UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
T Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period endedFebruary 28, 2009
£ Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from _____ to _____
Commission File Number: 000-52354
RUBY CREEK RESOURCES INC.
(Name of registrant as specified in its charter)
Nevada | 26-4329046 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Suite 400, 409 Granville Street |
|
(Address of principal executive offices) | (Zip Code) |
(604) 633-9768 | |
(Registrant's telephone number, including area code) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of Securities Exchange Act of 1934 during the preceding 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.
YesT No£
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer£ | Accelerated filer£ |
Non-accelerated filer£ (do not check is smaller reporting company) | Smaller reporting companyT |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes£ NoT
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.8,337,001 shares of common stock as of April 13, 2009.
__________
RUBY CREEK RESOURCES INC.
Quarterly Report On Form 10-Q
For The Quarterly Period Ended February 28, 2009
FORWARD-LOOKING STATEMENTS
This Form 10-Q for the quarterly period ended February 28, 2009 contains forward-looking statements that involve risks and uncertainties. Forward-looking statements in this document include, among others, statements regarding our capital needs, business plans and expectations. Such forward-looking statements involve assumptions, risks and uncertainties regarding, among others, the success of our business plan, availability of funds, government regulations, operating costs, our ability to achieve significant revenues, our business model and products and other factors. Any statements contained herein that are not statements of historical fact 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. In evaluating these statement s, you should consider various factors, including the assumptions, risks and uncertainties set forth in reports and other documents we have filed with or furnished to the SEC. These factors or any of them may cause our actual results to differ materially from any forward-looking statement made in this document. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding future events, our actual results will likely vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. The forward-looking statements in this document are made as of the date of this document and we do not intend or undertake to update any of the forward-looking statements to conform these statements to actual results, except as required by applicable law, including the securities laws of the United States.
__________
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The following unaudited interim financial statements of Ruby Creek Resources Inc. are included in this Quarterly Report on Form 10-Q:
Ruby Creek Resources Inc.
(An Exploration Stage Company)
February 28, 2009
(Unaudited)
Index | |
Balance Sheets | 4 |
Statements of Operations | 5 |
Statements of Cash Flows | 6 |
Notes to the Financial Statements | 7 |
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Ruby Creek Resources Inc.
(An Exploration Stage Company)
Balance Sheets
|
| |
(Unaudited) | ||
ASSETS | ||
Current Assets | ||
Cash | 9,848 | 76,192 |
GST receivable | 1,682 | 4,813 |
11,530 | 81,005 | |
Equipment, net | 946 | 554 |
Interest in mineral properties (Note 2) | 6,608 | 4,177 |
19,084 | 85,736 | |
LIABILITIES AND STOCKHOLDERS' EQUITY | ||
Current Liabilities | ||
Accounts payable | 82,120 | 46,590 |
Due to related parties | 113 | 113 |
82,233 | 46,703 | |
Stockholders' Equity | ||
Common stock (Note 3) | ||
Issued and outstanding: 8,337,001 (August 31, 2008 - 8,337,001) shares | 8,337 | 8,337 |
Additional paid in capital | 271,863 | 271,863 |
Donated capital | 3,000 | 3,000 |
Deficit accumulated during the exploration stage | (346,349) | (244,167) |
(63,149) | 39,033 | |
19,084 | 85,736 | |
The accompanying notes are an integral part of these financial statements.
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Ruby Creek Resources Inc.
(An Exploration Stage Company)
Statements of Operations
(Unaudited)
Three Month | Three Month | Six Month | Six Month | For the Period | |
Expenses | |||||
Management services (Note 4) | - | - | 1,938 | 9,280 | 55,237 |
Mineral property costs (recovery) (Note 3) | (3,097) | - | (2,297) | 1,505 | 28,117 |
Office and general (Note 4) | 6,187 | 1,664 | 15,872 | 3,372 | 34,343 |
Professional fees | 33,231 | 13,041 | 83,222 | 16,848 | 227,413 |
Property evaluation | - | - | 2,172 | - | 2,172 |
Shareholder relations | 750 | 100 | 1,275 | 250 | 3,991 |
Total expenses | 37,071 | 14,805 | 102,182 | 31,255 | 351,273 |
Net loss before other items | (37,071) | (14,805) | (102,182) | (31,255) | (351,273) |
Interest income | - | 200 | - | 200 | 4,924 |
Net loss | (37,071) | (14,605) | (102,182) | (31,055) | (346,349) |
Net loss per share - basic and diluted | (0.00) | (0.00) | (0.01) | (0.00) | |
Weighted average number of common shares outstanding - basic and diluted |
|
|
|
|
The accompanying notes are an integral part of these financial statements.
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Ruby Creek Resources Inc.
