TUFFNELL LTD.
TUFFNELL LTD.
(An Exploration Stage Company)
BALANCE SHEETS
| | | June 30, 2010 | | | September 30, 2009 | |
| | | (Unaudited) | | | | |
| ASSETS | | | | | | |
| Current assets: | | | | | | |
| | | | | | | |
| Cash | | $ | 261,743 | | | $ | 444 | |
| | | | | | | | | |
| Total current assets | | | 261,743 | | | | 444 | |
| | | | | | | | | |
| Mineral property interest | | | 39,261 | | | | - | |
| | | | | | | | | |
| Total Assets | | $ | 301,004 | | | $ | 444 | |
| | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS' DEFICIT | | | | | | | | |
| | | | | | | | | |
| Current liabilities: | | | | | | | | |
| | | | | | | | | |
| Accounts payable | | $ | 20,907 | | | $ | - | |
| | | | | | | | | |
| Shareholder advances | | | 54,083 | | | | 31,740 | |
| | | | | | | | | |
| Total current liabilities | | | 74,990 | | | | 31,740 | |
| | | | | | | | | |
| Total liabilities | | | 74,990 | | | | 31,740 | |
| Commitments | | | | | | | | |
| STOCKHOLDERS' DEFICIT | | | | | | | | |
| | | | | | | | | |
| Common stock, $0.001 par value, 75,000,000 shares authorized, 58,860,000 shares issued and outstanding at June 30, 2010 and September 30, 2009 | | | 58,860 | | | | 58,860 | |
| | | | | | | | | |
| Additional paid-in capital | | | 475,040 | | | | (24,960 | ) |
| | | | | | | | | |
| Deficit accumulated during the exploration stage | | | ( 307,886 | ) | | | ( 65,196 | ) |
| | | | | | | | | |
| Total stockholders' deficit | | | 226,014 | | | | (31,296 | ) |
| | | | | | | | | |
| Total liabilities and stockholders’ deficit | | $ | 301,004 | | | $ | 444 | |
The accompanying notes are an integral part of these financial statements
TUFFNELL LTD.
(An Exploration Stage Company)
STATEMENTS OF OPERATIONS
For the three and nine months ended June 30, 2010 and 2009 and the period from
July 26, 2007 (inception) through June 30, 2010
(Unaudited)
| | | Three months | | | Three months | | | Nine months | | | Nine months | | | Inception through | |
| | | June 30, 2010 | | | June 30, 2009 | | | June 30, 2010 | | | June 30, 2009 | | | June 30, 2010 | |
| | | | | | | | | | | | | | | | |
| Costs and expenses: | | | | | | | | | | | | | | | |
| Mineral exploration | | $ | 120,784 | | | $ | — | | | $ | 120,784 | | | $ | — | | | $ | 125,084 | |
| General and administrative | | | 86,733 | | | | 8,084 | | | | 121,906 | | | | 40,660 | | | | 182,802 | |
| Net loss: | | $ | (207,517 | ) | | $ | (8,084 | ) | | $ | (242,690 | ) | | $ | (40,660 | ) | | $ | (307,886 | ) |
| Net loss per share: | | | | | | | | | | | | | | | | | | | | |
| Basic and diluted | | $ | (0.00 | ) | | $ | (0.00 | ) | | $ | (0.00 | ) | | $ | (0.00 | ) | | | | |
| Weighted average shares outstanding: | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Basic and diluted | | | 58,860,000 | | | | 58,860,000 | | | | 58,860,000 | | | | 56,787,033 | | | | | |
The accompanying notes are an integral part of these financial statements.
TUFFNELL LTD.
