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, 2021 and 2020
Revenue
Revenues of oil and gas for the three months ended January 31, 2021 and 2020
were $400 and $148, respectively, an increase of $252. 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. The decrease in revenue is due to lower
production as well as lower oil and gas prices.
Officer compensation
Officer compensation was $6,600 and $0 for the three months ended January 31,
2021 and 2020, respectively. We began to incur monthly compensation expense for
our new CFO in April 2020 and no compensation has been accrued or paid to the
CEO in either period.
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Consulting
Consulting fees were $8,000 and $0 for the three months ended January 31, 2021
and 2020, respectively. When needed the Company hires experts in the mining, oil
and gas industries to assist with its current projects.
Consulting - related party
Consulting - related party services were $15,000 and $15,000 for the three
months ended January 31, 2021 and 2020, respectively. Fees of $5,000 per month
are paid to Noel Schaefer, Director, but are recorded as consulting fees.
Professional fees
Professional fees were $6,250 and $6,270 for the three months ended January 31,
2021 and 2020, respectively, a decrease of $20. 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.
Mineral property expenditures
Mineral property expenditures were $0 and $12,036 for the three months ended
January 31, 2021 and 2020, respectively, a decrease of $12,036. 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 $7,064 and $3,974 for the three months
ended January 31, 2021 and 2020, respectively, an increase of $3,090 or 77.7%.
The increase can be attributed to an increase in our transfer agent fees for the
period.
Interest expense
During the three months ended January 31, 2021 and 2020 we had interest expense
of $3,979 and $3,979, respectively.
Other income
During the three months ended January 31, 2021, we recognized a gain on the
forgiveness of debt of $23,616.
Net Loss
For the three months ended January 31, 2021, we had a net loss of $22,877 as
compared to a net loss of $41,111 for the three months ended January 31, 2020.
Results of Operations for the Six Months Ended January 31, 2021 and 2020
Revenue
Revenues of oil and gas for the six months ended January 31, 2021 and 2020 were
$400 and $1,379, respectively, a decrease of $979 or 70.9%. 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. The decrease in revenue is due to lower
production as well as lower oil and gas prices.
Officer compensation
Officer compensation was $13,200 and $0 for the six months ended January 31,
2021 and 2020, respectively. We began to incur monthly compensation expense for
our new CFO in April 2020 and no compensation has been accrued or paid to the
CEO in either period.
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Consulting
Consulting fees were $8,000 and $0 for the six months ended January 31, 2021 and
2020, respectively. When needed the Company hires experts in the mining, oil and
gas industries to assist with its current projects.
Consulting - related party
Consulting - related party services were $30,000 and $30,000 for the six months
ended January 31, 2021 and 2020, respectively. Fees of $5,000 per month are paid
to Noel Schaefer, Director, but are recorded as consulting fees.
Professional fees
Professional fees were $39,750 and $23,930 for the six months ended January 31,
2021 and 2020, respectively, an increase of $15,820 or 66.1%. 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.
Mineral property expenditures
Mineral property expenditures were $1,000 and $27,169 for the six months ended
January 31, 2021 and 2020, respectively, a decrease of $26,169. 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 $12,185 and $9,088 for the six months
ended January 31, 2021 and 2020, respectively, an increase of $3,097 or 34%. The
increase can be attributed to an increase in our transfer agent fees for the
period.
Interest expense
During the six months ended January 31, 2021 and 2020 we had interest expense of
$7,958 and $6,870, respectively, an increase of $1,088 or 15.8%. The increase is
due to newly acquired loans in the later part of fiscal year 2020.
Other income
During the six months ended January 31, 2021, we had other income of $25,000,
that was received as a onetime payment pursuant to the terms of a joint venture
agreement that we entered into. We also recognized a gain on the forgiveness of
debt of $23,616.
Net Loss
For the six months ended January 31, 2021, we had a net loss of $63,077 as
compared to a net loss of $95,678 for the six months ended January 31, 2020.
Liquidity and Financial Condition
Operating Activities
Cash used by operating activities was $109,170 for the six months ended January
31, 2021. Cash used for operating activities was $108,840 for the six months
ended January 31, 2020.
Financing Activities
Net cash provided by financing activities was $125,000 for the six months ended
January 31, 2021. We received $130,000 from the sale of our common stock, which
was offset by a $5,000 repayment on one of our loans payable. Net cash provided
by financing activities was $95,022 for the six months ended January 31, 2020.
In the prior period we received $22 from a related party, $75,000 from other
loans and sold common stock from cash proceeds of $20,000.
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We had the following loans outstanding as of January 31, 2021:
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, 2021,
there is $85,000 and $53,466 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, 2021 there is
$5,013 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 of January 31, 2021, there is $15,000 and $4,125 of principal
and accrued interest, respectively, due on this loan.
On June 11, 2020, a third party loaned the Company $14,000. On September 9,
2020, the Company repaid $5,000 on this loan. The loan is unsecured,
non-interest bearing and due on demand.
As of January 31, 2021, 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 $15,000.
The loan is unsecured, bears interest at 8% per annum and matures on September
1, 2021. As of January 31, 2021, there is $1,627 of interest accrued on this
note.
.
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, 2021, there is $6,325 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.
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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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