(An Exploration Stage Company)
Statements of Cash Flows
(Unaudited)
Six Month Period | Six Month Period | For the Period from | |
Cash flows from operating activities: | |||
Net loss | (102,182) | (31,055) | (346,349) |
Adjustments to reconcile net loss to net cash | |||
Depreciation | 136 | 119 | 514 |
Donated rent | - | - | 1,500 |
Donated services | - | - | 1,500 |
Net changes in non-cash working capital items: | |||
GST receivable | 3,131 | 4,786 | (1,682) |
Accounts payable and accrued liabilities | 35,530 | (9,385) | 82,120 |
Due to related parties | - | - | 113 |
Net cash flows used in operating activities | (63,385) | (35,535) | (262,284) |
Cash flows from investing activities | |||
Purchase of equipment | (528) | - | (1,460) |
Interest in mineral properties | (2,431) | - | (6,608) |
Net cash flows used in investing activities | (2,959) | - | (8,068) |
Cash flows from financing activities | |||
Share subscriptions received | - | - | 280,200 |
Net cash flows from financing activities | - | - | 280,200 |
Net increase (decrease) in cash and cash equivalents | (66,344) | (35,535) | 9,848 |
Cash - beginning | 76,192 | 141,288 | - |
Cash - ending | 9,848 | 105,753 | 9,848 |
Supplemental disclosure with respect to cash flows: | |||
Cash paid for: | |||
Interest | - | - | - |
Income taxes | - | - | - |
The accompanying notes are an integral part of these financial statements.
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1. Basis of Presentation
Unaudited Interim Financial Statements
The accompanying unaudited interim financial statements have been prepared in accordance with United States generally accepted accounting principles ("US GAAP") for interim financial information and with the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with US GAAP have been condensed or omitted pursuant to such rules and regulations. However, except as disclosed herein, there has been no material change in the information disclosed in the notes to the financial statements for the year ended August 31, 2008 included in the Company's annual report filed with the Securities and Exchange Commission. The interim unaudited financial statements should be read in conjunction with those financial statements included in the Form 10-KSB. In the opinion of Management, all adjustments considered necessary for a fair presentation, consisting solely of normal recurring adjus tments, have been made. Operating results for the six months ended February 28, 2009 are not necessarily indicative of the results that may be expected for the year ending August 31, 2009.
2. Mineral Properties
Pursuant to an agreement dated July 15, 2006, as amended on July 9, 2008 and February 18, 2009, the Company has acquired an option to earn a 100% interest in the Moore Creek Property (the"Property") located in the Iskut River region, British Columbia, Canada in exchange for cash payments totalling CDN$100,000 over 4 years, payable as follows:
(a) CDN$2,500 on October 15, 2006 (paid);
(b) CDN$2,000 on April 15, 2008 (paid);
(c) CDN$1,500 on September 30, 2008 (paid)
(d) CDN$6,500 on May 31, 2009;
(e) CDN$3,000 on August 31, 2009;
(f) CDN$12,000 on October 31, 2009;
(g) CDN$20,000 on March 31, 2010; and
(h) CDN$52,500 on November 30, 2010.
The Property is subject to a 2% net smelter return royalty ("NSR") of which 1% can be repurchased at any time by the vendor for $1,000,000. The Property is comprised of 8 mineral claims covering a total of 2,919 hectares and as of the date of these financial statements title is held in the name of the vendor. Title will be transferred to the Company upon receipt of all of the cash payments, as described above.
During the six months ended February 28, 2009 the Company expensed $2,852 (2008 - $1,505) in exploration costs and received $5,149 (2008- Nil) from B.C. Mining Tax Credits for net mineral property costs (recovery) of $(2,297).
3. Common Stock
Effective January 29, 2009, the Company changed its jurisdiction from the Province of British Columbia to the State of Nevada. Effective the same date, the Company's authorized capital was changed from an unlimited number of common shares without par value to 500,000,000 common shares with a par value of $0.001 per share. As a result, an amount of $271,863 has been reclassified out of common stock and into additional paid in capital.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
As used in this quarterly report: (i) the terms "we", "us", "our" and the "Company" mean Ruby Creek Resources Inc.; (ii) "SEC" refers to the Securities and Exchange Commission; (iii) "Exchange Act" refers to the Securities Exchange Act of 1934, as amended; and (iv) all dollar amounts refer to United States dollars unless otherwise indicated.
The following discussion of our plan of operations, results of operations and financial condition as at and for the comparative three and six month periods ended February 28, 2009 should be read in conjunction with our unaudited interim financial statements and related notes for the comparative periods ended February 28, 2009 included in this quarterly report.
Overview
We were incorporated on May 3, 2006 under the laws of the Province of British Columbia, Canada. On July 15, 2006 we acquired an option to acquire a group of eight mining exploration claims located in north western British Columbia. The property is also known as the More Creek property. To date, we have not discovered an economically viable mineral deposit on the optioned mineral properties, and there is no assurance that we will discover one.
In August 2008, we filed a Form S-4 with the SEC in which we proposed changing our jurisdiction of incorporation from British Columbia to Nevada through a process known as a conversion under Nevada corporate law, and known as a continuation under Canadian corporate law (the "Continuation" or the "Conversion"). A continuation or conversion is a process by which a corporation which is not incorporated under the laws of Nevada may change its jurisdiction of incorporation to Nevada. Under the Nevada Revised Statutes, if the laws of its home jurisdiction allow for it, a company may be "converted" to a Nevada corporation by filing Articles of Conversion with the Nevada Secretary of State under the Nevada Revised Statutes. In order to give effect to the Continuation, our board of directors adopted a plan of conversion (the "Plan of Conversion") and recommended that stockholders approve and adopt this Plan of Conversion.
