As filed with the Securities and Exchange Commission on September 28, 2006
Registration No. 333-125068
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NUMBER NINE TO
FORM SB-2
SEC FILE: 333-125068
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
NORTHERN EXPLORATIONS LTD.
(Name of small business issuer in its charter)
NEVADA 1000 Applied For
State or jurisdiction of Primary Standard Industrial I.R.S. Employer
incorporation or organization Classification Code Number Identification No.
Northern Explorations Ltd.
470 Granville Street, Suite 1120
Vancouver, B.C. V6C 1V5
Telephone: 604-713-8012
Facsimile: 604-713-8018
(Address and telephone number of principal executive offices)
Empire Stock Transfer Inc.
7251 West Lake Mead Blvd Suite 300
Las Vegas, NV 89128
Telephone: 702-562-4091
Facsimile: 702-562-4081
(Name, address and telephone number of agent for service)
Approximate date of proposed sale to the public: as soon as practicable after
the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box. [ ]
CALCULATION OF REGISTRATION FEE
================================================================================
TITLE OF EACH PROPOSED PROPOSED
CLASS OF MAXIMUM MAXIMUM
SECURITIES DOLLAR OFFERING AGGREGATE AMOUNT OF
TO BE AMOUNT TO BE PRICE PER OFFERING REGISTRATION
REGISTERED REGISTERED SHARE (1) PRICE (2) FEE (2)
- --------------------------------------------------------------------------------
Common Stock $254,000 $0.10 $254,000 $29.90
================================================================================
(1) Based on the last sales price on January 17, 2004.
(2) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457 under the Securities Act.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
SUBJECT TO COMPLETION, DATED SEPTEMBER 28, 2006
================================================================================
PROSPECTUS
NORTHERN EXPLORATIONS LTD.
2,540,000 SHARES
COMMON STOCK
----------
The selling shareholders named in this prospectus are offering all of the shares
of common stock offered through this prospectus.
Our common stock is presently not traded on any market or securities exchange.
----------
THE PURCHASE OF THE SECURITIES OFFERED THROUGH THIS PROSPECTUS INVOLVES A HIGH
DEGREE OF RISK. SEE SECTION ENTITLED "RISK FACTORS" ON PAGES 2-4.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
The selling shareholders will sell our shares at $0.10 per share until our
shares are quoted on the OTC Bulletin Board, and thereafter at prevailing market
prices or privately negotiated prices. We cannot ensure that our shares will be
quoted on the OTC Bulletin Board.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
----------
THE DATE OF THIS PROSPECTUS IS: SEPTEMBER 28, 2006
TABLE OF CONTENTS
Page
----
Summary 1
Risk Factors 2
- If we do not obtain additional financing, our business will fail 2
- Because we have only recently commenced business operations, we
face a high risk of business failure 3
- Because of the speculative nature of exploration of mining
properties, there is substantial risk that our business will fail 3
- Because our continuation as a going concern is in doubt, we will
be forced to cease business operations unless we can generate
profit in the future. 3
- Because of the inherent dangers involved in mineral exploration,
there is a risk that we may incur liability or damages, which
could hurt our financial position and possibly result in the
failure of our business. 3
- Even if we discover commercial reserves of precious metals on
the Cade Property, we may not be able to successfully obtain
commercial production 3
- Because our sole director owns 54.15% of our outstanding stock,
he could control and make corporate decisions that may be
disadvantageous to other minority stockholders 4
- Because our president has other business interests, he may not
be able or willing to devote a sufficient amount of time to our
business operations, causing our business to fail 4
- Because management has no technical experience in mineral
exploration, our business has a high risk of failure 4
- If a market for our common stock does not develop, shareholders
may be unable to sell their shares and will incur losses as a
result 4
- A purchaser is purchasing penny stock which limits the ability
to sell stock 4
Use of Proceeds 5
Determination of Offering Price 5
Dilution 5
Selling Securityholders 5
Plan of Distribution 7
Legal Proceedings 9
Directors, Executive Officers, Promoters and Control Persons 9
Security Ownership of Certain Beneficial Owners and Management 10
Description of Securities 10
Interest of Named Experts and Counsel 11
Disclosure of Commission Position of Indemnification for Securities
Act Liabilities 11
Organization Within Last Five Years 12
Description of Business 12
Plan of Operations 18
Description of Property 19
Certain Relationships and Related Transactions 19
Market for Common Equity and Related Stockholder Matters 20
Executive Compensation 21
Financial Statements 21
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure 21
SUMMARY
PROSPECTIVE INVESTORS ARE URGED TO READ THIS PROSPECTUS IN ITS ENTIRETY.
We are in the business of mineral property exploration. To date, we have
conducted preliminary exploration on our sole exploration target, the Cade
mineral claim located approximately 25 kilometers west northwest of Pemberton in
south-western British Columbia, Canada. We have an option to acquire a 90%
interest in the Cade claim from Gillian Wells of Tsawwassen, British Columbia
by:
a) paying $2,500 to Wells by March 31, 2005 (paid);
b) incurring $5,000 in exploration expenditures on the Cade claim by
December 31, 2005 (expended as of September 15, 2005); and
c) incurring an additional $10,000 in expenditures on the Cade claim by
December 31, 2006
Our objective is to conduct mineral exploration activities on the Cade claim in
order to assess whether it possesses economic reserves of copper, zinc and
silver. We have not yet identified any economic mineralization on the Cade
claim. Our proposed exploration program is designed to search for an economic
mineral deposit.
We were incorporated on November 17, 2004, under the laws of the state of
Nevada. Our principal offices are located at 470 Granville Street, Suite 1120,
Vancouver, British Columbia Canada V6C 1V5. Our telephone number is (604)
713-8010.
THE OFFERING:
SECURITIES BEING OFFERED Up to 2,540,000 shares of common stock.
OFFERING PRICE The selling shareholders will sell our shares
at $0.10 per share until our shares are quoted
on the OTC Bulletin Board, and thereafter at
prevailing market prices or privately
negotiated prices. We cannot ensure that our
shares will be quoted on the OTC Bulletin
Board. We determined this offering price based
upon the price of the last sale of our common
stock to investors.
TERMS OF THE OFFERING The selling shareholders will determine when
and how they will sell the common stock offered
in this prospectus.
TERMINATION OF THE OFFERING The offering will conclude when all of the
2,540,000 shares of common stock have been
sold, the shares no longer need to be
registered to be sold or we decide to terminate
the registration of the shares.
SECURITIES ISSUED AND
TO BE ISSUED 5,540,000 shares of our common stock are issued
and outstanding as of the date of this
prospectus. All of the common stock to be sold
under this prospectus will be sold by existing
shareholders.
USE OF PROCEEDS We will not receive any proceeds from the sale
of the common stock by the selling
shareholders.
1
SUMMARY FINANCIAL INFORMATION
BALANCE SHEET
June 30, 2006 March 31, 2006
(unaudited) (audited)
Cash $14,196 $14,646
Total Assets $14,196 $14,646
Liabilities $ 3,100 $ 175
Total Stockholders' Equity $11,096 $14,471
STATEMENT OF OPERATIONS
Three Months Three Months Inception on
Ended Ended November 17, 2004
June 30, 2006 June 30, 2005 to June 30, 2006
------------- ------------- ----------------
(unaudited) (unaudited) (unaudited)
Revenue $ 0 $ 0 $ 0
Net Loss and Deficit $ (3,375) $ (3,238) $(20,904)
Fiscal Year Inception on Inception on
Ended November 17, 2004 November 17, 2004
March 31, 2006 to March 31, 2005 to March 31, 2006
-------------- ----------------- -----------------
(audited) (audited) (audited)
Revenue $ 0 $ 0 $ 0
Net Loss and Deficit $(13,201) $ (4,328) $(17,529)
RISK FACTORS
An investment in our common stock involves a high degree of risk. The following
is a discussion of all of the material risks relating to the offering and our
business. You should carefully consider the risks described below and the other
information in this prospectus before investing in our common stock. If any of
the following risks occur, our business, operating results and financial
condition could be seriously harmed. The trading price of our common stock could
decline due to any of these risks, and you may lose all or part of your
investment.
IF WE DO NOT OBTAIN ADDITIONAL FINANCING, OUR BUSINESS WILL FAIL.
Our current operating funds are less than necessary to complete all intended
exploration of the Cade claim, and therefore we will need to obtain additional
financing in order to complete our business plan. We currently do not have any
operations and we have no income. As well, we will not receive any funds from
this registration.
Our business plan calls for significant expenses in connection with the
exploration of the Cade claim. While we have sufficient funds to conduct the
recommended phase two exploration program on the claim, which is estimated to
cost $6,000 in total ($2,500 of which we have incurred), we will need additional
funds to complete the phase three program, which is estimated in total to cost
$40,000. Even after completing these three phases of exploration, we will not
know if we have a commercially viable mineral deposit.
We will require additional financing to sustain our business operations if we
are not successful in earning revenues once exploration is complete. We do not
currently have any arrangements for financing and may not be able to find such
financing if required.
2
BECAUSE WE HAVE ONLY RECENTLY COMMENCED BUSINESS OPERATIONS, WE FACE A HIGH RISK
OF BUSINESS FAILURE.
We have only recently commenced exploration on the Cade claim. Accordingly, we
have no way to evaluate the likelihood that our business will be successful. We
were incorporated on November 17, 2004 and to date have been involved primarily
in organizational activities, the acquisition of an interest in the Cade claim
and preliminary exploration on the property. We have not earned any revenues as
of the date of this prospectus. Potential investors should be aware of the
difficulties normally encountered by new mineral exploration companies and the
high rate of failure of such enterprises. The likelihood of success must be
considered in light of the problems, expenses, difficulties, complications and
delays encountered in connection with the exploration of the mineral properties
that we plan to undertake. These potential problems include, but are not limited
to, unanticipated problems relating to exploration, and additional costs and
expenses that may exceed current estimates.
Prior to completion of our exploration stage, we anticipate that we will incur
increased operating expenses without realizing any revenues. We therefore expect
to incur significant losses into the foreseeable future. We recognize that if we
are unable to generate significant revenues from development of the Cade
property and the production of minerals from the claim, we will not be able to
earn profits or continue operations.
There is no history upon which to base any assumption as to the likelihood that
we will prove successful, and it is doubtful that we will generate any operating
revenues or ever achieve profitable operations. If we are unsuccessful in
addressing these risks, our business will most likely fail.
BECAUSE OF THE SPECULATIVE NATURE OF EXPLORATION OF MINING PROPERTIES, THERE IS
A SUBSTANTIAL RISK THAT OUR BUSINESS WILL FAIL.
The search for valuable minerals as a business is extremely risky. The
likelihood of our mineral claim containing economic mineralization or reserves
of gold is extremely remote. Exploration for minerals is a speculative venture
necessarily involving substantial risk. In all probability, the Cade claim does
not contain any reserves and funds that we spend on exploration will be lost. As
well, problems such as unusual or unexpected 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.
BECAUSE OUR CONTINUATION AS A GOING CONCERN IS IN DOUBT, WE WILL BE FORCED TO
CEASE BUSINESS OPERATIONS UNLESS WE CAN GENERATE PROFIT IN THE FUTURE.
The report of our independent accountant to our audited financial statements for
the periods ended March 31, 2006 and March 31, 2005 indicates that there are a
number of factors that raise substantial doubt about our ability to continue as
a going concern. Such factors identified in the report are that we have no
source of revenue and our dependence upon obtaining adequate financing. If we
are not able to continue as a going concern, it is likely investors will lose
all of their investment.
BECAUSE OF THE INHERENT DANGERS INVOLVED IN MINERAL EXPLORATION, THERE IS A RISK
THAT WE MAY INCUR LIABILITY OR DAMAGES, WHICH COULD HURT OUR FINANCIAL POSITION
AND POSSIBLY RESULT IN THE FAILURE OF OUR BUSINESS.
The search for valuable minerals involves numerous hazards. As a result, we may
become subject to liability for such hazards, including pollution, cave-ins and
other hazards against which we cannot insure or against which we may elect not
to insure. The payment of such liabilities may have a material adverse effect on
our financial position.
EVEN IF WE DISCOVER COMMERCIAL RESERVES OF PRECIOUS METALS ON THE CADE CLAIM, WE
MAY NOT BE ABLE TO SUCCESSFULLY COMMENCE COMMERCIAL PRODUCTION UNLESS WE RECEIVE
ADDITIONAL FUNDS, OF WHICH THERE IS NO GUARANTEE.
3
The Cade claim does not contain any known bodies of mineralization. If our
exploration programs are successful in establishing gold of commercial tonnage
and grade, we will require additional funds in order to place the Cade claim
into commercial production. We may not be able to obtain such financing.
