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, 2020 and 2019
Revenue
Revenues of oil and gas for the three months ended January 31, 2020 and 2019
were $148 and a net negative ($113), respectively, an increase of $231. Revenues
are earned primarily from the J.E. Richey Lease from the sale of oil and gas and
are recorded net of any distributions paid. In the prior period we had to pay
out additional back owed distributions which resulted in the negative net
revenue.
Consulting - related party
Consulting - related party services were $15,000 and $15,000 for the three
months ended January 31, 2020 and 2019, respectively. Fees at $5,000 per month
are paid to Noel Schaefer, Director, but are billed as consulting fees.
Professional fees
Professional fees were $6,270 and $23,500 for the three months ended January 31,
2020 and 2019, respectively, an increase of $17,230 or 73%. Professional fees
generally consist of legal, audit and accounting expense. The increase can
primarily be attributed to an increase in audit fees billed during the period.
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Mineral property expenditures
Mineral property expenditures were $12,036 and $361,048 for the three months
ended January 31, 2020 and 2019, respectively, an increase of $349,012. In the
prior period we accrued for $349,000 of firm commitments associated with the
Winnemucca property.
General and administrative
General and administrative expense was $3,974 and $8,316 for the three months
ended January 31, 2020 and 2019, respectively, a decrease of $4,342 or 52.2%.
The decrease can be attributed to a decrease in travel and office expense.
Interest expense
During the three months ended January 31, 2020 and 2019 we had interest expense
of $3,979 and $4,647, respectively, a decrease of $668 or 14.4%. In the prior
year we incurred an additional interest charge on one of our short-term loans
increasing the expense for that period.
Net Loss
For the three months ended January 31, 2020, we had a net loss of $41,111 as
compared to a net loss of $323,874 for the three months ended January 31, 2019.
Our net loss is lower in the current period due to a decrease in some of our
operating expenses as discussed above.
Results of Operations for the Six Months Ended January 31, 2020 and 2019
Revenue
Revenues of oil and gas for the six months ended January 31, 2020 and 2019 were
$1,379 and $1,596 respectively, a decrease of $217 or 13.6%. Revenues are earned
primarily from the J.E. Richey Lease from the sale of oil and gas and are
recorded net of any distributions paid.
Officer compensation
Officer compensation was $0 and $15,000 for the six months ended January 31,
2020 and 2019, respectively. No compensation was accrued or paid to the CEO in
the current period.
Consulting
Consulting fees were $0 and $10,000 for the six months ended January 31, 2020
and 2019, respectively. When needed the Company hires experts in the mining, oil
and gas industries to assist with its current projects. The decrease in
consulting fees in the current period can be attributed to a decrease in
expenditures while the Company pursues additional funding.
Consulting - related party
Consulting - related party services were $30,000 and $30,000 for the six months
ended January 31, 2020 and 2019, respectively. Fees at $5,000 per month are paid
to Noel Schaefer, Director, but are billed as consulting fees.
Professional fees
Professional fees were $23,930 and $25,250 for the six months ended January 31,
2020 and 2019, respectively, a decrease of $1,320 or 5.2%. Professional fees
generally consist of legal, audit and accounting expense.
Advertising and promotion
Advertising and promotion expenses were $0 and $38,485 for the six months ended
January 31, 2020 and 2019, respectively. We have temporarily decreased our
spending in this area to conserve our available cash.
Mineral property expenditures
Mineral property expenditures were $27,169 and $377,021 for the six months ended
January 31, 2020 and 2019, respectively, an increase of $349,852. In the prior
period we accrued for $349,000 of firm commitments associated with the
Winnemucca property.
General and administrative
General and administrative expense was $9,088 and $16,377 for the six months
ended January 31, 2020 and 2019, respectively, a decrease of $7,289 or 44.5%.
The decrease can be attributed to a decrease in travel and office expense.
Interest expense
During the six months ended January 31, 2020 and 2019 we had interest expense of
$6,870 and $12,144, respectively, a decrease of $5,244 or 43,3%. In the prior
year we incurred an additional interest charge on one of our short-term loans
increasing the expense for that period.
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Net Loss
For the six months ended January 31, 2020, we had a net loss of $95,678 as
compared to a net loss of $433,901 for the six months ended January 31, 2019.
Our net loss is lower in the current period due to a decrease in some of our
operating expenses as discussed above.
Liquidity and Financial Condition
Operating Activities
Cash used by operating activities was $108,840 for the six months ended January
31, 2020. Cash used for operating activities was $132,061 for the six months
ended January 31, 2019.
Financing Activities
Net cash provided by financing activities was $95,022 for the six months ended
January 31, 2020. We received $75,000 from loans payable and $20,000 from the
sale of our common stock. Net cash provided by financing activities was $127,210
for the six months ended January 31, 2019. In the prior period we received
$54,080 from loans from related parties, paid back $55,870 and sold common stock
from cash proceeds of $120,000.
We had the following loans outstanding as of January 31, 2020:
On August 22, 2013 the Company entered into a $50,000 Convertible Loan Agreement
with an un-related party. The Loan and interest are convertible into Units at
$0.08 per Unit with each Unit consisting of one common share of the Company and
½ warrant with each full warrant exercisable for one year to purchase one common
share at $0.30 per share. On July 10, 2014, a further $35,000 was received from
the same unrelated party under the same terms. On July 31, 2018, this Note was
amended whereby the principal and interest are now convertible into Units at
$0.04 per Unit with each Unit consisting of one common share of the Company and
½ warrant with each full warrant exercisable for one year to purchase one common
share at $0.08 per share. The Loan shall bear interest at the rate of Eight
Percent (8%) per annum and matures on March 26, 2020. As of January 31, 2020,
there was $85,000 and $46,610 of principal and accrued interest, respectively,
due on this loan. As of July 31, 2019, there is $85,000 and $43,182 of principal
and accrued interest, respectively, due on this loan. This note is currently in
default.
On October 20, 2017, the Company executed a convertible promissory note for
$25,000 with a third party. The note accrues interest at 6%, matures in two
years and is convertible into shares of common stock at maturity, at a minimum
of $0.10 per share, at the option of the holder. As of January 31, 2020and July
31, 2019, there is $3,501 and $2,367, respectively, of accrued interest due on
this loan. This note is currently in default.
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 ofJanuary 31, 2020 andJuly 31, 2019, there is $15,000 and
$2,625 and $15,000 and $1,875 of principal and accrued interest, respectively,
due on this loan. This loan is currently in default.
As of January 31, 2020 and July 31, 2019, the Company owed $5,000 and $5,000,
respectively, to a third party. The loan is unsecured, non-interest bearing and
due on demand.
During the six months ended January 31, 2020, a third party loaned the Company
$15,000. The loan is unsecured, bears interest at 8% per annum and matures on
September 1, 2021. As of January 31, 2020, there is $424 of interest accrued on
this note.
During the six months ended January 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, 2020, there is $1,512 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.
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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.
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