The SEC declared our Form S-4 registration statement effective on December 18, 2008. Proxy documentation was sent to all shareholders of our Company as of the record date of December 17, 2008 and the shareholder meeting which considered the motion to continue our Company from British Columbia to Nevada and change our authorized share capital to 500,000,000 common shares with a par value of $0.001 per share, was held on January 13, 2009. At the meeting, all issues were approved and we disclosed the Continuation and change of capital structure in our Form 8-K filed with the SEC on February 13, 2009.
As a result of the Continuation, Ruby Creek is now a Nevada corporation governed by the Nevada Revised Statutes. We continue to conduct the business in which we have been engaged. The Continuation will not have any material effect on our operations. The business and operations of Ruby Creek are identical in most respects to our business prior to the Continuation, except that we are no longer are subject to the corporate laws of British Columbia but are subject to the Nevada Revised Statutes. Ruby Creek (Nevada) is liable for all the debts and obligations of Ruby Creek (BC), and the officers and directors of Ruby Creek (BC) continue as the officers and directors of Ruby Creek (Nevada). The differences between the laws will not materially affect our business but will affect certain rights of stockholders. The differences between the applicable laws of the two jurisdictions were presented in greater detail under the section of our Form S-4 proxy statement/prospectus entitled "Comparati ve Rights of Stockholders".
In addition to the Continuation approval, our shareholders also authorized a change in our authorized share capital from unlimited common shares without par value to 500,000,000 common shares with a par value of $0.001 per share (the "Change in Authorized Share Capital"). The purpose of this proposed Change in Authorized Share Capital was to comply with Nevada corporate law and practice, which does not provide for unlimited authorized share capital.
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As a component of our Continuation from British Columbia, the NASD on February 12, 2009 approved a change of the Company's OTC Bulletin Board trading symbol from "RBCYF" to "RBCY".
We are considered an exploration or exploratory stage company as we are involved in the examination and investigation of land that we believe may contain valuable minerals, for the purpose of discovering the presence of ore, if any, and its extent. There is no assurance that a commercially viable mineral deposit exists on any of our optioned mining properties, and a great deal of further exploration will be required before a final evaluation as to the economic and legal feasibility for our future exploration is determined. We have no known reserves of any type of mineral.
Our office is located at Suite 400, 409 Granville Street, Vancouver, British Columbia, Canada, V6C 1T2; our telephone number is (604) 633-9768.
We have no revenues, have achieved losses since inception and rely upon the sale of our securities to fund our operations. Our auditors have expressed substantial doubt about our ability to continue as a going concern. We will not generate revenues even if our exploration program indicates that a mineral deposit may exist on our optioned mineral claims. Accordingly, we will be dependent on future additional financing in order to maintain our operations and continue our exploration activities.
We are an exploration stage company engaged in the acquisition and exploration of mineral properties. We acquired the option to acquire a 100% interest in eight mineral claims (the "More Creek properties") located in the Iskut River region of northern British Columbia, Canada, covering an area of approximately 2,919 hectares pursuant to an option agreement dated July 15, 2006 and amended on August 15, 2006 and further amended on February 18, 2009. Pursuant to this option agreement, we have the exclusive option to earn a 100% interest in and to these eight mineral claims, subject to a 2% net smelter return royalty payable to the optionor, in exchange for making cash payments totalling CDN$100,000 (US$81,887 based on the exchange rate of CDN$1.2212 : US$1.00 on April 13, 2009) to the optionor over a four-year period as follows: CDN$2,500 paid on October 15, 2006; CDN$2,000 paid on April 15, 2008; CDN$1,500 paid on September 30, 2008; CDN$6,500 payable on or before May 31, 2009, CDN$3,000 payable on or before August 31, 2009; CDN$12,000 payable on or before October 31, 2009; CDN$20,000 payable on or before March 31, 2010; and a final payment of CDN$52,500 payable on or before November 30, 2010.
Each of our optioned mineral claims is in good standing with the Province of British Columbia until July 10, 2009. The formal property owner, Mr. von Einsiedel's ownership in these mineral claims will expire on July 10, 2009. Mineral claims of this type may be extended either by completing sufficient work and filing a report on the work completed on the mineral property with the British Columbia Ministry of Energy and Mines, or by paying a filing fee in lieu of performing the exploration work.
In order to maintain the mineral claims in good standing after July 10, 2009, the Company (on behalf of the claim owner) must complete annual labour or exploration expenditures on the mineral claims and file confirmation of work with the applicable mining recording office of the Province of British Columbia. Currently, exploration work with a minimum value of CDN$11,676 for the property is required before the 10th of every July. If the Company does not complete this minimum amount of exploration work by July 10, 2009, the Company (on behalf of the claim owner) will be required to pay a fee in lieu of exploration work in the amount of CDN$4.00 per hectare, or approximately CDN$11,676 in total, to the Province of British Columbia. If the Company fails to make and file the work expenditures or, alternatively, make the appropriate payments to the Province of British Columbia in lieu of exploration expenditures, Mr. von Einsiedel will lose all interest the mineral claims that are the subject of our option.