(An Exploration Stage Company)
STATEMENTS OF CASH FLOWS
For the nine months ended June 30, 2010 and 2009 and the period from
July 26, 2007 (inception) through June 30, 2010
(Unaudited)
| | | Nine months | | | Nine months | | | Inception through | |
| | | June 30, 2010 | | | June 30, 2009 | | | June 30, 2010 | |
| | | | | | | | | | |
| CASH FLOWS FROM OPERATING ACTIVITIES: | | | | | | | | | |
| | | | | | | | | | |
| Net loss | | $ | (242,690 | ) | | $ | (40,660 | ) | | $ | (307,886 | ) |
| | | | | | | | | | | | | |
| Adjustment to reconcile net loss to cash used in operating activities: | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Net change in: | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Accounts payable | | | 20,907 | | | | - | | | | 20,907 | |
| | | | | | | | | | | | | |
| CASH FLOWS USED IN OPERATING ACTIVITIES: | | | (221,783 | ) | | | (40,660 | ) | | | (286,979 | ) |
| | | | | | | | | | | | | |
| CASH FLOWS FROM INVESTING ACTIVITIES: | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Purchase of mineral property interests | | | (39,261 | ) | | | - | | | | (39,261 | ) |
| | | | | | | | | | | | | |
| CASH FLOWS USED IN INVESTING ACTIVITIES: | | | (39,261 | ) | | | - | | | | (39,261 | ) |
| | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Cash received from the sale of common stock | | | 500,000 | | | | 30,400 | | | | 533,900 | |
| | | | | | | | | | | | | |
| Shareholder advances, net | | | 22,343 | | | | (3,900 | ) | | | 54,083 | |
| | | | | | | | | | | | | |
| CASH FLOWS PROVIDED BY FINANCING ACTIVITIES: | | | 522,343 | | | | 26,500 | | | | 587,983 | |
| | | | | | | | | | | | | |
| NET INCREASE (DECREASE) IN CASH | | | 261,299 | | | | (14,160 | ) | | | 261,743 | |
| | | | | | | | | | | | | |
| Cash, beginning of period | | | 444 | | | | 15,239 | | | | - | |
| | | | | | | | | | | | | |
| Cash, end of period | | $ | 261,743 | | | $ | 1,079 | | | $ | 261,743 | |
| | | | | | | | | | | | | |
| SUPPLEMENTAL CASH FLOW INFORMATION | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Cash paid on interest expenses | | $ | - | | | $ | - | | | $ | - | |
| | | | | | | | | | | | | |
| Cash paid for income taxes | | $ | - | | | $ | - | | | $ | - | |
The accompanying notes are an integral part of these financial statements
TUFFNELL LTD.
(An Exploration Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
March 31, 2010
(UNAUDITED)
Note 1 Basis of Presentation
The accompanying unaudited interim financial statements of Tuffnell Ltd. ("Tuffnell" or the "Company") have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the United States of America and the rules of the Securities and Exchange Commission ("SEC"), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company's annual report filed with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for our interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements that would substantially duplicate the disclosure contained in the audited financial statements for fiscal 2009, as reported in the Form 10-K annual report of the Company, have been omitted.
The Company was incorporated in the State of Nevada on July 26, 2007. On February 26, 2010, the Company’s principal shareholder entered into a stock purchase agreement which provided for the sale of 31,500,000 shares of common stock of the Company to George Dory. Effective February 26, 2010, Mr. Dory was appointed Chief Executive Officer, President, Chief Financial Officer, Treasurer and Director of the Company. Mr. Dory will be paid $4,000 per month for his services to the Company.
General
Mineral property acquisition costs
The capitalized amounts may be written down if potential future cash flows, including potential sales proceeds, related to the property are estimated to be less than the carrying value of the property. Management of the Company reviews the carrying value of each mineral property interest quarterly, and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Reductions in the carrying value of each property would be recorded to the extent the carrying value of the investment exceeds the estimated future net cash flows.
Exploration and development costs
Exploration costs are expensed as incurred. When it is determined that a mining deposit can be economically and legally extracted or produced based on established proven and probable reserves, further exploration and development costs related to such reserves incurred after such determination will be capitalized. The establishment of proven and probable reserves is based on results of final feasibility studies which indicate whether a property is economically feasible. Upon commencement of commercial production, capitalized costs will be transferred to the appropriate asset category and amortized over their estimated useful lives. Capitalized costs, net of salvage values, relating to a deposit which is abandoned or considered uneconomic for the foreseeable future, will be written off.