BECAUSE OUR SOLE DIRECTOR OWNS 54.15% OF OUR OUTSTANDING COMMON STOCK, HE COULD
MAKE AND CONTROL CORPORATE DECISIONS THAT MAY BE DISADVANTAGEOUS TO OTHER
MINORITY SHAREHOLDERS.
Our director owns approximately 54.15% of the outstanding shares of our common
stock. Accordingly, he will have a significant influence in determining the
outcome of all corporate transactions or other matters, including mergers,
consolidations, and the sale of all or substantially all of our assets. He will
also have the power to prevent or cause a change in control. The interests of
our director may differ from the interests of the other stockholders and thus
result in corporate decisions that are disadvantageous to other shareholders.
BECAUSE OUR PRESIDENT HAS OTHER BUSINESS INTERESTS, HE MAY NOT BE ABLE OR
WILLING TO DEVOTE A SUFFICIENT AMOUNT OF TIME TO OUR BUSINESS OPERATIONS,
CAUSING OUR BUSINESS TO FAIL.
Our president, Mr. Richard Novis, intends to devote approximately 15% of his
business time, or approximately six hours per week, providing his services to
us. While Mr. Novis presently possesses adequate time to attend to our
interests, it is possible that the demands on Mr. Novis from his other
obligations could increase with the result that he would no longer be able to
devote sufficient time to the management of our business.
BECAUSE OUR SOLE DIRECTOR HAS NO TECHNICAL EXPERIENCE IN MINERAL EXPLORATION,
OUR BUSINESS HAS A HIGHER RISK OF FAILURE.
Our sole director has no technical training in the field of geology and
specifically in the areas of exploring for, starting and operating a mine. As a
result, we may not be able to recognize and take advantage of potential
acquisition and exploration opportunities in the sector without the aid of
qualified geological consultants. As well, with no direct training or
experience, our management may not be fully aware of the specific requirements
related to working in this industry. His decisions and choices may not be well
thought out and our operations, earnings and ultimate financial success may
suffer irreparable harm as a result.
IF A MARKET FOR OUR COMMON STOCK DOES NOT DEVELOP, SHAREHOLDERS MAY BE UNABLE TO
SELL THEIR SHARES AND WILL INCUR LOSSES AS A RESULT.
There is currently no market for our common stock and no certainty that a market
will develop. We currently plan to apply for listing of our common stock on the
over the counter bulletin board upon the effectiveness of the registration
statement, of which this prospectus forms a part. Our shares may never trade on
the bulletin board. If no market is ever developed for our shares, it will be
difficult for shareholders to sell their stock. In such a case, shareholders may
find that they are unable to achieve benefits from their investment.
A PURCHASER IS PURCHASING PENNY STOCK WHICH LIMITS HIS OR HER ABILITY TO SELL
THE STOCK.
The shares offered by this prospectus constitute penny stock under the Exchange
Act. The shares will remain penny stock for the foreseeable future. The
classification of penny stock makes it more difficult for a broker-dealer to
sell the stock into a secondary market, thus limiting investment liquidity. Any
broker-dealer engaged by the purchaser for the purpose of selling his or her
shares in our company will be subject to rules 15g-1 through 15g-10 of the
Exchange Act. Rather than creating a need to comply with those rules, some
broker-dealers will refuse to attempt to sell penny stock.
4
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that involve risks and
uncertainties. We use words such as anticipate, believe, plan, expect, future,
intend and similar expressions to identify such forward-looking statements. You
should not place too much reliance on these forward-looking statements. Our
actual results may differ materially from those anticipated in these
forward-looking statements for many reasons, including the risks faced by us
described in the "Risk Factors" section and elsewhere in this prospectus.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the common stock offered
through this prospectus by the selling shareholders.
DETERMINATION OF OFFERING PRICE
The selling shareholders will sell our shares at $0.10 per share until our
shares are quoted on the OTC Bulletin Board, and thereafter at prevailing market
prices or privately negotiated prices. We cannot ensure that our shares will be
quoted on the OTC Bulletin Board. We determined this offering price, based upon
the price of the last sale of our common stock to investors.
DILUTION
The common stock to be sold by the selling shareholders is common stock that is
currently issued and outstanding. Accordingly, there will be no dilution to our
existing shareholders.
SELLING SECURITYHOLDERS
The selling shareholders named in this prospectus are offering all of the
2,540,000 shares of common stock offered through this prospectus. These shares
were acquired from us in private placements that were exempt from registration
under Regulation S of the Securities Act of 1933. The shares include the
following:
1. 2,500,000 shares of our common stock that the selling shareholders
acquired from us in an offering that was exempt from registration
under Regulation S of the Securities Act of 1933 and was completed on
December 22, 2004;
2. 40,000 shares of our common stock that the selling shareholders
acquired from us in an offering that was exempt from registration
under Regulation S of the Securities Act of 1933 and was completed on
January 17, 2004;
The following table provides as of the date of this prospectus, information
regarding the beneficial ownership of our common stock held by each of the
selling shareholders, including:
1. the number of shares owned by each prior to this offering;
2. the total number of shares that are to be offered for each;
3. the total number of shares that will be owned by each upon completion
of the offering; and
4. the percentage owned by each upon completion of the offering.
5
Total Number of
Shares to be
Offered for Total Shares Percent Owned
Shares Owned Selling Owned Upon Upon
Prior to this Shareholders Completion of Completion of
Name of Selling Stockholder Offering Account this Offering this Offering
- --------------------------- -------- ------- ------------- -------------
Andrew Austin 80,000 80,000 Nil Nil
3029 27th Street SW
Calgary, Alberta T3E 2G6
Nick Bekos 50,000 50,000 Nil Nil
20 Woodfield Green SW
Calgary, Alberta T2W 3T9
Dimosthenis (Jimmy) Bekropoulos 200,000 200,000 Nil Nil
1349 Shannon Avenue SW
Calgary, Alberta T2Y 2Z5
Dimos Bekropoulos 100,000 100,000 Nil Nil
20 Woodfield Green SW
Calgary, Alberta T2W 3T9
Tony Braile 150,000 150,000 Nil Nil
2827 26th Street, SW
Calgary, Alberta T3E 2B1
William (Bill) Brown 150,000 150,000 Nil Nil
73 Glamis Drive, Suite 308
Calgary, Alberta T3E 6R2
Rob Fetter 200,000 200,000 Nil Nil
1918 34th Avenue SW
Calgary, Alberta T2T 2C1
Dina Hasapes 10,000 10,000 Nil Nil
351 West Ranch Place SW
Calgary, Alberta T3H 5C3
Chad Hason 70,000 70,000 Nil Nil
3029 27th Street SW
Calgary, Alberta T3E 2G6
Tracy Hemeyer 150,000 150,000 Nil Nil
2827 26th Street SW
Calgary, Alberta, T3E 2B1
Charles Kayihura 10,000 10,000 Nil Nil
351 West Ranch Place SW
Calgary, Alberta T3H 5C3
Matthew Leith 40,000 40,000 Nil Nil
484 Queen Charlotte Road SE
Calgary, Alberta
George Liaridis 100,000 100,000 Nil Nil
703 75th Avenue NW
Calgary, Alberta T2K 0R1
Toula Liaridis 100,000 100,000 Nil Nil
703 75th Avenue, NW
Calgary, Alberta T2K 0R1
Dana Peck 10,000 10,000 Nil Nil
56 Woodstock Road SW
Calgary, Alberta T2W 5W2
Kent Pozzo 150,000 150,000 Nil Nil
30 Oakbury Place SW
Calgary, Alberta T2V 4A2
Wenhui Ruan 10,000 10,000 Nil Nil
1340 University Drive NW
Calgary, Alberta T2N 3Y7
6
John Rudin 50,000 50,000 Nil Nil
101 Cougarstone Manor SW
Calgary, Alberta T3H 5N5
Chad Rusnak 75,000 75,000 Nil Nil
4975 130th Avenue SW, Suite 4319
Calgary, Alberta T2Z 4M5
Leah Rusnak 30,000 30,000 Nil Nil
91 Woodborough Crescent SW
Calgary, Alberta T2W 5A1
Leith Rusnak 100,000 100,000 Nil Nil
25 Bridlewood Crescent SW
Calgary, Alberta T2X 3N1
Marge Rusnak 80,000 80,000 Nil Nil
25 Bridlewood Crescent SW
Calgary, Alberta T2X 3N1
Nabil Shlah 75,000 75,000 Nil Nil
640 Strathcona Drive SW
Calgary, Alberta T3H 1K4
Tyler Tanner 100,000 100,000 Nil Nil
2339 53rd Avenue SW
Calgary, Alberta T3E 1L1
Kathy Tsambouris 100,000 100,000 Nil Nil
48 Selkirk Drive SW
Calgary, Alberta T2W 0M2
Lampros Tsaprailis 100,000 100,000 Nil Nil
5 Coach Court SW
Calgary, Alberta T3H 4P7
Stavroula M. Tsaprailis 100,000 100,000 Nil Nil
5 Coach Court SW
Calgary, Alberta T3H 4P7
Heather Williams 50,000 50,000 Nil Nil
215 86th Avenue SE, Suite 1206
Calgary, Alberta T2J 4H1
Yulin Yang 100,000 100,000 Nil Nil
342 15th Avenue SW, Suite 803
Calgary, Alberta
Each of the above shareholders beneficially owns and has sole voting and
investment over all shares or rights to the shares registered in his or her
name. The numbers in this table assume that none of the selling shareholders
sells shares of common stock not being offered in this prospectus or purchases
additional shares of common stock, and assumes that all shares offered are sold.
The percentages are based on 5,540,000 shares of common stock outstanding on the
date of this prospectus.
None of the selling shareholders:
(1) has had a material relationship with us other than as a shareholder at
any time within the past three years;
(2) has ever been one of our officers or directors; or
(3) is a broker-dealer or affiliate of a broker dealer.
PLAN OF DISTRIBUTION
The selling shareholders may sell some or all of their common stock in one or
more transactions, including block transactions. Such sales may occur in private
transactions arranged by each selling shareholder in accordance with resale
exemptions in applicable jurisdictions or through the facilities of the OTC
7
Bulletin Board, if we successfully obtain a quotation for our stock, of which
there is no guarantee.
The selling shareholders will sell our shares at $0.10 per share until our
shares are quoted on the OTC Bulletin Board, and thereafter at prevailing market
prices or privately negotiated prices. We cannot ensure that our shares will be
quoted on the OTC Bulletin Board.
We determined this offering price arbitrarily based upon the price of the last
sale of our common stock to investors. The shares may also be sold in compliance
with the Securities and Exchange Commission's Rule 144.
We are bearing all costs relating to the registration of the common stock. These
are estimated to be $7,000. The selling shareholders, however, will pay any
commissions or other fees payable to brokers or dealers in connection with any
sale of the common stock.
The selling shareholders must comply with the requirements of the Securities Act
and the Exchange Act in the offer and sale of the common stock. In particular,
during such times as the selling shareholders may be deemed to be engaged in a
distribution of the common stock, and therefore be considered to be an
underwriter, they must comply with applicable law and may, among other things:
1. Not engage in any stabilization activities in connection with our
common stock;
2. Furnish each broker or dealer through which common stock may be
offered, such copies of this prospectus, as amended from time to time,
as may be required by such broker or dealer; and
3. Not bid for or purchase any of our securities or attempt to induce any
person to purchase any of our securities other than as permitted under
the Exchange Act.
The Securities Exchange Commission has also adopted rules that regulate
broker-dealer practices in connection with transactions in penny stocks. Penny
stocks are generally equity securities with a price of less than $5.00 (other
than securities registered on certain national securities exchanges or quoted on
the Nasdaq system, provided that current price and volume information with
respect to transactions in such securities is provided by the exchange or
system).
The penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from those rules, deliver a standardized risk
disclosure document prepared by the Commission, which:
* contains a description of the nature and level of risk in the market
for penny stocks in both public offerings and secondary trading;
* contains a description of the broker's or dealer's duties to the
customer and of the rights and remedies available to the customer with
respect to a violation of such duties;
* contains a brief, clear, narrative description of a dealer market,
including "bid" and "ask" prices for penny stocks and the significance
of the spread between the bid and ask price;
* contains a toll-free telephone number for inquiries on disciplinary
actions;
* defines significant terms in the disclosure document or in the conduct
of trading penny stocks; and
* contains such other information and is in such form (including
language, type, size, and format) as the Commission shall require by
rule or regulation;
The broker-dealer also must provide, prior to proceeding with any transaction in
a penny stock, the customer:
* with bid and offer quotations for the penny stock;
* details of the compensation of the broker-dealer and its salesperson
in the transaction;
* the number of shares to which such bid and ask prices apply, or other
comparable information relating to the depth and liquidity of the
market for such stock; and
* monthly account statements showing the market value of each penny
stock held in the customer's account.