Our optioned mineral claims presently do not have any proven mineral reserves. The property that is the subject of our mineral claim is undeveloped and does not contain any open-pit or underground mines. There is no plant or equipment located on the property that is the subject of the mineral claim.
9
Between July 15 and September 30, 2006, we retained Mr. von Einsiedel, a consulting geologist, to complete the initial stages of a work program consisting of Landsat 7 alteration imaging, compilation of all available geological data, preparation of detailed base topographic maps and a site examination to confirm the published technical information. The total cost of the work completed was CDN$10,290 (US$8,426 based on the exchange rate of US$1.00 : CDN$1.2212 on April 13, 2009).
We obtained a geological report on our optioned mineral claims prepared by Mr. von Einsiedel, dated October 15, 2006. This report was based on information on the mineral claims included in the public domain, geologic maps, geological survey data and from Mr. von Einsiedel's geological experience in the area. Mr. von Einsiedel's report outlined a recommended phased exploration program on our optioned mineral claims, including a phase one exploration work program consisting of geochemical surveys to determine if there are overburden covered zones of porphyry style copper gold mineralization present within the claim area.
We retained Mr. von Einsiedel to conduct the first phase of the recommended exploration program between June and October 2007. The cost of this exploration program was CDN$17,000 (US$13,921 based on the exchange rate of US$1.00 : CDN$1.2212 on April 13, 2009).The phase one work that was carried out involved several helicopter-supported, recon sampling traverses that were made to the More Creek property with the objective of identifying porphyry style copper - gold mineralization. Approximately 60% of the claim area now has at least widely spaced sample coverage. Considering the large size of porphyry type copper gold systems, the recon program completed at More Creek was designed to provide an indication as to whether or not a porphyry system exists on the subject property.
In addition to this phase one work, subsequent to the Company's filing of an Assessment Report with the British Columbia government in early 2008, new historic data was found (by way of an additional literature search) that covered the More Creek property. This data was from a large survey performed in 1990. The reason that it had not been previously found was that the assessment report for this survey was plotted in MapBC, a long distance from the More Creek property. The program was extensive and was covered in two separate assessment reports. The work covered all drainages and included several transects throughout the property. Soil, silt and float samples were collected. This data showed only several weak widespread anomalies which did not indicate the presence of a significant porphyry body. Of note is that this 1990 survey showed two float samples in the eastern drainage that graded 1900 and 530 ppb gold. These float samples were of quartz carbonate vein within grey sediments .
Mr. von Einsiedel provided the Company with a report on this phase one property work on July 2, 2008. This report concluded that the available data, which includes both the 2007 data and historical sampling data, identified several weakly anomalous sites but did not identify any strongly anomalous sites. Although much of the property is heavily overburden covered, the recon program should have been able to identify any large, near surface mineralized zones present within the areas sampled. The weakly anomalous sample results that were identified, although interesting, are too low to be indicative of "in situ" mineralization. In this report, Mr. von Einsiedel indicated that the origin of the gold bearing float samples within the eastern portion of the property will be a key aspect of any future exploration program. While any exploration team is on the property, it is recommended that the source of the three main areas with gold, copper and/or arsenic anomalies that were identified with in the western portion of the property be investigated. An advantage for the next program is that there is now road access to near the southern boundary of the property as the Teck Cominco-Novagold road has been completed to within 1 kilometer of the property (therefore there will be no - or minimal - helicopter usage).
Although no specific definitive results were identified during the 2007 work program, the work itself was not detailed in terms of the entire property. We believe that the historical data that Mr. von Einsiedel discovered indicates a number of interesting and promising mineralization indications. As a result, our board of directors decided to retain our option agreement with respect to the More Creek property and continue with a phase two program as recommended by Mr. von Einsiedel.
On July 10, 2008 we requested that Mr. von Einsiedel prepare a proposal to carry out the planned phase two work. We received the proposal from Mr. von Einsiedel on September 4, 2008, which recommended a program to concentrate on specific high-opportunity areas. To evaluate these areas, Mr. Von Einsiedel recommended that we complete a minimum 10-day field program with at least one geologist and an experienced prospector. He quoted a cost estimate of CDN$21,800 (US$17,851 based on the exchange rate of US$1.00 : CDN$1.2212 on April 13, 2009), as follows:
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Crew mobilization: Vancouver to Bob Quin | CDN $2,000.00 |
Total: | CDN $21,800.00 |
In the event that Mr. Von Einsiedel's personnel are allowed to use the new access road, the costs of the program could be reduced by as much as 25% as this would eliminate the requirement to utilize any helicopter time. If this is the case, the estimated cost of the program, including the required cash in lieu payment would be CDN$18,500 (US$15,149 based on the exchange rate of US$1.00 : CDN$1.2212 on April 13, 2009).
Mr. von Einsiedel concluded that in the event that the phase two program is able to delineate a target area or areas that exhibit a co-incident geochemical and geophysical response, a next phase program consisting of detailed geochemical surveys and ground geophysical surveys would be warranted in a phase three program. He estimated the cost of this program to be approximately CDN$115,000 (US$94,170 based on the exchange rate of US$1.00 : CDN$1.2212 on April 13, 2009), but he did not provide a specific break-down of these costs.