Note 2 Related Party Transactions
The Company was charged the following by a director of the Company:
| | | Nine months ended June 30, 2010 | | | Nine months ended June 30, 2009 | |
| | | | | | | |
| Management fees | | $ | 16,000 | | | $ | 1,000 | |
The related party payable is classified as a loan and is due to a director of the Company for funds advanced. The loan is unsecured, non-interest bearing and has no specific terms for repayment.
Note 3 Equity Transactions
On April 26, 2010, the Company closed a private placement of 500,000 units at $1.00 per unit for a total offering price of $500,000. The units were offered by the Company pursuant to an exemption from registration pursuant to Regulation S under the Securities Act of 1933, as amended. Each unit consists of one common share of the Company and one non-transferable share purchase warrant. The warrants are exercisable at a price of $1.50 per share commencing April 26, 2010 and expire on April 26, 2012. The private placement was fully subscribed to by a non-U.S. corporation. The relative fair valve of the share purchase warrant was $140,496.
Note 4 Commitments
On March 12, 2010 the Company agreed to the terms of an option agreement for the acquisition of the Little Butte mining property in the State of Nevada by making a cash payment to MinQuest, Inc. of $39,261 (US) upon signing the Agreement, $10,000 on or before February 25, 2011, $20,000 (US) on or before March 12, 2011, $20,000 on or before the February 25, 2012, $30,000 on or before March 12, 2012, $30,000 on or before February 25, 2013, $40,000 on or before March 12, 2013, $40,000 on or before February 25, 2014, $50,000 on or before March 12, 2014, $175,000 on or before February 25, 2015, $60,000 on or before March 12, 2015, $60,000 on or before March 12, 2016 and $60,000 on or before March 12, 2017.
The Company shall also be responsible for making all necessary property payments and taxes to keep the property in good standing. The cash payments above include payments to Jack Walker pursuant to a property option agreement which has been assigned by MinQuest, Inc. to the Company as set out in the Agreement.
As it relates to the above payments, Jack Walker received $5,000 upon signing, shall receive $10,000 on or before February 25, 2011,$20,000 on or before the February 25, 2012, $30,000 on or before February 25, 2013, $40,000 on or before February 25, 2014, and $175,000 on or before February 25, 2015.
The Company shall complete the following exploration expenditures on the property as follows: (i) $250,000 on or before the first anniversary of the signing of the Agreement (ii) $250,000 on or before the second anniversary of the signing of the Agreement; (iii) $300,000 on or before the fourth anniversary of the signing Agreement; (iv) $300,000 on or before the fifth anniversary of the signing of the Agreement; (v) $300,000 on or before the sixth anniversary of the signing of the Agreement; and (vi) $300,000 on or before the seventh anniversary of the signing of the Agreement.
Effective April 1, 2010, Mr. Richard J. Kehmeier, age 62, of Conifer, Colorado, was appointed to the board of directors of the Company. Mr. Kehmeier will be paid $500 per month compensation for as long as he remains a director of the Company.
Effective April 12, 2010, Mr. Jared Beebe, age 60, of Quebec, Canada was appointed to the board of directors of the Company. Mr. Beebe will be paid $500 per month compensation for as long as he remains a director of the Company.
Item 2.
Management’s Discussion and Analysis or Plan of Operation
Caution Regarding Forward-Looking Statements
The following information may contain certain forward-looking statements that are not historical facts. These statements represent our expectations or beliefs, including but not limited to, statements concerning future acquisitions, future operating results, statements concerning industry performance, capital expenditures, financings, as well as assumptions related to the foregoing. Forward-looking statements may be identified by the use of forward-looking terminology such as “may,” “shall,” “will,” “could,” “expect,” “estimate,” “anticipate,” “predict,” “should,” “continue” or similar terms, variations of those terms or the negative of those terms. Forward-looking statements are based on current expectations and involve various risks and uncertainties that could cause actual results and outcomes for future periods to differ materially from any forward-looking statement or view expressed herein. Our financial performance and the forward-looking statements contained in this report are further qualified by other risks including those set forth from time to time in documents filed by us with the U.S. Securities and Exchange Commission (“SEC”).
