreement to earn an interest in the Winnemucca Mountain Gold Property has been terminated for being in default of certain terms and conditions of the Agreement. Management is in discussions with the principals of the Winnemucca property to resolve any outstanding obligations.
During the year ended July 31, 2021, the Company received notice of the current amount due resulting in the reduction of the liability to $
The Company does not fully agree with the amount due and is working to resolve the issue.
NOTE 6 - CONVERTIBLE DEBT
On October 20, 2017, the Company executed a convertible promissory note for $
NOTE 7 – LOANS PAYABLE
On April 16, 2017, the Company executed a promissory note for $
On June 11, 2020, a third party loaned the Company $
As of January 31, 2022, the Company owed $
During the year ended July 31, 2020, a third party loaned the Company $
During the year ended July 31, 2020, a third party loaned the Company $
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NOTE 8 - COMMON STOCK
During the six months ended January 31, 2022, the Company sold
During the six months ended January 31, 2022, the Company sold
As discussed in Note 6 a note holder converted their note in full into
As discussed in Note 7 a note holder converted their note in full into
Refer to Note 11 for stock issued to related parties.
NOTE 9 – WARRANTS
The Company issued
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NOTE 10 - COMMITTEMENTS AND CONTINGENCIES
On April 13, 2021, the Company entered into an agreement with Foster S. Zeiders, one of the owners of the Calihoma Partners LLC (“Fosters’). Per the terms of the agreement Foster is willing to transfer to NMEX Natural Gas LLC, (a subsidiary of the Company still to be created), all of his interest, including but not limited to a 35% back-in after payout interest in Calihoma Partners LLC which has 60% ownership in West Lenapah Project including the assets and project definition as described in the agreement. Foster hereby agrees to transfer one hundred (100%) percent of his membership interests in Calihoma Partners LLC, in exchange for
During the initial period of this Agreement if either party hereto for reasonable cause determines that membership interests in Calihoma Partners LLC should no longer be held by NMEX Natural Gas LLC. Foster shall exchange his shares in Northern for the membership interests in NMEX Natural Gas LLC, and Northern will convey such membership interests to Foster in exchange for his stock in Northern, and NMEX Natural Gas LLC shall become wholly owned by Foster. Foster shall serve as Manager of NMEX Natural Gas LLC until Northern determines to convey the interests in Calihoma Partners or one year whichever is shorter. As of January 31, 2022, the initial
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NOTE 11 - RELATED PARTY TRANSACTIONS
For the six months ended January 31, 2022 and 2021, total payments of $
As of January 31, 2022 and July 31, 2021, there is $
On September 25, 2018, the Company executed a loan agreement with the wife of the Ivan Webb, CEO for $
On January 28, 2022, Mr. Webb, purchased
Victor Miranda, a Director of the Company is also President and owner of Labrador Capital SAPI DE CV (“Labrador”), a major shareholder of the Company owning 8.8% of its issued and outstanding shares. The Company has entered into a Memorandum of Understanding with Labrador to jointly pursue developing real estate projects in Mexico. As of the date of this report no projects have been identified to jointly pursue. In the event of a decision to go forward with Labrador, Victor Miranda will abstain from voting to avoid any conflict of interest.
During the year ended July 31, 2021, Mr. Miranda purchased
During the six months ended January 31, 2022, Mr. Miranda purchased
NOTE 12 - SUBSEQUENT EVENTS
Management has evaluated subsequent events pursuant to the requirements of ASC Topic 855, from the balance sheet date through the date the financial statements were issued and has determined that no material subsequent events exist other than the following.
Subsequent to January 31, 2022, all shares disclosed as to be issued as of January 31, 2022, were issued by the transfer agent.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
This report on Form 10-Q contains certain forward-looking statements. All statements other than statements of historical fact are “forward-looking statements” for purposes of these provisions, including any projections of earnings, revenues, or other financial items; any statements of the plans, strategies, and objectives of management for future operation; any statements concerning proposed new products, services, or developments; any statements regarding future economic conditions or performance; statements of belief; and any statement of assumptions underlying any of the foregoing. Such forward-looking statements are subject to inherent risks and uncertainties, and actual results could differ materially from those anticipated by the forward-looking statements.