In order to fulfill certain disclosure requirements in Canada, we requested George A. Nicholson, P. Geo., to prepare a technical report with respect to our optioned mineral properties in compliance with National Instrument 43-101 of the Canadian Securities Administrators,Standards of Disclosure for Mineral Projects("NI 43-101"). Mr. Nicholson's report, dated November 27, 2008, concludes that the geological setting of the More Creek property is prospective for the occurrence of alkalic, porphyry style copper-gold mineralization. He reported that the results of the exploration work and geochemical sampling conducted by Ruby Creek and a previous operator have identified several areas which exhibit elevated copper, gold and/or arsenic levels in soil and/or rock samples that warrant additional exploration. Mr. Nicholson's technical report identifies the highest priority areas as "Copper Anomaly No. 2" located in the south central part of the More Creek property and "Gold Anomaly No. 2" located in the east central part of the More Creek property. We filed this report to the British Columbia Securities Commission on November 28, 2008, issued a news release on the same date and disclosed this filing by way of a Form 8-K filed with the SEC on December 3, 2008.
Mr. Nicholson's technical report recommends the same initial follow-up (phase two) exploration work program as set forth in Mr. Einsiedel's report as described above at the same estimated cost of CDN$21,800.
Contingent on the results of such initial follow-up exploration work, the Mr. Nicholson's technical report recommends follow-up exploration work (phase three) at an estimated cost of CDN$87,000 (US$71,241 based on the exchange rate of US$1.00 : CDN$1.2212 on April 13, 2009), which is less than Mr. Einsiedel's estimated cost for phase three follow-up exploration work of CDN$115,000. Mr. Nicholson's report provides the following estimated cost break down for such follow-up work:
Crew mobilization: Vancouver to Bob Quinn | CDN$4,000 |
Total: | CDN$87,000 |
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Because of early winter weather in the More Creek area, the phase two program will not be able to be carried out until the second quarter of 2009. We intend to raise additional financing with which to carry out this program.
Our plan of operations for the next twelve months is to complete the following objectives within the time periods specified, subject to our obtaining the funding necessary for the continued exploration of our optioned mineral claims:
As such, we estimate that our total expenditures over the next twelve months will be approximately $95,149 to $97,851. This estimate does not take into account estimated expenditures with respect to phase three of our exploration program, as this phase is contingent on the results of phase two and on our receipt of sufficient financing. If we were to complete phase two and three during the next twelve months, our total estimated expenditures for that period would be approximately $166,390 to $192,021.
Based on the nature of our business, we anticipate incurring operating losses in the foreseeable future. We base this expectation, in part, on the fact that very few mineral claims in the exploration stage ultimately develop into producing, profitable mines. Our future financial results are also uncertain due to a number of factors, some of which are outside our control. These factors include, but are not limited to:
Due to our lack of operating history and present inability to generate revenues, our auditors have stated in their report for our most recent fiscal year end that there exists substantial doubt about our ability to continue as a going concern. Even if we complete our current exploration program and it is successful in identifying a mineral deposit, we will have to spend substantial funds on further drilling and engineering studies before we will know if we have a commercially viable mineral deposit or reserve.
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Financial Condition
At February 28, 2009, we had cash of $9,848 and a negative working capital position of $70,703.
We estimate that our total expenditures over the next twelve months will be approximately $95,149 to $97,851, as outlined above under the heading "Plan of Operations". This estimate does not take into account estimated expenditures with respect to phase three of our exploration program, as this phase is contingent on the results of phase two and on our receipt of sufficient financing. If we were to complete phase two and three during the next twelve months, our total estimated expenditures for that period would be approximately $166,390 to $192,021.
At the present time, we have insufficient cash to proceed with phase two of our recommended work program, and we will be required to obtain additional financing to continue basic operations and to proceed with phase two and phase three of the recommended work program, as these expenditures exceed our current cash reserves.
We believe that debt financing will not be an alternative for funding additional phases of exploration as we do not have tangible assets to secure any debt financing. We anticipate that additional funding will be in the form of equity financing from the sale of our common stock. We are in the process of raising funds through a private placement offering of our shares of common stock. However, there can be no assurance that we will complete the private placement or that the funds raised will be sufficient for us to pay our expenses beyond the next twelve months. In the absence of such financing, we will not be able to continue exploration of any future mineral claims and our business plan will fail. Even if we are successful in obtaining equity financing to fund an exploration program, there is no assurance that we will obtain the funding necessary to pursue any advanced exploration of any mineral claims we may acquire. If we do not continue to obtain additional financing, we will be forced to abandon any future mineral claims that we may acquire and our plan of operations.
We may consider entering into a joint venture partnership by linking with a major resource company to provide the required funding to complete further exploration programs. We have not undertaken any efforts to locate a joint venture partner; however, if we enter into a joint venture arrangement, we will assign a percentage of our interest in our mineral claims to the joint venture partner.
Results of Operations for the Three and Six Month periods ended February 28, 2009
Revenues
We have had no operating revenues since our inception on May 3, 2006 through to February 28, 2009. We anticipate that we will not generate any revenues for so long as we are an exploration stage company.