The following information has not been audited. You should read this information in conjunction with the unaudited financial statements and related notes to the financial statements included in this report.
Plan of Operations
Overview
We are a natural resource exploration company with an objective of acquiring, exploring, and if warranted and feasible, exploiting natural resource properties. Our primary focus in the natural resource sector is gold.
We do not anticipate going into productions ourselves but instead anticipate optioning or selling any ore bodies that we may discover to a major mining company. Most major mining companies obtain their ore reserves through the purchase of ore bodies found by junior exploration companies such as the Company. Although these major mining companies do some exploration work themselves, many of them rely on the junior resource exploration companies to provide them with future deposits for them to mine. By optioning or selling a deposit found by us to these major mining companies, it would provide an immediate return to our shareholders without the long time frame and cost of putting a mine into operation ourselves, and it would also provide future capital for the Company to continue operations.
The search for valuable natural resources as a business is extremely risky. We can provide investors with no assurance that the properties we have contain commercially exploitable reserves. Exploration for natural resource reserves is a speculative venture involving substantial risks. Few properties that are explored are ultimately developed into producing commercially feasible reserves. Problems such as unusual or unexpected geological formations and other conditions are involved in mineral exploration and often result in unsuccessful exploration efforts. In such a case, we would be unable to complete our business plan and any money spent on exploration would be lost.
Natural resource exploration and development requires significant capital and our assets and resources are very limited. Therefore, we anticipate participating in the natural resource industry through the purchase or option of early stage properties. To date, we have one property under option and own another property.
Mineral Exploration Property - USE 1-4 Claims
We own a 100% interest in four mineral claims known as the Use 1 - 4 claims, which are located in the west- central area of the State of Nevada, approximately 18 air miles west of the town of Tonopah. We purchased these claims from Western Minerals Inc., an unaffiliated third party.
Mineral Exploration Property - Little Butte
On March 12, 2010, the Company entered into an Option Agreement (the "Agreement") with MinQuest, Inc. ("MinQuest"), an unaffiliated third party, whereby MinQuest granted the Company the sole and exclusive right and option to acquire an undivided 100% right, title and interest in and to the Little Butte property subject only to a royalty, being located in LaPaz County, Arizona (the "Property").
Under the terms of the Agreement, MinQuest has granted the Company the sole and exclusive option to acquire a 100% undivided interest in and to the Property by making a cash payment to MinQuest of $39,261 (US) upon signing the Agreement, $10,000 on or before February 25, 2011, $20,000 (US) on or before March 12, 2011, $20,000 on or before the February 25, 2012, $30,000 on or before March 12, 2012, $30,000 on or before February 25, 2013, $40,000 on or before March 12, 2013, $40,000 on or before February 25, 2014, $50,000 on or before March 12, 2014, $175,000 on or before February 25, 2015, $60,000 on or before March 12, 2015, $60,000 on or before March 12, 2016, and $60,000 on or before March 12, 2017.
The Company shall also be responsible for making all necessary property payments and taxes to keep the Property in good standing. The cash payments above include payments to Jack Walker pursuant to a property option agreement which has been assigned by MinQuest to the Company as set out in the Agreement.
As it relates to the above payments, Jack Walker received $5,000 upon signing the Agreement, shall receive $10,000 on or before February 25, 2011, $20,000 on or before the February 25, 2012, $30,000 on or before February 25 2013, $40,000 on or before February 25, 2014 and $175,000 on or before February 25, 2015.