8
In addition, the penny stock rules require that prior to a transaction in a
penny stock not otherwise exempt from those rules; the broker-dealer must make a
special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's written acknowledgment of the receipt
of a risk disclosure statement, a written agreement to transactions involving
penny stocks, and a signed and dated copy of a written suitability statement.
These disclosure requirements will have the effect of reducing the trading
activity in the secondary market for our stock because it will be subject to
these penny stock rules. Therefore, stockholders may have difficulty selling
those securities.
LEGAL PROCEEDINGS
We are not currently a party to any legal proceedings. Our address for service
of process in Nevada is 7251 West Lake Mead Blvd Suite 300 Las Vegas, NV 89128.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Our executive officer and director and his age as of the date of this prospectus
is as follows:
DIRECTOR:
Name of Director Age
- ---------------- ---
Richard Novis 55
EXECUTIVE OFFICER:
Name of Officer Age Office
- --------------- --- ------
Richard Novis 55 President, Secretary, Treasurer
and Chief Executive Officer
BIOGRAPHICAL INFORMATION
Set forth below is a brief description of the background and business experience
of our executive officer and director for the past five years.
MR. RICHARD NOVIS has acted as our president, secretary, treasurer, chief
executive officer and as a director since our incorporation on November 17,
2004. Mr. Novis is a graduate of the Burnaby based British Columbia Institute of
Technology where he earned a diploma in financial administration. He also
completed additional courses in economics, marketing and human resources at the
University of British Columbia in Vancouver and Simon Fraser University in
Burnaby. From 1999 to present, Mr. Novis has acted as manager of 416398 B.C. Ltd
dba Micro Cap et al, a private Vancouver, British Columbia based business
involved in providing marketing, promotion and investor relations services to
private and reporting companies. These services involve preparing promotional
and investor relations materials, introducing clients to potential underwriters
and financiers, and communicating with investment dealers, advisers and
shareholders to increase awareness of and interest in the client companies,
From July 2004 to present, he has also acted as president, secretary, treasurer
and a director of International Oil & Gas Inc., a United States company involved
in oil and gas exploration.
Mr. Novis does not have any professional training or technical credentials in
the exploration, development and operation of mines.
Mr.Novis intends to devote approximately 15% of his business time, or
approximately seven hours per week, to our affairs.
9
TERM OF OFFICE
Our sole director is appointed for a one-year term to hold office until the next
annual general meeting of our shareholders or until removed from office in
accordance with our bylaws. Our sole officer is appointed by our board of
directors and hold office until removed by the board.
SIGNIFICANT EMPLOYEES
We have no significant employees other than the officer and director described
above.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table provides the names and addresses of each person known to us
to own more than 5% of our outstanding common stock as of the date of this
prospectus, and by the officers and directors, individually and as a group.
Except as otherwise indicated, all shares are owned directly.
Amount of
Name and address beneficial Percent
Title of Class of beneficial owner ownership of class
- -------------- ------------------- --------- --------
Common stock Richard Novis 3,000,000 54.15%
470 Granville Street, Suite 1120
Vancouver, B.C., V6C 1V5
Common stock All officers and directors as a 3,000,000 54.15%
group consisting of one person
The percent of class is based on 5,540,000 shares of common stock issued and
outstanding as of the date of this prospectus.
DESCRIPTION OF SECURITIES
GENERAL
Our authorized capital stock consists of 75,000,000 shares of common stock at a
par value of $0.001 per share.
COMMON STOCK
As of the date of this prospectus, there were 5,540,000 shares of our common
stock issued and outstanding that are held by 30 stockholders of record. Holders
of our common stock are entitled to one vote for each share on all matters
submitted to a stockholder vote. Holders of common stock do not have cumulative
voting rights. Therefore, holders of a majority of the shares of common stock
voting for the election of directors can elect all of the directors. Two persons
present and being, or representing by proxy, shareholders are necessary to
constitute a quorum at any meeting of our stockholders. A vote by the holders of
a majority of our outstanding shares is required to effectuate certain
fundamental corporate changes such as liquidation, merger or an amendment to our
articles of incorporation.
Holders of common stock are entitled to share in all dividends that the board of
directors, in its discretion, declares from legally available funds. In the
event of a liquidation, dissolution or winding up, each outstanding share
entitles its holder to participate pro rata in all assets that remain after
payment of liabilities and after providing for each class of stock, if any,
having preference over the common stock.
Holders of our common stock have no pre-emptive rights, no conversion rights and
there are no redemption provisions applicable to our common stock.
10
PREFERRED STOCK
We do not have an authorized class of preferred stock.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common stock. We
currently intend to retain future earnings, if any, to finance the expansion of
our business. As a result, we do not anticipate paying any cash dividends in the
foreseeable future.
SHARE PURCHASE WARRANTS
We have not issued and do not have outstanding any warrants to purchase shares
of our common stock.
OPTIONS
We have not issued and do not have outstanding any options to purchase shares of
our common stock.
CONVERTIBLE SECURITIES
We have not issued and do not have outstanding any securities convertible into
shares of our common stock or any rights convertible or exchangeable into shares
of our common stock.
INTERESTS OF NAMED EXPERTS AND COUNSEL
No expert or counsel named in this prospectus as having prepared or certified
any part of this prospectus or having given an opinion upon the validity of the
securities being registered or upon other legal matters in connection with the
registration or offering of the common stock was employed on a contingency
basis, or had, or is to receive, in connection with the offering, a substantial
interest, direct or indirect, in the registrant. Nor was any such person
connected with the registrant as a promoter, managing or principal underwriter,
voting trustee, director, officer, or employee.
Joseph I. Emas has provided an opinion on the validity of our common stock.
The financial statements included in this prospectus and the registration
statement have been audited by Armando C. Ibarra, Certified Public Accountants,
to the extent and for the periods set forth in their report appearing elsewhere
in this document and in the registration statement filed with the SEC, and are
included in reliance upon such report given upon the authority of said firm as
experts in auditing and accounting.
DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Our directors and officers are indemnified as provided by the Nevada Revised
Statutes and our Bylaws. These provisions provide that we shall indemnify a
director or former director against all expenses incurred by him by reason of
him acting in that position. The directors may also cause us to indemnify an
officer, employee or agent in the same fashion.
We have been advised that in the opinion of the Securities and Exchange
Commission indemnification for liabilities arising under the Securities Act is
against public policy as expressed in the Securities Act, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities is asserted by one of our directors, officers, or controlling
persons in connection with the securities being registered, we will, unless in
the opinion of our legal counsel the matter has been settled by controlling
precedent, submit the question of whether such indemnification is against public
policy to a court of appropriate jurisdiction. We will then be governed by the
court's decision.
11
ORGANIZATION WITHIN LAST FIVE YEARS
We were incorporated on November 17, 2004 under the laws of the state of Nevada.
On that date, Richard Novis was appointed as our sole director. As well, Mr.
Novis was appointed as our president, secretary, treasurer and chief executive
officer.
DESCRIPTION OF BUSINESS
IN GENERAL
We conduct operations as an exploration stage company. We are engaged in the
acquisition and exploration of mineral properties with a view to exploiting any
mineral deposits we discover. We own the option to acquire a 90% interest in one
mineral claim known as the Cade claim. In order to exercise this option, we
must:
a) pay $2,500 to Wells by March 31, 2005 (paid);
b) incur $5,000 in exploration expenditures on the Cade claim by December
31, 2005 (expended); and
c) incur an additional $10,000 in expenditures on the Cade claim by
December 31, 2006
If we are in default of any of the above requirements, Ms. Wells cannot
terminate the option agreement until she has first provided us with 60 days
written notice of the default and we have failed to cure the default during that
notice period.
There is no assurance that a commercially viable mineral deposit exists on the
Cade claim. We do not have any current plans to acquire interests in additional
mineral properties, though we may consider such acquisitions in the future.
We are not a "blank check" company as defined in Rule 419 of Regulation C of the
Securities Act of 1933. Rule 419 and the corresponding adopting release define a
blank check company as a company that has no specific business plan, or merely
creates the appearance that it has a specific business plan. Our business plan,
as stated herein, is to conduct the geologist recommended phase one and two
exploration programs on the Cade claim, as well as any additional exploration
work recommended by the independent geologist who oversees these first two
phases. In addition, we intend to be engaged in the acquisition and exploration
of additional mineral properties.
Within the next 12 months, we will not enter into a merger with, or acquisition
of, another business entity, other than an acquisition of mineral properties.
Our intention is to continue our exploration programs on the Cade property. As
we are in the business of acquiring and exploring mineral properties, we may
acquire mineral properties in the future though we do not have any present
intention of doing so.
Mineral property exploration is typically conducted in phases. Each subsequent
phase of exploration work is recommended by a geologist based on the results
from the most recent phase of exploration. Once we have completed each phase of
exploration, we will make a decision as to whether or not we proceed with each
successive phase based upon the analysis of the results of that program. Our
director will make this decision based upon the recommendations of the
independent geologist who oversees the program and records the results.
We completed the recommended phase one exploration program on the Cade claim, as
well as part of the second phase. Due to winter weather conditions, we were
forced to cease exploration in the autumn of 2005. The phase two exploration
program recommenced in September of 2006 and will take approximately two months
to complete. The phase three program is scheduled for spring of 2007 and will
take approximately two months to complete as well.
12
Our plan of operation is to conduct exploration work on the Cade claim in order
to ascertain whether it possesses economic quantities of copper, zinc and
silver. There can be no assurance that an economic mineral deposit exists on the
Cade claim until appropriate exploration work is completed.
Even if we complete our proposed exploration programs on the Cade claim and we
are 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.
CADE CLAIM OPTION AGREEMENT
On January 4, 2005, we entered into a mineral property option agreement with
Gillian Wells of Tsawassen, British Columbia, whereby she granted us the option
to acquire a 90% undivided right title and interest in one mineral claim located
in the Lillooet Mining Division of British Columbia, Canada. In order to
exercise the option, we must
a) pay $2,500 to Wells by March 31, 2005 (paid);
b) incur $5,000 in exploration expenditures on the Cade claim by December
31, 2005 (expended); and
c) incur an additional $10,000 in expenditures on the Cade claim by
December 31, 2006
It is anticipated we will be able to pay $5,000 of the $10,000 expenditure
requirement by December 31, 2006 from existing cash and require additional
funding for the remaining $5,000. The additional funding may be through equity
financing, the sale of stock or loans from our director. At this time we have no
agreements for this funding.
DESCRIPTION, LOCATION AND ACCESS
The Cade claim is located south of Lillooet River approximately 25 kilometres
west northwest of Pemberton in southwestern British Columbia. It lies just off a
paved highway immediately south of the Pemberton Meadows on Lillooet River, in
British Columbia's southern Coast Mountains. The property is approximately 115
kilometres north of Vancouver. It can be accessed by two wheel drive vehicle in
about three hours from Vancouver via the Sea-to-Sky Highway 99: north along Howe
Sound from Vancouver's North Shore to Squamish, and then through the winter
resort town of Whistler to Pemberton. Pemberton is a fully-serviced community of
some 3,000 people and through which the BC Rail mainline runs as does major
power transmission. Local access to the property for the first three phases of
exploration is only practical via helicopter, but a year-round helicopter base
in nearby Pemberton is only 15 minutes flight-time away. Following an upgrade of
the existing road to the property, it will be accessible by four-wheel drive
vehicle.
Every time that we conduct exploration on the Cade property during the phase one
and two exploration programs, we will incur $1,000 in helicopter costs in order
to gain access to it. We have included this cost in our exploration budgets.
This will not have an impact on the frequency of our exploration phases. During
the initial exploration phases the use of a helicopter is the most practical and
convenient mode of transportation. We will use a helicopter to gain access to
the property for the phase one, two and three exploration programs. This will
cost us a total of $3,000.
It is not unusual in the mineral exploration sector to use a helicopter to
access mineral claims during the initial phases of exploration if a property is
not readily accessible by road. The geologist who prepared the technical report
on the Cade property, Mr. George Nicholson, confirms that this occurs frequently
in remote areas. If drilling of the property is justified, then it is necessary
to build or upgrade an existing road to the property in order to transport heavy
equipment.
Future exploration phases beyond phase three will require drilling and the use
of heavy equipment. Accordingly, we will then need to upgrade the road to the
Cade property at an approximate cost of $10,000. Once this is complete, we will
access the property by four-wheel drive vehicle. Once it has been determined
13
that there are economic reserves a mine road would be installed for greater
access to the property. This would cost us an additional $20,000 to $25,000.