General and Administrative Expenses
Our general and administrative expenses for the three and month periods ended February 28, 2009 and February 29, 2008, as well as the total of these expenses since our inception on May 3, 2006, are summarized below:
Three Month | Three Month | Six Month | Six Month | For the Period | |
Expenses | |||||
Management services | - | - | 1,938 | 9,280 | 55,237 |
Mineral property costs (recovery) | (3,097) | - | (2,297) | 1,505 | 28,117 |
Office and general | 6,187 | 1,664 | 15,872 | 3,372 | 34,343 |
Professional fees | 33,231 | 13,041 | 83,222 | 16,848 | 227,413 |
Property evaluation | - | - | 2,172 | - | 2,172 |
Shareholder relations | 750 | 100 | 1,275 | 250 | 3,991 |
Total expenses | 37,071 | 14,805 | 102,182 | 31,255 | 351,273 |
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Expenses for the three month period ended February 28, 2009 totalled $37,071 and were primarily comprised of professional fees (audit and legal costs) which totalled $33,231. These costs included year end Form 10-KSB preparation and filing as well as filing expenses related to Form 8-K, Form S-4 and Form S-1 filings with the SEC. The expenses for professional fees for the comparable period in 2008 were $13,041 out of total expenses of $14,805. Management services costs were nil in the current three month period and nil in the 2008 comparable period. Office and general expenses (consisting primarily of office rent and telecommunication costs) were $6,187 during the current three month period as compared to $1,664 in the prior year comparable period.
Expenses for the six month period ended February 28, 2009 totalled $102,182 and were primarily comprised of professional fees (audit and legal costs) which totalled $83,222. These costs included quarterly Forms 10-Q and Form 10-K preparation and filing as well as filing expenses related to Forms 8-K, S-4 and S-1 filings with the SEC. The expenses for professional fees for the comparable period in 2008 were $16,848 out of total expenses of $31,255. Management services costs were $1,938 in the current six month period and $9,280 in the 2008 comparable period. Office and general expenses (consisting primarily of office rent and telecommunication costs) were $15,872 during the current six month period as compared to $3,372 in the prior year comparable period.
Net Loss
We had a net loss of $37,071 in the three months ended February 28, 2009 as compared to a net loss of $14,605 in the comparable 2008 three month period. Losses increased primarily as a result of an increase in professional fees between the two periods.
We had a net loss of $102,182 in the six months ended February 28, 2009 as compared to a net loss of $31,055 in the comparable 2008 six month period. Losses increased primarily as a result of an increase in professional fees between the two periods. Our net loss from inception on May 3, 2006 until February 28, 2009 was $346,349.
Liquidity and Capital Resources
We had cash of $9,848 and a negative working capital position of $70,703 at February 28, 2009.
We estimate that our total expenditures over the next twelve months will be approximately $95,149 to $97,851, as outlined above under the heading "Plan of Operations". This estimate does not take into account estimated expenditures with respect to phase three of our exploration program, as this phase is contingent on the results of phase two and on our receipt of sufficient financing. If we were to complete phase two and three during the next twelve months, our total estimated expenditures for that period would be approximately $166,390 to $192,021. At the present time, we have insufficient cash to proceed with phase two of our recommended work program, and we will be required to obtain additional financing to continue basic operations and to proceed with phase two and phase three of the recommended work program, as these expenditures exceed our current cash reserves.
Cash Used in Operating Activities
Cash used in operating activities was $63,385 during the six month period ended February 28, 2009, as compared to $35,535 during the six month period ended February 29, 2008. Cash used in operating activities from our inception on May 3, 2006 to February 28, 2009 was $262,284.
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Cash Used in Investing Activities
We used cash of $2,959 in investing activities during the six months ended February 28, 2009 (consisting of $528 for purchase of office equipment and payments totalling $2,431 related to our mineral property interest), as compared to cash used in investing activities of nil during the six month period ended February 29, 2008. Cash used in investing activities from our inception on May 3, 2006 to February 28, 2009 was $8,068 ($1,460 for the purchase of equipment and $6,608 related to our mineral property interest).
Cash from Financing Activities
We have funded our business to date primarily from sales of our common stock. From our inception on May 3, 2006 to February 28, 2009, we raised a total of approximately $280,200 from private offerings of our securities. During the six months ended February 28, 2009 as well as during the six months ended February 29, 2008, no net cash was provided by financing activities from sale of our securities.
There are no assurances that we will be able to achieve further sales of our common stock or any other form of additional financing. If we are unable to achieve the financing necessary to continue our plan of operations, then we will not be able to continue our exploration of the prospect lease and our venture will fail.
Going Concern
We are in the exploration stage and have not generated revenues since inception. We have incurred significant losses to date and further losses are anticipated raising substantial doubt about the ability of our Company to continue operating as a going concern. The continuation of our Company as a going concern is dependent upon our ability to obtain necessary equity financing to continue operations and to determine the existence, discovery and successful exploitation of economically recoverable reserves on its resource properties and ultimately on the attainment of future profitable operations. We are currently negotiating with three shareholders and new investors on private equity and/or convertible debt financing which would provide sufficient working capital to finance our operations for the next twelve months. As at February 28, 2009, we had accumulated losses of $346,349 since inception. These financial statements do not include any adjustments to the recoverabil ity and classification of recorded asset amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern.