The Company shall complete the following exploration expenditures on the Property as follows: (i) $250,000 on or before the first anniversary of the signing of the Agreement (ii) $250,000 on or before the second anniversary of the signing of the Agreement; (iii) $300,000 on or before the fourth anniversary of the signing Agreement; (iv) $300,000 on or before the fifth anniversary of the signing of the Agreement; (v) $300,000 on or before the sixth anniversary of the signing of the Agreement; and (vi) $300,000 on or before the seventh anniversary of the signing of the Agreement .
If and when the option has been exercised, a 100% right, title and interest in and to the property shall vest in the Company free and clear of all charges except for the royalty. The Company may terminate the Agreement at any time by giving 30 days notice of such termination of the Agreement.
If the Company is in default of the Agreement, MinQuest may terminate the Agreement but only if:
(a) MinQuest has first given the Company notice of the default containing particulars of the obligations which the Company has not performed, and (b) the Company has not, within 30 days following delivery of such notice, cured such default by appropriate payment or performance
On April 27, 2010, MinQuest and the Company entered into an Option Amendment Agreement wherein the date of first payment was extended from March 12, 2010, as set out in the option agreement dated March 12, 2010 above, to April 30, 2010. On April 29, 2010, the Company made the first payment of $39,261 to MinQuest in accordance with the Agreement.
Results of Operations for the Three Months Ended June 30, 2010 and the Nine Months ended June 30, 2009
We have not earned any revenues since our incorporation on July 26, 2007, to June 30, 2010. We do not anticipate earning revenues unless we enter into commercial production on the Little Butte or USE 1- 4 claims, which is doubtful. We can provide no assurance that we will discover economic mineralization on the Little Butte or USE 1 - 4 claims, or if such minerals are discovered, that we will enter into commercial production.
Three Months Ended June 30, 2010 compared to the Three Months Ended June 30, 2009
Mineral Exploration. During the three months ended June 30, 2010, the Company incurred $120,784 in mineral exploration costs compared to no mineral exploration costs during the three month period June 30, 2009.
General and Administrative Expenses. During the three month period ended June 30, 2010, the Company incurred $86,733 of general and administrative expenses compared to $8,084 during the three month period ended June 30, 2009. The general and administrative costs were comprised of accounting fees, legal fees, filing of SEC reports, and other administrative expenses.
Nine Months Ended June 30, 2010, Compared to the Nine Months Ended June 30, 2009
Mineral Exploration. During the nine month period ended June 30, 2010, the Company incurred $120,784 in mineral exploration costs compared to no mineral exploration costs during the nine month period June 30, 2009.
General and Administrative Expenses. During the nine month period ended June 30, 2010, the Company incurred $121,906 of general and administrative expenses compared to $40,660 during the nine month period ended June 30, 2009. The general and administrative costs were comprised of accounting fees, legal fees, filing of SEC reports, and other administrative expenses.
The Company did not have any revenues during the three and nine month periods ended June 30, 2010.
From the date of inception on July 26, 2007 to June 30, 2010, we have incurred total operating expenses of $307,886, consisting of mineral exploration costs of $125,084 and general and administrative costs of $182,802.
Liquidity and Capital Resources
Since inception, we have financed our cash requirements from cash generated from the sale of common stock and advances from related parties.
Since inception through to and including June 30, 2010, we have raised $533,900 through private placements of our common stock and received $54,083 in cash advances from shareholders.
On April 26, 2010, the Company closed a private placement of 500,000 units at $1.00 per unit for a total offering price of $500,000. The units were offered by the Company pursuant to an exemption from registration under Regulation S under the Securities Act of 1933, as amended. Each unit consists of one common share of the common stock of the Company and one non-transferable share purchase warrant. The warrants are exercisable at a price of $1.50 per share commencing April 26, 2010, and expire on April 26, 2012. The private placement was fully subscribed to by a non-U.S. corporation. 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 the plan of operations, then we will not be able to continue our exploration of our mineral claims and our venture will fail.