Lillooet River is at an elevation of about 850 feet, and the ridge tops and
peaks near the east side of the property are in excess of 7,000 feet, so the
intervening slopes are commonly steep. Lower slopes heavily forested and mantled
by thick glacial drift, although local cliffs and creek canyons afford good rock
exposure. On the higher slopes, the tree line varies in elevation from about
5,000 to 6,000 feet, and bedrock exposure is generally excellent.
The vegetation of the Cade claim is typical rain forest found in the
coastal-interior ranges of British Columbia. There is a mix of cedar, hemlock,
spruce trees with alder, willow and cottonwood on old roads and poorly drained
areas. Undergrowth brush is typical with salal, devil's club and assorted berry
bushes. Climate is subtly changed from the lower mainland area with longer,
colder winters and warmer summers. The most snow observed on the tops of the
hills was four meters in late January. We will have access to the claims for
exploration from approximately April to November each year.
TITLE TO THE CADE CLAIM
The Cade property consists of one mineral claim comprising 500 hectares. A
"mineral claim" refers to a specific section of land over which a title holder
owns rights to explore the ground and subsurface, and extract minerals. Title to
the Cade claim is registered in the name of Gillian Wells. She has provided us
with an absolute bill of sale with respect to the property, with which we can
register a 90% interest in our name following the exercise of the option. If we
fail to exercise the option, we must return the absolute bill of sale to her and
we will not own any interest in the property.
Because title to the Cade claim is not registered in our name, we may incur
significant legal expenses if prior to us exercising the option, Ms. Wells
becomes bankrupt or transfers the claims to a third party without our knowledge.
Claim details are as follows:
Claim Name Record Number Expiry Date
---------- ------------- -----------
Cade 414552 August 18, 2006
The claim was created on August 28, 2004 and is in good standing until August
28, 2007. This means that the claim will expire on August 28, 2007 unless we
complete at least $200 worth of exploration work on the claim by that date. If
this required exploration work is incurred, then the deadline is extended to
August 28, 2008. In subsequent years, we must spend at least an additional $200
on the claim to extend the expiry date by one year.
MINERALIZATION
The area of the Cade claim is mapped as being underlain by Cretaceous - Jurassic
Age plutonic rocks, that is, rocks that vary from 65 to 206 million years old.
Plutonic rocks are created when a mass of molten rock cools below the earth's
surface. Volcanic boulders containing sulphides were located in drainages south
of the claim probably represent rock types on the claim. Sulphides are compounds
containing sulphur and one additional element, which are often associated with
valuable mineralization.
EXPLORATION HISTORY
The Cade clam was staked following initial field investigations that discovered
mineralized boulders down slope from the property. Several unexplained stream
sediment anomalies are also present throughout the drainages in the area of the
claim. Extensive research uncovered no previous property-scale work that had
been done in the immediate area of the claim. There is no assurance that a
commercially viable mineral deposit exists on the Cade property
14
GEOLOGICAL REPORT
We retained Mr. George Nicholson, a professional geologist, to complete an
evaluation of the Cade claim and to prepare a geology report on the claim.
Mr. Nicholson is a professional geologist who graduated from the University of
British Columbia with a bachelor's degree in geology in 1986. Since his
graduation, Mr. Nicholson has been continuously employed as a geologist. He is a
member of the Association of Professional Engineers and Geoscientists of British
Columbia and a Fellow of the Royal Geographic Society.
Based on his review, Mr. Nicholson concludes that the Cade claim warrants
further exploration due to the geochemistry and inferred geological continuity,
as well as the lack of previous exploration.
Mr. Nicholson recommends an initial exploration program consisting of three
phases. The first phase would consist of geological mapping, prospecting and
geochemical sampling. Geological mapping involves plotting previous exploration
data relating to a property area on a map in order to determine the best
property locations to conduct subsequent exploration work. Prospecting involves
analyzing rocks on the property surface with a view to discovering indications
of potential mineralization. Geochemical sampling involves gathering rock and
soil samples from property areas with the most potential to host economically
significant mineralization. All samples gathered are sent to a laboratory where
they are crushed and analysed for metal content.
We commenced and completed the phase one program in August 2005. The first phase
cost us $5,000 as described below.
BUDGET - PHASE I
Geologist 3 day @ $400/day $ 1,200
Geotechnician 3 days @ $350/day $ 1,050
Equipment rental 1 x 4 wheeldrive vehicle $ 300
Fuel, Food, Field Supplies $ 400
Assays 20 @ $20 each $ 400
Helicopter 1 hour @ $1,000 $ 1,000
Report $ 500
Filing Fees $ 150
-------
TOTAL $ 5,000
=======
During the Phase I exploration program, 14 soil samples and six rock samples
were taken and assayed for mineral content. These were all grab samples, that
is, soil samples or pieces of rock that appear to contain precious metals such
as gold and silver, or industrial metals such as copper and nickel. The grab
samples that were assayed during the phase one exploration program indicated
that several areas of the property contain moderate to high levels of copper,
zinc and silver mineralization. These areas will be the focus of follow up
exploration to determine how far this surface mineral extends and whether it
continues below the surface of these property areas.
The initial part of the second phase of exploration, which was completed in the
autumn of 2005, consisted of a follow-up of the initial stage geological mapping
and included detailed geology. This exploration focused on areas of the property
that we identified in phase one as containing potential mineralization. We
gathered additional rock samples from the property surface from these areas. Our
consulting geologist will determine whether there is a geological explanation to
explain the patterns of mineralization found on the property following the
completion of the phase. We recommenced the phase two exploration program in
September 2006 and expect to complete it in November of 2006. The second phase
will have a total cost of approximately $9,000.
The third phase of exploration will consist of an airborne electromagnetic
survey of the Cade claim, followed by additional sampling of prospective areas.
The first part of this program involves attaching equipment to a helicopter that
is flown above the property surface. This equipment measures whether or not
rocks on the surface and subsurface of the property conduct electricity. Copper
15
and gold are excellent conductors of electricity. Areas of high conductivity are
targets for follow-up exploration. The activities that are involved in this part
of the exploration program are the retention of the helicopter company, the
affixation of the electromagnetic equipment to the helicopter and the flight of
the helicopter over the property surface. This process will take approximately
one week and will cost $10,000. The data from the equipment is then compiled and
analyzed by the consulting geologist. The cost of this analysis is $5,000.
Based on the results from the electromagnetic survey, the consulting geologist
will then gather additional rock and soil samples for analysis on property areas
that relate to the high electromagnetic results. This involves identifying and
marking sample areas of the property, placing rock and soil into sample bags,
transporting the samples to an assay laboratory and having the laboratory
analyze the samples for mineral content. The geologist then reviews these
results and prepares a report for us summarizing the results of the entire Phase
III program and recommending any further exploration work that is warranted. The
cost of this part of the exploration phase consists of $20,000 for the geologist
and $5,000 for assay costs.
BUDGET - PHASE III
Airborne EM Survey $15,000
Follow-up geological surveys $25,000
-------
$40,000
=======
However, we expect that we will need to raise additional financing to cover the
costs of the phase three program through the sale of our common stock, although
we currently do not have any specific financing arranged. Subject to financing,
we expect to commence a third phase of exploration on the Cade property
commencing in the spring of 2007. Once we have received the results of the Phase
III surveys, we would then have our consulting geologist make recommendations
for future exploration phases to commence in the summer 2007 when weather
conditions permit.
Future exploration phases beyond phase three will require drilling and the use
of heavy equipment. Accordingly, we will then need to upgrade the road to the
Cade property at an approximate cost of $10,000. Once this is complete, we will
access the property by four-wheel drive vehicle. Once it has been determined
that there are economic reserves a mine road, accessible to 2 wheel drive
vehicles, would be installed for greater access to the property. We estimate
this would cost us an additional $20,000 to $25,000, based on the verbal
estimates of management's colleagues in the mining field. We are unable to
assure you we will be able to raise the funds necessary for any future
exploration or improvements.
There is the possibility that the Cade claim does not contain any reserves and
funds that we spend on exploration will be lost. Even if we complete our current
exploration program and are successful in identifying any mineral deposits we
will be required to expend substantial funds on further drilling and engineering
studies before we proceed. We are unable to assure you we will be able to raise
the additional funds necessary to implement any future exploration or extraction
program even if mineralization is found. If no commercially viable mineral
deposit exists on the Cade claim we may consider acquiring interests in
additional mineral properties in the future, though we do not have any current
plans to do so.
COMPLIANCE WITH GOVERNMENT REGULATION
We will be required to comply with all regulations, rules and directives of
governmental authorities and agencies applicable to the exploration of minerals
in Canada generally, and in British Columbia specifically.
Because there will not be any appreciable disturbance to the land during the
phase one and two exploration programs on the Cade claim, we will not have to
seek any government approvals prior to conducting exploration, as it is deemed
"low-disturbance/low-impact" by the British Columbia Department of Energy, Mines
and Petroleum Resources (BCDM).
16
We will have to sustain the cost of reclamation and environmental mediation for
all exploration and development work undertaken. The amount of these costs is
not known at this time as we do not know the extent of the exploration program
that will be undertaken beyond completion of the currently planned work
programs. Because there is presently no information on the size, tenor, or
quality of any resource or reserve at this time, it is impossible to assess the
impact of any capital expenditures on earnings or our competitive position in
the event a potentially economic deposit is discovered.
If we enter into production, the cost of complying with permit and regulatory
environment laws will be greater than in the exploration phases because the
impact on the project area is greater. Permits and regulations will control all
aspects of any production program if the project continues to that stage because
of the potential impact on the environment. Examples of regulatory requirements
include:
- Water discharge will have to meet water standards;
- Dust generation will have to be minimal or otherwise re-mediated;
- Dumping of material on the surface will have to be re-contoured and
re-vegetated;
- An assessment of all material to be left on the surface will need to
be environmentally benign;
- Ground water will have to be monitored for any potential contaminants;
- The socio-economic impact of the project will have to be evaluated and
if deemed negative, will have to be re-mediated; and
- There will have to be an impact report of the work on the local fauna
and flora.
With respect to the mechanized trenching or drilling - a plan of operation will
need to be filed with the BCDM. This plan will detail the extent, location and
amount of surface disturbance for the trenching and/or drilling. As the amount
of trenching and drilling (initially) will be limited the permit should be
issued within 30 days. We will be required to obtain a refundable bond in the
amount of $2,000 - $5,000 (depending on the anticipated amount of disturbance).
The bond is to ensure that we reclaim or repair the disturbance caused by the
trenching and drilling. Usually this reclaiming work entails filling in and
smoothing the surface at trenching sites, clean up and removal of any work
material, and seeding native grass/plants at the sites of any disturbance.
In the event that trees larger than 6 inches in diameter need to be cut down, a
permit will need to be obtained from the British Columbia Ministry of Forests.
This usually takes less than 30 days to obtain. We will try to adjust the areas
we work at and trench around larger trees (initially) to avoid any disturbance
to larger trees. If the disturbance to larger trees is unavoidable then a permit
to cut will be obtained. There are nominal costs involved in obtaining the BCDM
or Forestry permits (less than $100.00).
EMPLOYEES
We have no employees as of the date of this prospectus other than our sole
director.
RESEARCH AND DEVELOPMENT EXPENDITURES
We have not incurred any other research or development expenditures since our
incorporation.
SUBSIDIARIES
We do not have any subsidiaries.
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PATENTS AND TRADEMARKS
We do not own, either legally or beneficially, any patents or trademarks.
REPORTS TO SECURITY HOLDERS
Although we are not required to deliver a copy of our annual report to our
security holders, we will voluntarily send a copy of our annual report,
including audited financial statements, to any registered shareholder who
requests it. We will not be a reporting issuer with the Securities and Exchange
Commission until our registration statement on Form SB-2 is declared effective.
We have filed a registration statement on Form SB-2, under the Securities Act of
1933, with the Securities and Exchange Commission with respect to the shares of
our common stock offered through this prospectus. This prospectus is filed as a
part of that registration statement, but does not contain all of the information
contained in the registration statement and exhibits. Statements made in the
registration statement are summaries of the material terms of the referenced
contracts, agreements or documents of the company. We refer you to our
registration statement and each exhibit attached to it for a more detailed
description of matters involving the company, and the statements we have made in
this prospectus are qualified in their entirety by reference to these additional
materials. You may inspect the registration statement, exhibits and schedules
filed with the Securities and Exchange Commission at the Commission's principal
office in Washington, D.C. Copies of all or any part of the registration
statement may be obtained from the Public Reference Section of the Securities
and Exchange Commission, 100 F Street NE, Washington, D.C. 20549. Please call
the Commission at 1-800-SEC-0330 for further information on the operation of the
public reference rooms. The Securities and Exchange Commission also maintains a
web site at http://www.sec.gov that contains reports, proxy statements and
information regarding registrants that file electronically with the Commission.