These forward-looking statements involve significant risks and uncertainties, including, but not limited to, the following: competition, promotional costs and the risk of declining revenues. Our actual results could differ materially from those anticipated in such forward-looking statements as a result of a number of factors. These forward-looking statements are made as of the date of this filing, and we assume no obligation to update such forward-looking statements. The following discusses our financial condition and results of operations based upon our unaudited financial statements which have been prepared in conformity with accounting principles generally accepted in the United States. It should be read in conjunction with our financial statements and the notes thereto included elsewhere herein.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
As used in this quarterly report, the terms “we”, “us”, “our” and “our company” mean Northern Minerals Exploration Ltd., unless otherwise indicated.
General Overview
We are an emerging natural resource company operating in oil and gas production in central Texas and exploration for gold and silver in northern Nevada.
Current Business
Refer to NOTE 4 and NOTE 5 for property information.
Results of Operations
Results of Operations for the Three Months Ended January 31, 2022 and 2021
Revenue
We had revenue for the three months ended January 31, 2022 of $0, compared to $400 for the three months ended January 31, 2021.
Officer compensation
Officer compensation was $6,600 and $6,600 for the three months ended January 31, 2022, and 2021, respectively. Officer compensation is paid to our CFO.
Consulting – related party
Consulting – related party services were $20,000 and $15,000 for the three months ended January 31, 2022, and 2021, respectively. Fees of $5,000 per month are paid to Noel Schaefer, Director, but are recorded as consulting fees. During the current period Mr. Schaefer was compensated an additional $5,000.
Professional fees
Professional fees were $5,945 and $6,250 for the three months ended January 31, 2022, and 2021, respectively, a decrease of $305 or 4.9%. Professional fees generally consist of legal, audit and accounting expense. The decrease can be attributed to a decrease in audit fees billed during the period.
General and administrative
General and administrative expense was $5,025 and $7,064 for the three months ended January 31, 2022, and 2021, respectively, a decrease of $2,039 or 28.9%. The decrease is mainly due to a decrease in transfer agent fees.
Interest expense
During the three months ended January 31, 2022, and 2021 we had interest expense of $10,392 and $3,979, respectively. The increase is due to additional interest charged on the debt assumed by Mr. Webb.
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Other income
During the three months ended January 31, 2022, we recognized other income of $2,287 and a gain on forgiveness of debt of $17,167. During the three months ended January 31, 2021, we recognized a gain on forgiveness of debt of $23,616.
Net Loss
For the three months ended January 31, 2022, we had a net loss of $28,508 as compared to a net loss of $22,877 for the three months ended January 31, 2021, an increase of $5,631, or 24.6%.
Results of Operations for the Six Months Ended January 31, 2022 and 2021
Revenue
We had revenue for the six months ended January 31, 2022 of $0, compared to $400 for the six months ended January 31, 2021.
Officer compensation
Officer compensation was $13,200 and $13,200 for the six months ended January 31, 2022, and 2021, respectively. Officer compensation is paid to our CFO.
Consulting – related party
Consulting – related party services were $35,000 and $30,000 for the six months ended January 31, 2022, and 2021, respectively. Fees of $5,000 per month are paid to Noel Schaefer, Director, but are recorded as consulting fees. During the current period Mr. Schaefer was compensated an additional $5,000.
Professional fees
Professional fees were $25,395 and $39,750 for the six months ended January 31, 2022, and 2021, respectively, a decrease of $14,355 or 36.1%. Professional fees generally consist of legal, audit and accounting expense. The decrease can be attributed to a decrease in audit fees billed during the period.
Mineral property expenditures
Mineral property expenditures were $0 and $1,000 for the six months ended January 31, 2022, and 2020, respectively, a decrease of $1,000. The decrease in in the current period can be attributed to a decrease in expenditures while the Company pursues additional funding.
General and administrative
General and administrative expense was $15,472 and $12,185 for the six months ended January 31, 2022, and 2021, respectively, an increase of $3,287 or 27%. The increase is mainly due to an increase in transfer agent fees.
Interest expense
During the six months ended January 31, 2022, and 2021 we had interest expense of $12,376 and $7,958, respectively. The increase is due to additional interest charged on the debt assumed by Mr. Webb.
Other income
During the six months ended January 31, 2022, we recognized other income of $2,287 and a gain on forgiveness of debt of $17,167. During the six months ended January 31, 2021, we recognized a gain on forgiveness of debt of $23,616 and other income of $25,000 that was received as a one-time payment pursuant to the terms of a joint venture agreement the we entered into.