Off-Balance Sheet Arrangements
We do not maintain any off-balance sheet transactions, arrangements, or obligations that are reasonably likely to have a material effect on our financial condition, results of operations, liquidity, or capital resources.
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
We are a smaller reporting Company as defined by Rule 12b-2 under the Securities Exchange Act of 1934, and are not required to provide the information required under this item.
Item 4.
Controls and Procedures
Evaluation of Disclosure Controls
Our management evaluated the effectiveness of our disclosure controls and procedures as of the end of our fiscal quarter ended June 30, 2010. This evaluation was conducted by George Dory, our Chief Executive Officer, President, and principal accounting officer.
Disclosure controls are controls and other procedures that are designed to ensure that information that we are required to disclose in the reports we file pursuant to the Securities Exchange Act of 1934 is recorded, processed, summarized and reported.
Limitations on the Effectiveness of Controls
Our management does not expect that our disclosure controls or our internal controls over financial reporting will prevent all error and fraud. A control system, no matter how well conceived and operated, can provide only reasonable, but no absolute, assurance that the objectives of a control system are met.
Further, any control system reflects limitations on resources, and the benefits of a control system must be considered relative to its costs. These limitations also include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of a control. A design of a control system is also based upon certain assumptions about potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected.
Conclusion
Based upon his evaluation of our controls, our Chief Executive Officer and principal accounting officer has concluded that, subject to the limitations noted above, the disclosure controls are effective providing reasonable assurance that material information relating to us is made known to management on a timely basis during the period when our reports are being prepared. There were no changes in our internal controls and internal controls over financial reporting that occurred during the quarter covered by this report that have materially affected, or are reasonably likely to materially affect our internal controls.
OTHER INFORMATION
None
ITEM 1A. RISK FACTORS
N/A
On April 26, 2010, the Company closed a private placement of 500,000 units at $1.00 per unit for a total offering amount of $500,000 to one non-U.S. purchaser. The units were offered by the Company pursuant to an exemption from registration under Regulation S under the Securities Act of 1933, as amended. Each unit consists of one share of common stock of the Company and one non-transferable common stock purchase warrant. The warrants are exercisable at a price of $1.50 (US) per share and terminate on April 26, 2012.
None
None
ITEM 5. OTHER INFORMATION
| 10.1 | Form of warrant covering 500,000 shares of common stock, exercisable at $1.50 per share issued during April 2010, is hereby incorporated by reference to Exhibit 10.2 to the Form 8-K current report filed by the Company on April 26, 2010. |
| 10.2 | Option Agreement with MinQuest, Inc. dated March 12, 2010, to acquire the Little Butte mining property in LaPaz County, Arizona, is hereby incorporated by reference to Exhibit 10.1 to the Form 8-K current report of the Company filed on March 15, 2010. |
| 10.4 | Amendment to Option Agreement with MinQuest, Inc. dated March 12, 2010 is hereby incorporated herein by reference to Exhibit 10.4 to the Form 10-Q quarterly report for the period ended March 31, 2010. |
| 10.5 | Agreement by George Dory to purchase common stock of the Company from Kyle Beddom is hereby incorporated by reference to Exhibit 10.1 of the Schedule 13D filed by George Dory on March 9, 2010. |
| 31.1 | Certification of George Dory - Director, Chief Executive Office, President, Treasurer, Chief Financial Officer and principal accounting officer of the Company |
| 32.1 | Certification of George Dory - Director, Chief Executive Office, President, Treasurer, Chief Financial Officer and principal accounting officer of the Company |
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.
August 12, 2010
| | TUFFNELL LTD. |
| | | |
| | By: | /s/ George Dory |
| | | George Dory |
| | | Director, Chief Executive Office, President, Treasurer, Chief Financial Officer and principal accounting officer |
Exhibit
| No. | | Description |
| | | |
| 31.1 | | Certification of George Dory |
| | | |
| 32.1 | | Certification of George Dory |