This site contains information statements and other information regarding
issuers that file electronically with the Commission. Our registration statement
and the referenced exhibits can also be found on this site.
PLAN OF OPERATIONS
Our plan of operation for the next twelve months is to complete the recommended
phase two and phase three exploration programs on the Cade claim consisting of a
geological mapping, prospecting, detailed geology and geochemical sampling, as
well as an electromagnetic survey. The balance of the phase two program will
cost approximately $3,000, for a total of $9,000, and was commenced in September
2006. We expect that the program will be completed in November 2006. The phase
three exploration program will cost approximately $40,000 and is scheduled for
spring of 2007. The phase three exploration program should take approximately
two months to complete.
The third phase of exploration will consist of an airborne electromagnetic
survey of the Cade claim, followed by additional sampling of prospective areas.
An electromagnetic survey involves measuring whether or not rocks on the surface
and subsurface of the property conduct electricity. Copper and gold are
excellent conductors of electricity. Areas of high conductivity are targets for
follow-up exploration. The survey will involve leasing a helicopter equipped
with equipment that will obtain electromagnetic readings as the helicopter flies
over portions of the Cade claim. The data from the equipment is then compiled
and analyzed by the consulting geologist. He will then gather additional rock
and soil samples for analysis on property areas that relate to the high
electromagnetic results.
BUDGET - PHASE III
Airborne EM Survey $15,000
Follow-up geological surveys $25,000
-------
$40,000
=======
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We do not have any verbal or written agreement regarding the retention of any
qualified engineer or geologist for this exploration program, though Mr. George
Nicholson has indicated that he will oversee all exploration if he is available.
We intend to proceed with a phase four exploration program in the summer of
2007. We will not know the parameters of this program until our consulting
geologist receives the results of the phase two three exploration programs and
provides us with recommendations and a budget. However, we estimate that the
phase four program could cost as much as $100,000.
As well, we anticipate spending an additional $15,000 on administrative fees,
including fees payable in connection with the filing of this registration
statement and complying with reporting obligations. We will pay most of these
expenses from our current cash on hand.
Total expenditures over the next 12 months are therefore expected to be
$158,000.
While we have enough funds to cover most of our anticipated administrative
expenses, we will require additional funding in order to cover additional
exploration on the Cade claim. We anticipate that additional funding will be in
the form of equity financing from the sale of our common stock or from director
loans. We do not have any arrangements in place for any future equity financing
or loans.
RESULTS OF OPERATIONS FOR THE PERIOD FROM INCEPTION THROUGH JUNE 30, 2006
We have not earned any revenues from our incorporation on November 17, 2004 to
June 30, 2006. We do not anticipate earning revenues unless we enter into
commercial production on the Cade claim, which is doubtful. We have not
commenced the exploration stage of our business and can provide no assurance
that we will discover economic mineralization on the Cade claim, or if such
minerals are discovered, that we will enter into commercial production.
We incurred operating expenses in the amount of $20,904 for the period from our
inception on November 17, 2004 to June 30, 2006. Of these, $13,201 were incurred
during the fiscal year ended March 31, 2006 and $4,328 were incurred in the
period from our inception on November 17, 2004 to March 31, 2005. These
operating expenses were comprised entirely of administrative expenses.
We have not attained profitable operations and are dependent upon obtaining
financing to pursue exploration activities. For these reasons our auditors
believe that there is substantial doubt that we will be able to continue as a
going concern.
DESCRIPTION OF PROPERTY
We have the option to acquire a 90% interest in the Cade mineral claim. We do
not own any real property interest in the Cade claim or any other property.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None of the following parties has, since our date of incorporation, had any
material interest, direct or indirect, in any transaction with us or in any
presently proposed transaction that has or will materially affect us:
* Any of our directors or officers;
* Any person proposed as a nominee for election as a director;
* Any person who beneficially owns, directly or indirectly, shares
carrying more than 10% of the voting rights attached to our
outstanding shares of common stock;
* Our sole promoter, Richard Novis;
* Any member of the immediate family of any of the foregoing persons.
19
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
NO PUBLIC MARKET FOR COMMON STOCK
There is presently no public market for our common stock. We anticipate applying
for trading of our common stock on the over the counter bulletin board upon the
effectiveness of the registration statement of which this prospectus forms a
part. However, we can provide no assurance that our shares will be traded on the
bulletin board or, if traded, that a public market will materialize.
STOCKHOLDERS OF OUR COMMON SHARES
As of the date of this registration statement, we have 30 registered
shareholders.
RULE 144 SHARES
A total of 3,000,000 shares of our common stock are available for resale to the
public in accordance with the volume and trading limitations of Rule 144 of the
Act. In general, under Rule 144 as currently in effect, a person who has
beneficially owned shares of a company's common stock for at least one year is
entitled to sell within any three month period a number of shares that does not
exceed the greater of:
1. 1% of the number of shares of the company's common stock then
outstanding which, in our case, will equal 55,400 shares as of the
date of this prospectus; or
2. the average weekly trading volume of the company's common stock during
the four calendar weeks preceding the filing of a notice on Form 144
with respect to the sale.
Sales under Rule 144 are also subject to manner of sale provisions and notice
requirements and to the availability of current public information about the
company.
Under Rule 144(k), a person who is not one of the company's affiliates at any
time during the three months preceding a sale, and who has beneficially owned
the shares proposed to be sold for at least two years, is entitled to sell
shares without complying with the manner of sale, public information, volume
limitation or notice provisions of Rule 144.
As of the date of this prospectus, persons who are our affiliates hold all of
the 3,000,000 shares that may be sold pursuant to Rule 144.
REGISTRATION RIGHTS
We have not granted registration rights to the selling shareholders or to any
other persons.
DIVIDENDS
There are no restrictions in our articles of incorporation or bylaws that
prevent us from declaring dividends. The Nevada Revised Statutes, however, do
prohibit us from declaring dividends where, after giving effect to the
distribution of the dividend:
1. we would not be able to pay our debts as they become due in the usual
course of business; or
2. our total assets would be less than the sum of our total liabilities
plus the amount that would be needed to satisfy the rights of
shareholders who have preferential rights superior to those receiving
the distribution.
We have not declared any dividends, and we do not plan to declare any dividends
in the foreseeable future.
20
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The table below summarizes all compensation awarded to, earned by, or paid to
our executive officer by any person for all services rendered in all capacities
to us for the fiscal period from our inception on November 17, 2004 to March 31,
2005, for the fiscal year ended March 31, 2006 and the subsequent period to the
date of this prospectus.
Annual Compensation
Restr
Other Stock Options/ LTIP
Name Title Year Salary Bonus Comp. Awarded SARS(#) payouts($)
---- ----- ---- ------ ----- ----- ------- ------- ----------
Richard Novis Pres, Sec, 2006 $0 0 0 0 0 0
Treas, CEO, 2005 $0 0 0 0 0 0
& Dir
STOCK OPTION GRANTS
We have not granted any stock options to the executive officer since our
inception.
CONSULTING AGREEMENTS
We do not have any employment or consulting agreement with our director or
officer. We do not pay Mr. Novis any amount for acting as a director of the
Company.
FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS:
1. Report of Independent Registered Public Accounting Firm;
2. Audited financial statements for the periods ending March 31, 2006 and
March 31, 2005, including:
a. Balance Sheets;
b. Statements of Operations;
c. Statements of Stockholders' Equity;
d. Statements of Cash Flows; and
e. Notes to Financial Statements
3. Unaudited interim financial statements for the three month period
ending June 30, 2006 including:
a. Balance Sheets;
b. Statements of Operations;
c. Statements of Stockholders' Equity;
d. Statements of Cash Flows; and
e. Notes to Financial Statements
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
We have had no changes in or disagreements with our accountants.
21
ARMANDO C. IBARRA
Certified Public Accountants
A Professional Corporation
Armando C. Ibarra, C.P.A. Members of the California Society of
Certified Public Accountants
Armando Ibarra, Jr., C.P.A., JD Members of the of American Institute
of Certified Public Accountants
Registered with the Public Company
Accounting Oversight Board
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors of
Northern Explorations, LTD.
(An Exploration Stage Company)
We have audited the accompanying balance sheets of Northern Explorations, LTD.
(An Exploration Stage Company) as of March 31, 2006 and 2005, and the related
statements of operations, changes in stockholders' equity, and cash flows for
the year ended March 31, 2006 and for the period November 17, 2004 (inception)
through March 31, 2006. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). These standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company as of March 31,
2006 and 2005, and the results of its operations and its cash flows for the year
ended March 31, 2006 and the period November 17, 2004 (inception) through March
31, 2006, in conformity with US generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. Because of the Company's current
status and limited operations there is substantial doubt about its ability to
continue as a going concern. Management's plans in regard to its current status
are also described in Note 3. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ Armando C. Ibarra
- ----------------------------
Armando C. Ibarra, CPA
Chula Vista, Ca.
May 25, 2006
F-1
NORTHERN EXPLORATIONS, LTD.
(An Exploration Stage Company)
Balance Sheets
(Stated in US Dollars)
- --------------------------------------------------------------------------------
As of As of
March 31, March 31,
2006 2005
-------- --------
ASSETS
CURRENT ASSETS
Cash $ 14,646 $ 27,672
-------- --------
TOTAL CURRENT ASSETS 14,646 27,672
-------- --------
TOTAL ASSETS $ 14,646 $ 27,672
======== ========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 175 $ --
-------- --------
TOTAL CURRENT LIABILITIES 175 --
-------- --------
TOTAL LIABILITIES 175 --
STOCKHOLDERS' EQUITY
Common stock, ($0.001 par value, 75,000,000
shares authorized; 5,540,000 shares issued and
outstanding as of March 31, 2006 and 2005) 5,540 5,540
Additional paid-in capital 26,460 26,460
Retained earnings (deficit) (17,529) (4,328)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 14,471 27,672
-------- --------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 14,646 $ 27,672
======== ========
See Notes to Financial Statements
F-2
NORTHERN EXPLORATIONS, LTD.
(An Exploration Stage Company)
Statements of Operations
(Stated in US Dollars)
- --------------------------------------------------------------------------------
November 17, 2004 November 17, 2004
(inception) (inception)
Year Ended through through
March 31, March 31, March 31,
2006 2005 2006
----------- ----------- -----------
REVENUES
Revenues $ -- $ -- $ --
----------- ----------- -----------
TOTAL REVENUES -- -- --
OPERATING COSTS
Administrative expenses 13,201 4,328 17,529
----------- ----------- -----------
TOTAL OPERATING COSTS (13,201) (4,328) (17,529)
----------- ----------- -----------
NET INCOME (LOSS) $ (13,201) $ (4,328) $ (17,529)
=========== =========== ===========
BASIC EARNINGS PER SHARE $ (0.00) $ (0.00) $ (0.00)
=========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 5,540,000 5,532,889 5,532,889
=========== =========== ===========
See Notes to Financial Statements
F-3
NORTHERN EXPLORATIONS, LTD.
(An Exploration Stage Company)
Statement of Changes in Stockholders' Equity
From November 17, 2004 (Inception) through March 31, 2006
(Stated in US Dollars)
- --------------------------------------------------------------------------------
Common Additional Retained
Common Stock Paid-in Earnings
Stock Amount Capital (Deficit) Total
----- ------ ------- --------- -----
BALANCE, NOVEMBER 17, 2004 -- $ -- $ -- $ -- $ --
Stock issued for cash on December 7, 2004
@ $0.001 per share 3,000,000 3,000 3,000
Stock issued for cash on December 22, 2004
@ $0.01 per share 2,500,000 2,500 22,500 25,000
Stock issued for cash on January 17, 2005
@ $0.10 per share 40,000 40 3,960 4,000
Net loss, March 31, 2005 (4,328) (4,328)
---------- ---------- ---------- ---------- ----------
BALANCE, MARCH 31, 2005 5,540,000 $ 5,540 $ 26,460 $ (4,328) $ 27,672
---------- ---------- ---------- ---------- ----------
Net loss, March 31, 2006 (13,201) (13,201)
---------- ---------- ---------- ---------- ----------
BALANCE, MARCH 31, 2006 5,540,000 $ 5,540 $ 26,460 $ (17,529) $ 14,471
========== ========== ========== ========== ==========
See Notes to Financial Statements
F-4
NORTHERN EXPLORATIONS, LTD.