Future Financings
We anticipate continuing to rely on equity sales of our common shares in order to continue to fund our business operations. Issuances of additional shares will result in dilution to our existing shareholders. There is no assurance that we will achieve any additional sales of our equity securities or arrange for debt or other financing to fund our planned exploration activities.
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.
Critical Accounting Policies
Our consolidated financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.
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We regularly evaluate the accounting policies and estimates that we use to prepare our consolidated financial statements. In general, management's estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.
Use of Estimates and Assumptions
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 period. Actual results could differ from those estimates.
Mineral Property Costs
Pursuant to EITF 04-2, we classified our mineral rights as tangible assets and accordingly acquisition costs are capitalized as mineral property costs. Generally accepted accounting principles require that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In performing the review for recoverability, we are to estimate the future cash flows expected to result from the use of the asset and its eventual disposition. If the sum of the undiscounted expected future cash flows is less than the carrying amount of the asset, an impairment loss is recognized. Mineral exploration costs are expensed as incurred until commercially mineable deposits are determined to exist within a particular property. Accordingly, we have expensed all mineral exploration costs.
To date we have not established any proven or probable reserves on its mineral properties.
We have adopted the provisions of SFAS No. 143 "Accounting for Asset Retirement Obligations" which establishes standards for the initial measurement and subsequent accounting for obligations associated with the sale, abandonment, or other disposal of long-term tangible assets arising from the acquisition, construction or development and for normal operations of such assets. As of February 28, 2009, any potential costs related to the retirement of our mineral property interests have not yet been determined.
Foreign Currency Translation
The financial statements are presented in United States dollars. In accordance with Statement of Financial Accounting Standards ("SFAS") No. 52, "Foreign Currency Translation", foreign denominated monetary assets and liabilities are translated to their United States dollar equivalents using foreign exchange rates which prevailed at the balance sheet date. Non-monetary assets and liabilities are translated at the transaction date. Revenue and expenses are translated at average rates of exchange during the year. Related translation adjustments are reported as a separate component of stockholders' equity, whereas gains or losses resulting from foreign currency transactions are included in results of operations.
Recent Accounting Pronouncements
In May 2008, the Financial Accounting Standards Board ("FASB") issued SFAS No. 163, "Accounting for Financial Guarantee Insurance Contracts - An interpretation of FASB Statement No. 60". SFAS 163 requires that an insurance enterprise recognize a claim liability prior to an event of default when there is evidence that credit deterioration has occurred in an insured financial obligation. It also clarifies how Statement 60 applies to financial guarantee insurance contracts, including the recognition and measurement to be used to account for premium revenue and claim liabilities, and requires expanded disclosures about financial guarantee insurance contracts. It is effective for financial statements issued for fiscal years beginning after December 15, 2008, except for some disclosures about the insurance enterprise's risk-management activities. SFAS 163 requires that disclosures about the risk-management activities of the insurance enterprise be effective for the first period beginning after issuance. Except for those disclosures, earlier application is not permitted. The adoption of this statement is not expected to have a material effect on the Company's financial statements.
In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles ("SFAS No. 162"). SFAS No. 162 is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in conformity with U.S. generally accepted accounting principles for nongovernmental entities. SFAS No. 162 is effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board Auditing amendments to AU Section 411,The Meaning ofPresent Fairly in Conformity with Generally Accepted Accounting Principles. We do not expect there to be any significant impact of adopting SFAS 162 on its financial position, cash flows and results of operations.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not required because we are a smaller reporting company.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our principal executive officer and our principal financial officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective as of the end of the period covered by this report, based on their evaluation of these controls and procedures required by paragraph (b) of Rules 13a-15 and 15d-15, due to certain material weaknesses in our internal control over financial reporting.
Internal Control Over Financial Reporting
As previously disclosed in our annual report on Form 10-K for our fiscal year ended August 31, 2008, our management conducted an assessment of the effectiveness of the Company's internal control over financial reporting as of August 31, 2008, based on criteria established inInternal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). As a result of this assessment, our management identified material weaknesses in internal control over financial reporting as of August 31, 2008, specifically:
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At the time of filing of this quarterly report, we are actively negotiating with a number of third parties regarding consenting to act as independent directors for our Company in order to mitigate lack of independent oversight. It is our objective to add a minimum of two additional directors to our Board of Directors prior to the end of the third quarter of our 2009 fiscal year. We believe that the likely costs related to the addition of new directors will not be material.
During the quarter ended November 30, 2008, we hired, on a fee basis, an independent Certified General Accountant to prepare our general ledger and other financial records for reporting periods. This individual was previously retained to assist in the preparation of our 2008 year end internal control analysis on an independent basis. The fee costs for the financial record completion are estimated to be $1,500 per quarter. The recruitment of an independent Certified General Accountant to prepare our financial reporting records has now segregated the duties of actual cash control from the financial statement preparation.