Net Loss
For the six months ended January 31, 2022, we had a net loss of $81,989 as compared to a net loss of $63,077 for the six months ended January 31, 2021, an increase of $18,912, or 29.9%.
Liquidity and Financial Condition
Operating Activities
Cash used by operating activities was $103,170 for the six months ended January 31, 2022. Cash used for operating activities was $109,170 for the six months ended January 31, 2021.
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Financing Activities
Net cash provided by financing activities was $155,551 for the six months ended January 31, 2022. We received $160,551 from the sale of our common stock and $5,000 from a loan payable, which was offset by repayment of $10,000. Net cash provided by financing activities was $125,000 for the six months ended January 31, 2021. In the prior period we repaid $5,000 of a loan payable and sold common stock from cash proceeds of $130,000.
We had the following loans outstanding as of January 31, 2022:
On April 16, 2017, the Company executed a promissory note for $15,000 with a third party. The note matures in two years and interest is set at $3,000 for the full two years. As of January 31, 2022, there is $15,000 and $5,625 of principal and accrued interest, respectively, due on this loan. As of July 31, 2021, there is $15,000 and $4,875 of principal and accrued interest, respectively, due on this loan. This loan is currently in default.
On June 11, 2020, a third party loaned the Company $14,000. On September 9, 2020, the Company repaid $5,000 on this loan. On March 3, 2021, the party loaned another $5,000 to the Company, which was repaid during the six months ended January 31, 2022. The loan is unsecured, non-interest bearing and due on demand.
As of January 31, 2022, the Company owed $5,000 to a third party. The loan is unsecured, non-interest bearing and due on demand.
During the year ended July 31, 2020, a third party loaned the Company $60,000. The loan is unsecured, bears interest at 8% per annum and matures on September 1, 2021. As of January 31, 2022, there is $11,165 of interest accrued on this note.
We will require additional funds to fund our budgeted expenses over the next twelve months. These funds may be raised through equity financing, debt financing, or other sources, which may result in further dilution in the equity ownership of our shares. There is still no assurance that we will be able to maintain operations at a level sufficient for an investor to obtain a return on his investment in our common stock. Further, we may continue to be unprofitable. We need to raise additional funds in the immediate future in order to proceed with our budgeted expenses.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.
Critical Accounting Policies
Refer to Note 2 of our financial statements contained elsewhere in this Form 10-Q for a summary of our critical accounting policies and recently adopting and issued accounting standards.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and, as such, are not required to provide the information under this Item.
Item 4. Controls and Procedures
We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer (our principal executive officer, principal financial officer and principal accounting officer), as appropriate to allow timely decisions regarding required disclosure.
We carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and chief financial officer (our principal executive officer, principal financial officer and principal accounting officer), of the effectiveness of the design and operation of our disclosure controls and procedures as of quarter covered by this report. Based on the evaluation of these disclosure controls and procedures the chief executive officer and chief financial officer (our principal executive officer, principal financial officer and principal accounting officer) concluded that our disclosure controls and procedures were not effective.
Changes in Internal Controls
During the quarter covered by this report there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings
We know of no material, existing or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our company.
Item 1A. Risk Factors
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and, as such, are not required to provide the information under this Item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
During the three months ended January 31, 2022, the Company sold 1,083,335 shares of common stock at $0.03 per share for total cash proceeds of $32,550. As of January 31, 2022, 833,335 of the shares had not yet been issued by the transfer agent; therefore $25,050 has been credited to common stock to be issued. The shares were issued in February 2022.
On January 28, 2022, Mr. Webb, purchased 2,000,000 shares of common stock for $60,000.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
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Item 6. Exhibits
Exhibit Number |
| Exhibit Description |
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(101)** |
| Interactive Data File |
101.INS |
| iXBRL Instance Document |
101.SCH |
| iXBRL Taxonomy Extension Schema Document. |
101.CAL |
| iXBRL Taxonomy Extension Calculation Link base Document. |
101.DEF |
| iXBRL Taxonomy Extension Definition Link base Document. |
101.LAB |
| iXBRL Taxonomy Extension Label Link base Document. |
101.PRE |
| iXBRL Taxonomy Extension Presentation Link base Document. |
* | (a) Filed herewith. |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.