(An Exploration Stage Company)
Statement of Cash Flows
(Stated in US Dollars)
- --------------------------------------------------------------------------------
November 17, 2004
(inception)
Year Ended Year Ended through
March 31, March 31, March 31,
2006 2005 2006
-------- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $(13,201) $(4,328) $(17,529)
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Changes in operating assets and liabilities:
Increase (decrease) in accounts payable 175 175
-------- -------- --------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (13,026) (4,328) (17,354)
CASH FLOWS FROM INVESTING ACTIVITIES
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES -- -- --
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock -- 5,540 5,540
Additional paid-in capital -- 26,460 26,460
-------- -------- --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES -- 32,000 32,000
-------- -------- --------
NET INCREASE (DECREASE) IN CASH (13,026) 27,672 14,646
CASH AT BEGINNING OF YEAR 27,672 -- --
-------- -------- --------
CASH AT END OF YEAR $ 14,646 $ 27,672 $ 14,646
======== ======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during year for interest $ -- $ -- $ --
======== ======== ========
Cash paid during year for taxes $ -- $ -- $ --
======== ======== ========
See Notes to Financial Statements
F-5
NORTHERN EXPLORATIONS, LTD.
(An Exploration Stage Company)
Notes To Financial Statements
March 31, 2006
(Stated in U.S. Dollars)
NOTE 1. NATURE AND CONTINUANCE OF OPERATIONS
The Company was incorporated in the State of Nevada on November 17, 2004, and
its year-end is March 31st. The Company is an Exploration Stage Company as
defined by Statement of Financial Accounting Standard ("SFAS") No. 7. The
Company has acquired a mineral property located in the Nicola Mining Division,
British Columbia, Canada, and has not yet determined whether this property
contains reserves that are economically recoverable. The recoverability of
property expenditures will be dependent upon the discovery of economically
recoverable reserves, confirmation of the Company's interest in the underlying
property, the ability of the Company to obtain necessary financing to satisfy
the expenditure requirements under the property agreement and upon future
profitable production or proceeds for the sale thereof.
These financial statements have been prepared on a going concern basis. The
Company has incurred losses since inception resulting in an accumulated deficit
of $17,529 since inception and further losses are anticipated in the development
of its business raising substantial doubt about the Company's ability to
continue as a going concern. Its ability to continue as a going concern is
dependent upon the ability of the Company to generate profitable operations in
the future and/or to obtain the necessary financing to meet its obligations and
repay its liabilities arising from normal business operations when they come
due. Management has plans to seek additional capital through a private placement
and public offering of its common stock. The financial statements do not include
any adjustments relating to the recoverability and classification of recorded
assets, or the amounts of and classification of liabilities that might be
necessary in the event the Company cannot continue in existence.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements of the Company have been prepared in accordance with
generally accepted accounting principles in the United States of America.
Because a precise determination of many assets and liabilities is dependent upon
future events, the preparation of financial statements for a period necessarily
involves the use of estimates, which have been made using careful judgment.
Actual results may vary from these estimates.
F-6
NORTHERN EXPLORATIONS, LTD.
(An Exploration Stage Company)
Notes To Financial Statements
March 31, 2006
(Stated in U.S. Dollars)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The financial statements have, in management's opinion, been properly prepared
within reasonable limits of materiality and within the framework of the
significant accounting policies summarized below:
A) MINERAL PROPERTY COSTS
The Company has been in the exploration stage since its formation on November
17, 2004 and has not yet realized any revenues from its planned operations. It
is primarily engaged in the acquisition and exploration of mining properties.
Mineral property acquisition and exploration costs are charged to operations as
incurred. When it has been determined that a mineral property can be
economically developed as a result of establishing proven and probable reserves,
the costs incurred to develop such property, are capitalized. Such costs will be
amortized using the units-of-production method over the estimated life of the
probable reserve.
B) 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 reporting period.
Actual results could differ from those estimates. In accordance with FASB 16 all
adjustments are normal and recurring.
C) FINANCIAL INSTRUMENTS
The carrying value of cash, and accounts payable and accrued liabilities
approximates their fair value because of the short maturity of these
instruments. The Company's operations are in Canada and virtually all of its
assets and liabilities are giving rise to significant exposure to market risks
from changes in foreign currency rates. The Company's financial risk is the risk
that arises from fluctuations in foreign exchange rates and the degree of
volatility of these rates. Currently, the Company does not use derivative
instruments to reduce its exposure to foreign currency risk.
F-7
NORTHERN EXPLORATIONS, LTD.
(An Exploration Stage Company)
Notes To Financial Statements
March 31, 2006
(Stated in U.S. Dollars)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
D) ENVIRONMENTAL COSTS
Environmental expenditures that relate to current operations are charged to
operations or capitalized as appropriate. Expenditures that relate to an
existing condition caused by past operations, and which do not contribute to
current or future revenue generation, are charged to operations. Liabilities are
recorded when environmental assessments and/or remedial efforts are probable,
and the cost can be reasonably estimated. Generally, the timing of these
accruals coincides with the earlier of completion of a feasibility study or the
Company's commitments to plan of action based on the then known facts.
E) INCOME TAXES
The Company uses the asset and liability method of accounting for income taxes
in accordance with SFAS No. 109 - "Accounting for Income Taxes". This standard
requires the use of an asset and liability approach for financial accounting and
reporting on income taxes. If it is more likely than not that some portion or
all of a deferred tax asset will not be realized, a valuation allowance is
recognized.
F) BASIC AND DILUTED NET LOSS PER SHARE
The Company reports basic loss per share in accordance with SFAS No. 128 -
"Earnings Per Share". Basic loss per share is computed using the weighted
average number of common stock outstanding during the period. Diluted loss per
share is computed using the weighted average number of common and potentially
dilutive common stock outstanding during the period. As the Company generated
net losses in the period presented, the basic and diluted loss per share is the
same, as any exercise of options or warrants would be anti-dilutive.
G) COMPREHENSIVE LOSS
SFAS No. 130, "Reporting Comprehensive Income," establishes standards for the
reporting and display of comprehensive loss and its components in the financial
statements. As at March 31, 2005, the Company has no items that represent a
comprehensive loss and, therefore, has not included a schedule of comprehensive
loss in the financial statements.
F-8
NORTHERN EXPLORATIONS, LTD.
(An Exploration Stage Company)
Notes To Financial Statements
March 31, 2006
(Stated in U.S. Dollars)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
H) CASH AND CASH EQUIVALENTS
For purposes of the balance sheet and statement of cash flows, the Company
considers all highly liquid instruments with maturity of three months or less at
the time of issuance to be cash equivalents. At March 31, 2006, the Company had
no cash equivalents.
I) NEW ACCOUNTING STANDARDS
Management does not believe that any recently issued, but not yet effective,
accounting standards, if currently adopted, could have a material effect on the
accompanying financial statements.
NOTE 3. GOING CONCERN
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company generated a net loss of
$17,529 during the period from November 17, 2004 (inception) to March 31, 2006.
This condition raises substantial doubt about the Company's ability to continue
as a going concern. The Company's continuation as a going concern is dependent
on its ability to meet its obligations, to obtain additional financing as may be
required and ultimately to attain profitability. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
Management plans to raise additional funds through debt or equity offerings.
Management has yet to decide what type of offering the Company will use or how
much capital the Company will attempt to raise. There is no guarantee that the
Company will be able to raise any capital through any type of offerings.
F-9
NORTHERN EXPLORATIONS, LTD.
(An Exploration Stage Company)
Notes To Financial Statements
March 31, 2006
(Stated in U.S. Dollars)
NOTE 4. MINERAL PROPERTY
Pursuant to a mineral property option agreement dated January 4, 2005, the
Company was granted an option to acquire the sole and exclusive right, privilege
and option to explore the claim together with the sole and exclusive right,
privilege and option to purchase a 90% interest in the Cade Claim located in the
Nicola Mining Division, British Columbia, Canada, for:
A) CASH PAYMENTS
Cash payment of $2,500 by March 31, 2005 (paid on March 17, 2005).
B) EXPENDITURE COMMITMENTS
Expenditures for exploration and development work on the Claim totalling at
least $15,000 by December 31, 2006, which work shall be conducted by the Company
under the direction of a qualified geologist or project engineer, as follows:
- - $5,000 in expenditures on the Claim by December 31, 2005; and
- - an additional $10,000 in expenditures on the Claim by December 31, 2006.
C) ASSESSMENT WORK
All Claim payments and assessment work required to keep the Claim and this
Option in good standing during the term of this Agreement.
NOTE 5. COMMON STOCK
On December 7, 2004, the Company sold 3,000,000 shares of its common stock at
$0.001 per share.
On December 22, 2004, the Company sold 2,500,000 shares of its common stock at
$0.01 per share.
On January 17, 2005, the Company sold 40,000 shares of its common stock at $0.10
per share.
At March 31, 2006, there were no outstanding stock options or warrants.
F-10
NORTHERN EXPLORATIONS, LTD.
(An Exploration Stage Company)
Notes To Financial Statements
March 31, 2006
(Stated in U.S. Dollars)
NOTE 6. INCOME TAXES
Potential benefits of income tax losses are not recognized in the accounts until
realization is more likely than not. The Company has incurred net operating
losses of $17,529, which expire in 2025. Pursuant to SFAS No. 109, the Company
is required to compute tax asset benefits for net operating losses carried
forward. Potential benefit of net operating losses have not been recognized in
these financial statements because the Company cannot be assured that it is more
likely than not it will utilize the net operating losses carried forward in
future years.
Deferred tax asset $ 2,629
Valuation allowance (2,629)
-------
Net deferred tax asset $ --
=======
NOTE 7. FOREIGN CURRENCY TRANSLATION
Functional currency for Northern Explorations, Ltd is in US dollars. In
accordance with FASB #52 paragraph 9 the Company will continue to issue their
financial statements in their established functional currency unless significant
changes in economic facts and circumstances indicate clearly that the functional
currency has changed.
F-11
NORTHERN EXPLORATIONS, LTD.
(An Exploration Stage Company)
Balance Sheets
(Stated in US Dollars)
- --------------------------------------------------------------------------------
As of As of
June 30, March 31,
2006 2006
-------- --------
ASSETS
CURRENT ASSETS
Cash $ 14,196 $ 14,646
-------- --------
TOTAL CURRENT ASSETS 14,196 14,646
-------- --------
TOTAL ASSETS $ 14,196 $ 14,646
======== ========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 3,100 $ 175
-------- --------
TOTAL CURRENT LIABILITIES 3,100 175
TOTAL LIABILITIES 3,100 175
STOCKHOLDERS' EQUITY
Common stock, ($0.001 par value, 75,000,000 shares
authorized; 5,540,000 shares issued and outstanding
as of June 30, 2006 and March 31, 2006) 5,540 5,540
Additional paid-in capital 26,460 26,460
Deficit accumulated during exploration stage (20,904) (17,529)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 11,096 14,471
-------- --------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 14,196 $ 14,646
======== ========
See Notes to Financial Statements
F-12
NORTHERN EXPLORATIONS, LTD.
(An Exploration Stage Company)
Statements of Operations
(Stated in US Dollars)
- --------------------------------------------------------------------------------
November 17, 2004
Three Months Three Months (inception)
Ended Ended through
June 30, June 30, June 30,
2006 2005 2006
----------- ----------- -----------
REVENUES
Revenues $ -- $ -- $ --
----------- ----------- -----------
TOTAL REVENUES -- -- --
OPERATING COSTS
Administrative Expenses 3,375 3,238 20,904
----------- ----------- -----------
TOTAL OPERATING COSTS (3,375) (3,238) (20,904)
NET INCOME (LOSS) $ (3,375) $ (3,238) $ (20,904)
=========== =========== ===========
BASIC EARNINGS PER SHARE $ (0.00) $ (0.00)
=========== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 5,540,000 5,540,000
=========== ===========
See Notes to Financial Statements
F-13
NORTHERN EXPLORATIONS, LTD.