During the quarter ended February 28, 2009 this accountant continued to provide third party account record preparation services for us. As a result, the consultant (who was previously the only individual with any significant knowledge of generally accepted accounting principles as discussed above), is no longer the only individual with any significant knowledge of generally accepted accounting principles and is also no longer the only individual in charge of activities with the general ledger (including the preparation of routine and non-routine journal entries), the preparation of accounting reconciliations, the selection of accounting principles, and the preparation of interim and annual financial statements (including footnote disclosures) in accordance with generally accepted accounting principles.
Changes in Internal Control Over Financial Reporting
As discussed above, we previously recruited an independent Certified General Accountant to offset concerns regarding lack of Segregation of Duties. This individual continued to provide third party record preparation services to the Company during the quarter ended February 28, 2009. There have been no other changes in our internal control over financial reporting during the fiscal quarter ended February 28, 2009 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
We currently are not a party to any material legal proceedings and, to our knowledge, no such proceedings are threatened or contemplated.
Item 1A. Risk Factors
Not required because we are a smaller reporting company.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
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Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Securities Holders
In August 2008, we filed a Form S-4 with the SEC in which we proposed changing our jurisdiction of incorporation from British Columbia to Nevada through a process known as a conversion under Nevada corporate law, and known as a continuation under Canadian corporate law (the "Continuation" or the "Conversion"). A continuation or conversion is a process by which a corporation which is not incorporated under the laws of Nevada may change its jurisdiction of incorporation to Nevada. Under the Nevada Revised Statutes, if the laws of its home jurisdiction allow for it, a company may be "converted" to a Nevada corporation by filing Articles of Conversion with the Nevada Secretary of State under the Nevada Revised Statutes. In order to give effect to the Continuation, our board of directors adopted a plan of conversion (the "Plan of Conversion") and recommended that stockholders approve and adopt this Plan of Conversion.
The SEC declared our Form S-4 registration statement effective on December 18, 2008. Proxy documentation was sent to all shareholders of our Company as of the record date of December 17, 2008 (representing 8,337,001 shares of our common stock issued and outstanding as of such record date), and a special shareholder meeting was held on January 13, 2009 at our legal representative's offices at Suite #1500, 1055 West Georgia Street, Vancouver, BC, Canada. At the meeting, the following motions were considered and the results of voting were as follows:
Proposal No. 1 - Approval of Change in Jurisdiction from British Columbia to Nevada | For | Against | Abstain |
Resolved that the Company transfer out of British Columbia under the jurisdiction of the British Columbia Business Corporations Act, Chapter 57, Section 308, and continue into Nevada under the jurisdiction of the Nevada Revised Statues | 7,312,501 | Nil |
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Proposal No. 2 - Approval of Amendment of the Company's Articles of Incorporation | For | Against | Abstain |
Resolved that the Articles of Incorporation of the Company be amended to change the authorized capital of the Company from an unlimited number of common shares of to 500,000,000 common shares with a par value of $0.001 per share. | 7,312,501 | Nil |
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As such, all issues were approved and we disclosed the Continuation and change of capital structure in our Form 8-K filed with the SEC on February 13, 2009.
The
Item 5. Other Information
None.
Item 6. Exhibits
The following exhibits are filed with this Quarterly Report on Form 10-Q:
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Exhibit | Description of Exhibit |
3.1 | Articles of Incorporation (1) |
10.1 | Mineral Claims Option Agreement between Ruby Creek Resources Inc. and Carl von Einsiedel, dated July 15, 2006, as amended August 15, 2006 (2) |
10.2 | July 9, 2008 Amendment to Mineral Claims Option Agreement between Ruby Creek Resources Inc. and Carl von Einsiedel (2) |
10.3 | February 18, 2009 Amendment to Mineral Claims Option Agreement between Ruby Creek Resources Inc. and Carl von Einsiedel (filed herewith) |
31.1 | Rule 13a-14(a)/15(d)-14(a) Certification of Chief Executive Officer(filed herewith) |
31.2 | Rule 13a-14(a)/15(d)-14(a) Certification of Chief Financial Officer (filed herewith) |
32.1 | 18 U.S.C. Section 1350 Certifications of Chief Executive Officer and Chief Financial Officer (filed herewith) |
(1) Filed as an exhibit to our Post-Effective Amendment No. 1 on Form S-1/A, as filed with the SEC on February 17, 2009 and incorporated herein by this reference.
(2) Filed as an exhibit to the Company's Registration Statement on Form SB-2, as filed with the SEC on November 7, 2006, and incorporated herein by this reference.
(3) Filed as an exhibit to the Company's Annual Report on Form 10-K for its fiscal year ended August 31, 2008, as filed with the SEC on November 28, 2008 and incorporated herein by this reference.
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SIGNATURES
Pursuant to the requirements 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.
RUBY CREEK RESOURCES INC.
Per: "Brian Roberts"
Brian Roberts
President, Chief Executive Officer, Principal Executive Officer and a director
Date: April 14, 2009
Per: "Ian Foreman"
Ian Foreman
Secretary, Treasurer, Chief Financial Officer, Principal Accounting Officer and a director
Date: April 14, 2009
__________