(An Exploration Stage Company)
Statement of Changes in Stockholders' Equity (Deficit)
From November 17, 2004 (Inception) through June 30, 2006
(Stated in US Dollars)
- --------------------------------------------------------------------------------
Common Additional Retained
Common Stock Paid-in Earnings
Stock Amount Capital (Deficit) Total
----- ------ ------- --------- -----
BALANCE, NOVEMBER 17, 2004 -- $ -- $ -- $ -- $ --
Stock issued for cash on December 7, 2004
@ $0.001 per share 3,000,000 3,000 3,000
Stock issued for cash on December 22, 2004
@ $0.01 per share 2,500,000 2,500 22,500 25,000
Stock issued for cash on January 17, 2005
@ $0.10 per share 40,000 40 3,960 4,000
Net loss, March 31, 2005 (4,328) (4,328)
---------- ---------- ---------- ---------- ----------
BALANCE, MARCH 31, 2005 5,540,000 $ 5,540 $ 26,460 $ (4,328) $ 27,672
---------- ---------- ---------- ---------- ----------
Net loss, March 31, 2006 (13,201) (13,201)
---------- ---------- ---------- ---------- ----------
BALANCE, MARCH 31, 2006 5,540,000 $ 5,540 $ 26,460 $ (17,529) $ 14,471
---------- ---------- ---------- ---------- ----------
Net loss, June 30, 2006 (3,375) (3,375)
---------- ---------- ---------- ---------- ----------
BALANCE, JUNE 30, 2006 5,540,000 $ 5,540 $ 26,460 $ (20,904) $ 11,096
========== ========== ========== ========== ==========
See Notes to Financial Statements
F-14
NORTHERN EXPLORATIONS, LTD.
(An Exploration Stage Company)
Statements of Cash Flows
(Stated in US Dollars)
- --------------------------------------------------------------------------------
November 17, 2004
Three Months Three Months (inception)
Ended Ended through
June 30, June 30, June 30,
2006 2005 2006
-------- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (3,375) $ (3,238) $(20,904)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Changes in operating assets and liabilities:
Increase (decrease) in accounts payable 2,925 -- 100
-------- -------- --------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (450) (3,238) (20,804)
CASH FLOWS FROM INVESTING ACTIVITIES
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES -- -- --
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock -- -- 5,540
Additional paid-in capital -- -- 26,460
-------- -------- --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES -- -- 32,000
-------- -------- --------
NET INCREASE (DECREASE) IN CASH (450) (3,238) 11,196
CASH AT BEGINNING OF PERIOD 14,646 27,672 --
-------- -------- --------
CASH AT END OF PERIOD $ 14,196 $ 24,434 $ 11,196
======== ======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during period for:
Interest $ -- $ -- $ --
======== ======== ========
Income Taxes $ -- $ -- $ --
======== ======== ========
See Notes to Financial Statements
F-15
NORTHERN EXPLORATIONS, LTD.
(An Exploration Stage Company)
Notes To Financial Statements
June 30, 2006
(Stated in U.S. Dollars)
NOTE 1. NATURE AND CONTINUANCE OF OPERATIONS
The Company was incorporated in the State of Nevada on November 17, 2004, and
its year-end is March 31st. The Company is an Exploration Stage Company as
defined by Statement of Financial Accounting Standard ("SFAS") No. 7. The
Company has acquired a mineral property located in the Nicola Mining Division,
British Columbia, Canada, and has not yet determined whether this property
contains reserves that are economically recoverable. The recoverability of
property expenditures will be dependent upon the discovery of economically
recoverable reserves, confirmation of the Company's interest in the underlying
property, the ability of the Company to obtain necessary financing to satisfy
the expenditure requirements under the property agreement and upon future
profitable production or proceeds for the sale thereof.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements have, in management's opinion, been properly prepared
within reasonable limits of materiality and within the framework of the
significant accounting policies summarized below:
BASIS OF ACCOUNTING
The Company's financial statements are prepared using the accrual method of
accounting. The financial statements of the Company have been prepared in
accordance with generally accepted accounting principles in the United States of
America.
CASH AND CASH EQUIVALENTS
For purposes of the balance sheet and statement of cash flows, the Company
considers all highly liquid instruments with maturity of three months or less at
the time of issuance to be cash equivalents. At June 30, 2006, the Company had
no cash equivalents.
FINANCIAL INSTRUMENTS
The carrying value of cash, and accounts payable and accrued liabilities
approximates their fair value because of the short maturity of these
instruments. The Company's operations are in Canada and virtually all of its
assets and liabilities are giving rise to significant exposure to market risks
from changes in foreign currency rates. The Company's financial risk is the risk
that arises from fluctuations in foreign exchange rates and the degree of
volatility of these rates. Currently, the Company does not use derivative
instruments to reduce its exposure to foreign currency risk.
MINERAL PROPERTY COSTS
The Company has been in the exploration stage since its formation on November
17, 2004 and has not yet realized any revenues from its planned operations. It
is primarily engaged in the acquisition and exploration of mining properties.
Mineral property acquisition and exploration costs are charged to operations as
incurred. When it has been determined that a mineral property can be
economically developed as a result of establishing proven and probable reserves,
the costs incurred to develop such property, are capitalized. Such costs will be
amortized using the units-of-production method over the estimated life of the
probable reserve.
F-16
NORTHERN EXPLORATIONS, LTD.
(An Exploration Stage Company)
Notes To Financial Statements
June 30, 2006
(Stated in U.S. Dollars)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
ENVIRONMENTAL COSTS
Environmental expenditures that relate to current operations are charged to
operations or capitalized as appropriate. Expenditures that relate to an
existing condition caused by past operations, and which do not contribute to
current or future revenue generation, are charged to operations. Liabilities are
recorded when environmental assessments and/or remedial efforts are probable,
and the cost can be reasonably estimated. Generally, the timing of these
accruals coincides with the earlier of completion of a feasibility study or the
Company's commitments to plan of action based on the then known facts.
INCOME TAXES
Income taxes are provided in accordance with Statement of Financial Accounting
Standards No. 109 (SFAS 109), Accounting for Income Taxes. A deferred tax asset
or liability is recorded for all temporary differences between financial and tax
reporting and net operating loss carryforwards. Deferred tax expense (benefit)
results from the net change during the year of deferred tax assets and
liabilities.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion of all of the deferred
tax assets will be realized. Deferred tax assets and liabilities are adjusted
for the effects of changes in tax laws and rates on the date of enactment.
BASIC EARNINGS (LOSS) PER SHARE
In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share", which
specifies the computation, presentation and disclosure requirements for earnings
(loss) per share for entities with publicly held common stock. SFAS No. 128
supersedes the provisions of APB No. 15, and requires the presentation of basic
earnings (loss) per share and diluted earnings (loss) per share. The Company has
adopted the provisions of SFAS No. 128 effective November 17, 2004 (inception).
Basic net earnings (loss) per share amounts is computed by dividing the net
earnings (loss) by the weighted average number of common shares outstanding.
Diluted earnings (loss) per share are the same as basic earnings (loss) per
share due to the lack of dilutive items in the Company.
COMPREHENSIVE LOSS
SFAS No. 130, "Reporting Comprehensive Income," establishes standards for the
reporting and display of comprehensive loss and its components in the financial
statements. As at March 31, 2006, the Company has no items that represent a
comprehensive loss and, therefore, has not included a schedule of comprehensive
loss in the financial statements.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
certain 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 revenue and expenses during
the periods presented. Actual results could differ from those estimates.
F-17
NORTHERN EXPLORATIONS, LTD.
(An Exploration Stage Company)
Notes To Financial Statements
June 30, 2006
(Stated in U.S. Dollars)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Significant estimates made by management are, among others, realizability of
long-lived assets, deferred taxes and stock option valuation. Management reviews
its estimates on a quarterly basis and, where necessary, makes adjustments
prospectively.
NEW ACCOUNTING PRONOUNCEMENTS
In July 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No.
141, Business Combinations, and SFAS No. 142, Goodwill and Other Intangible
Assets. SFAS No. 141 requires the use of the purchase method of accounting and
prohibits the use of the pooling of interests method of accounting for business
combinations initiated after June 30, 2001. SFAS No. 141 also requires that the
Company recognize acquired intangible assets apart from goodwill if the acquired
intangible assets meet certain criteria. SFAS No. 141 applies to all business
combinations initiated after June 30, 2001, and for purchase business
combinations completed on or after July 1, 2001. Upon adoption of SFAS No. 142,
it also requires that the Company reclassify, if necessary, the carrying amounts
of intangible assets and goodwill, based on the criteria in SFAS No. 141. SFAS
No. 142 requires, among other things, that companies no longer amortize
goodwill, but instead test goodwill for impairment, at least annually. In
addition, SFAS No. 142 requires that the Company identify reporting units for
the purpose of assessing potential future impairments of goodwill, reassess the
useful lives of other existing recognized intangible assets, and cease
amortization of intangible assets with an indefinite useful life. The effect of
adoption of these statements is not expected to be material.
In July 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations. SFAS No. 143 is effective for fiscal years beginning after June 15,
2002, and will require companies to record a liability for asset retirement
obligation in the period in which they are incurred. Adoption of this statement
is not expected to be material.
In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. SFAS No. 144 supersedes SFAS No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of, in that it removes goodwill from its impairment scope and allows for
different approaches in cash flow estimation. However, SFAS No. 144 retains the
fundamental provisions of SFAS No. 121 for (a) recognition and measurement of
long-lived assets to be held and used and (b) measurement of long-lived assets
to be disposed of. SFAS No. 144 also supersedes the business segment concept in
Accounting Principles Board Opinion No. 30, Reporting the Results of
Operations-Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions, in
that it permits presentation of a component of an entity, whether classified as
held for sale or disposed of, as a discontinued operation. However, SFAS No. 144
retains the requirement of Accounting Principals Board Opinion No. 30 to report
discontinued operations separately from continuing operations. The provisions of
this Statement are effective for financial statements issued for fiscal years
beginning after December 15, 2001 with earlier application encouraged.
Implementation of SFAS No. 144 will not have a material effect on the Company's
results of operations or financial position.
In July 2002, the Financial Accounting Standards Board issued SFAS No. 146,
Accounting for Costs Associated with Exit or Disposal Activities. SFAS No. 146
requires that a liability for costs associated with an exit or disposal activity
be recognized and measured initially at fair value only when the liability is
incurred. SFAS No.146 is effective for exit or disposal activities that are
initiated after December 31, 2002. Management is evaluating the effect of this
statement on the Company's results of operations and financial position.
F-18
NORTHERN EXPLORATIONS, LTD.
(An Exploration Stage Company)
Notes To Financial Statements
June 30, 2006
(Stated in U.S. Dollars)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities, which amends SFAS No. 133 for
certain decisions made by the FASB Derivatives Implementation Group.
In particular, SFAS No. 149 (1) clarifies under what circumstances a contract
with an initial net investment meets the characteristic of a derivative, (2)
clarifies when a derivative contains a financing component, (3) amends the
definition of an underlying instrument to conform it to language used in FASB
Interpretation No. 45, Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others, and (4)
amends certain other existing pronouncements. This Statement is effective for
contracts entered into or modified after June 30, 2003, and for hedging
relationships designated after June 30, 2003. In addition, most provisions of
SFAS No. 149 are to be applied prospectively. Management does not expect the
adoption of SFAS No. 149 to have a material impact on our financial position,
cash flows or results of operations.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity" ("SFAS 150").
SFAS 150 changes the accounting for certain financial instruments that under
previous guidance issuers could account for as equity. It requires that those
instruments be classified as liabilities in balance sheets. The guidance in SFAS
150 is generally effective for all financial instruments entered into or
modified after May 31, 2003, and otherwise is effective on July 1, 2003. The
adoption of SFAS 150 did not have any material impact on its financial position,
cash flows or results of operations.
On December 16, 2004, the Financial Accounting Standards Board ("FASB")
published Statement of Financial Accounting Standards No. 123 (Revised 2004),
Shared-Based Payment ("SFAS 123R). SFAS 123R requires that compensation cost
related to share-based payment transactions be recognized in the financial
statements. Share-based payment transactions within the scope of SFAS 123R
include stock options, restricted stock plans, performance-based awards, stock
appreciation rights, and employee share purchase plans. The provisions of SFAS
123R are effective as of the first interim period that begins after June 15,
2005. Accordingly, the Company implement the revised standard in the third
quarter of fiscal year 2005. Currently, the Company accounts for its share-based
payment transactions under the provisions of APB 25, which does not necessarily
require the recognition of compensation cost in the financial statements. The
Company does not anticipate that the implementation of this standard will have a
material impact on its financial position
On December 16, 2004, FASB issued Statement of Financial Accounting Standards
No. 153, Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29,
Accounting for Nonmonetary transactions ("SFAS 153"). This statement amends APB
Opinion 29 to eliminate the exception for nonmonetary exchanges of similar
productive assets and replaces it with a general exception of exchanges of
nonmonetary assets that do not have commercial substance. Under SFAS 153, if a
nonmonetary exchange of similar productive assets meets a commercial-substance
criterion and fair value is determinable, the transaction must be accounted for
at fair value resulting in recognition of any gain or loss. SFAS 153 is
effective for nonmonetary transactions in fiscal periods that begin after June
15, 2005. The Company does not anticipate that the implementation of this
standard will have a material impact on its financial position, results of
operations or cash flows.
F-19
NORTHERN EXPLORATIONS, LTD.
(An Exploration Stage Company)
Notes To Financial Statements
June 30, 2006
(Stated in U.S. Dollars)
NOTE 3. GOING CONCERN
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company generated a net loss of
$20,904 during the period from November 17, 2004 (inception) to June 30, 2006.
This condition raises substantial doubt about the Company's ability to continue
as a going concern. The Company's continuation as a going concern is dependent
on its ability to meet its obligations, to obtain additional financing as may be
required and ultimately to attain profitability. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
Management plans to raise additional funds through debt or equity offerings.
Management has yet to decide what type of offering the Company will use or how
much capital the Company will attempt to raise. There is no guarantee that the
Company will be able to raise any capital through any type of offerings.
NOTE 4. MINERAL PROPERTY
Pursuant to a mineral property option agreement dated January 4, 2005, the
Company was granted an option to acquire the sole and exclusive right, privilege
and option to explore the claim together with the sole and exclusive right,
privilege and option to purchase a 90% interest in the Cade Claim located in the
Nicola Mining Division, British Columbia, Canada, for:
CASH PAYMENTS
Cash payment of $2,500 by March 31, 2005 (paid on March 17, 2005).
EXPENDITURE COMMITMENTS
Expenditures for exploration and development work on the Claim totalling at
least $15,000 by December 31, 2006, which work shall be conducted by the Company
under the direction of a qualified geologist or project engineer, as follows:
- $5,000 in expenditures on the Claim by December 31, 2005 (paid on
December 6, 2005); and
- an additional $10,000 in expenditures on the Claim by December 31,
2006.
ASSESSMENT WORK
All Claim payments and assessment work required to keep the Claim and this
Option in good standing during the term of this Agreement.
NOTE 5. SHARE CAPITAL
On December 7, 2004, the Company sold 3,000,000 shares of its common stock at
$0.001 per share. On December 22, 2004, the Company sold 2,500,000 shares of its
common stock at $0.01 per share. On January 17, 2005, the Company sold 40,000
shares of its common stock at $0.10 per share.
At June 30, 2006, there were no outstanding stock options or warrants.
F-20
NORTHERN EXPLORATIONS, LTD.
(An Exploration Stage Company)
Notes To Financial Statements
June 30, 2006
(Stated in U.S. Dollars)
NOTE 6. INCOME TAXES
Potential benefits of income tax losses are not recognized in the accounts until
realization is more likely than not. The Company has incurred net operating
losses of 207,904, which expire in 2025. Pursuant to SFAS No. 109, the Company
is required to compute tax asset benefits for net operating losses carried
forward. Potential benefit of net operating losses have not been recognized in
these financial statements because the Company cannot be assured that it is more
likely than not it will utilize the net operating losses carried forward in
future years.
The components of the net deferred tax asset at June 30, 2006, and the statutory
tax rate, the effective tax rate and the elected amount of the valuation
allowance are indicated below:
Net operating loss $ 20,904
Statutory tax rate 34%
Effective tax rate --
--------
Deferred tax asset $ 7,107
Valuation allowance (7,107)
--------
Net deferred tax asset $ --
========
NOTE 7. FOREIGN CURRENCY TRANSLATION
Functional currency for Northern Explorations, Ltd is in US dollars. In
accordance with FASB #52 paragraph 9 the Company will continue to issue their
financial statements in their established functional currency unless significant
changes in economic facts and circumstances indicate clearly that the functional
currency has changed.
F-21
Until ______________, all dealers that effect transactions in these securities
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealer's obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our officers and directors are indemnified as provided by the Nevada Revised
Statutes (the "NRS") and our bylaws.
Under the NRS, director immunity from liability to a company or its shareholders
for monetary liabilities applies automatically unless it is specifically limited
by a company's articles of incorporation that is not the case with our articles
of incorporation. Excepted from that immunity are:
(1) a willful failure to deal fairly with the company or its shareholders
in connection with a matter in which the director has a material
conflict of interest;
(2) a violation of criminal law (unless the director had reasonable cause
to believe that his or her conduct was lawful or no reasonable cause
to believe that his or her conduct was unlawful);
(3) a transaction from which the director derived an improper personal
profit; and
(4) willful misconduct.
Our bylaws provide that we will indemnify our directors and officers to the
fullest extent not prohibited by Nevada law; provided, however, that we may
modify the extent of such indemnification by individual contracts with our
directors and officers; and, provided, further, that we shall not be required to
indemnify any director or officer in connection with any proceeding (or part
thereof) initiated by such person unless:
(1) such indemnification is expressly required to be made by law;
(2) the proceeding was authorized by our Board of Directors;
(3) such indemnification is provided by us, in our sole discretion,
pursuant to the powers vested us under Nevada law; or
(4) such indemnification is required to be made pursuant to the bylaws.
Our bylaws provide that we will advance all expenses incurred to any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that he is or was our director or
officer, or is or was serving at our request as a director or executive officer
of another company, partnership, joint venture, trust or other enterprise, prior
to the final disposition of the proceeding, promptly following request. This
advanced of expenses is to be made upon receipt of an undertaking by or on
behalf of such person to repay said amounts should it be ultimately determined
that the person was not entitled to be indemnified under our bylaws or
otherwise.
Our bylaws also provide that no advance shall be made by us to any officer in
any action, suit or proceeding, whether civil, criminal, administrative or
investigative, if a determination is reasonably and promptly made: (a) by the
board of directors by a majority vote of a quorum consisting of directors who
were not parties to the proceeding; or (b) if such quorum is not obtainable, or,
even if obtainable, a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion, that the facts known to the
decision-making party at the time such determination is made demonstrate
II-1
clearly and convincingly that such person acted in bad faith or in a manner that
such person did not believe to be in or not opposed to our best interests.
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated costs of this offering are as follows:
Securities and Exchange Commission registration fee $ 29.90
Transfer Agent fees $1,000.00
Accounting and auditing fees and expenses $3,000.00
Legal fees and expenses $1,500.00
Edgar filing fees $1,500.00
---------
Total $7,029.90
=========
All amounts are estimates other than the Commission's registration fee.
We are paying all expenses of the offering listed above. No portion of these
expenses will be borne by the selling shareholders. The selling shareholders,
however, will pay any other expenses incurred in selling their common stock,
including any brokerage commissions or costs of sale.
RECENT SALES OF UNREGISTERED SECURITIES
We completed an offering of 3,000,000 shares of our common stock at a price of
$0.001 per share to our president, Richard Novis, on December 7, 2004. The total
amount received from this offering was $3,000. These shares were issued pursuant
to Regulation S of the Securities Act.
We completed an offering of 2,500,000 shares of our common stock at a price of
$0.01 per share to a total of twenty-five purchasers on December 22, 2004. The
total amount received from this offering was $9,000. These shares were issued
pursuant to Regulation S of the Securities Act. The purchasers in this offering
were as follows:
Name of Subscriber Number of Shares
------------------ ----------------
Andrew Austin 80,000
Nick Bekos 50,000
Dimosthenis (Jimmy) Bekropoulos 200,000
Dimos Bekropoulos 100,000
Tony Braile 150,000
William (Bill) Brown 150,000
Rob Fetter 200,000
Chad Hason 70,000
Tracy Hemeyer 150,000
Matthew Leith 40,000
George Liaridis 100,000
Toula Liaridis 100,000
Kent Pozzo 150,000
John Rudin 50,000
Chad Rusnak 75,000
Leah Rusnak 30,000
Leith Rusnak 100,000
Marge Rusnak 80,000
Nabil Shlah 75,000
Tyler Tanner 100,000
Kathy Tsambouris 100,000
Lempros Tsaprailis 100,000
Stavroula M. Tsaprailis 100,000
Heather Williams 50,000
Yulin Yang 100,000
II-2
We completed an offering of 40,000 shares of our common stock at a price of
$0.10 per share to a total of four purchasers on January 17, 2004. The total
amount received from this offering was $4,000. We completed this offering
pursuant to Regulation S of the Securities Act. The purchasers in this offering
were as follows:
Name of Subscriber Number of Shares
------------------ ----------------
Dina Hasapes 10,000
Charles Kayihura 10,000
Dana Peck 10,000
Wenhui Ruan 10,000
REGULATION S COMPLIANCE
Each offer or sale was made in an offshore transaction;
Neither we, a distributor, any respective affiliates nor any person on behalf of
any of the foregoing made any directed selling efforts in the United States;
Offering restrictions were, and are, implemented;
No offer or sale was made to a U.S. person or for the account or benefit of a
U.S. person;
Each purchaser of the securities certifies that it was not a U.S. person and was
not acquiring the securities for the account or benefit of any U.S. person;
Each purchaser of the securities agreed to resell such securities only in
accordance with the provisions of Regulation S, pursuant to registration under
the Act, or pursuant to an available exemption from registration; and agreed not
to engage in hedging transactions with regard to such securities unless in
compliance with the Act;
The securities contain a legend to the effect that transfer is prohibited except
in accordance with the provisions of Regulation S, pursuant to registration
under the Act, or pursuant to an available exemption from registration; and that
hedging transactions involving those securities may not be conducted unless in
compliance with the Act; and
We are required, either by contract or a provision in its bylaws, articles,
charter or comparable document, to refuse to register any transfer of the
securities not made in accordance with the provisions of Regulation S pursuant
to registration under the Act, or pursuant to an available exemption from
registration; provided, however, that if any law of any Canadian province
prevents us from refusing to register securities transfers, other reasonable
procedures, such as a legend described in paragraph (b)(3)(iii)(B)(3) of
Regulation S have been implemented to prevent any transfer of the securities not
made in accordance with the provisions of Regulation S.
EXHIBITS
Exhibit
Number Description
- ------ -----------
3.1* Articles of Incorporation
3.2* Bylaws
5.1* Legal opinion of Joseph I. Emas, with consent to use
10.1* Mineral property option agreement dated January 4, 2005
23.1 Consent of Armando C. Ibarra, Certified Public Accountants for 3/31/05
Audited Financial Statements
23.2* Consent of George Nicholson, professional geologist, with consent to use
99.1* Location map
- ----------
* filed as an exhibit to our registration statement on Form SB-2 dated May
19, 2005
II-3
THE UNDERSIGNED REGISTRANT HEREBY UNDERTAKES:
1. To file, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
a. include any prospectus required by Section 10(a)(3) of the Securities
Act of 1933;
b. reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information set forth
in this registration statement; and notwithstanding the forgoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the commission pursuant to Rule 424(b) if, in
the aggregate, the changes in the volume and price represent no more
than a 20% change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective
registration Statement; and
c. include any additional or changed material information on the plan of
distribution.
2. That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
3. To remove from registration by means of a post-effective amendment any of
the securities being registered hereby which remain unsold at the
termination of the offering.
4. That, for determining our liability under the Securities Act to any
purchaser in the initial distribution of the securities, we undertake that
in a primary offering of our securities pursuant to this registration
statement, regardless of the underwriting method used to sell the
securities to the purchaser, if the securities are offered or sold to such
purchaser by means of any of the following communications, we will be a
seller to the purchaser and will be considered to offer or sell such
securities to such purchaser:
(i) any preliminary prospectus or prospectus that we file relating to the
offering required to be filed pursuant to Rule 424 (Section 230.424 of
this chapter);
(ii) any free writing prospectus relating to the offering prepared by or on
our behalf or used or referred to by us;
(iii)the portion of any other free writing prospectus relating to the
offering containing material information about us or our securities
provided by or on behalf of us; and
(iv) any other communication that is an offer in the offering made by us to
the purchaser.
Each prospectus filed pursuant to Rule 424(b) as part of a registration
statement relating to an offering, other than registration statements relying on
II-4
Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be
deemed to be part of and included in the registration statement as of the date
it is first used after effectiveness. Provided, however, that no statement made
in a registration statement or prospectus that is part of the registration
statement or made in a document incorporated or deemed incorporated by reference
into the registration statement or prospectus that is part of the registration
statement will, as to a purchaser with a time of contract of sale prior to such
first use, supersede or modify any statement that was made in the registration
statement or prospectus that was part of the registration statement or made in
any such document immediately prior to such date of first use.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to our directors, officers and controlling persons pursuant to the
provisions above, or otherwise, we have been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act, and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities, other
than the payment by us of expenses incurred or paid by one of our directors,
officers, or controlling persons in the successful defense of any action, suit
or proceeding, is asserted by one of our directors, officers, or controlling
person sin connection with the securities being registered, we will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification is against public policy as expressed in the Securities Act, and
we will be governed by the final adjudication of such issue.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of
Vancouver, Province of British Columbia on September 28, 2006.
NORTHERN EXPLORATIONS LTD.
By: /s/ Richard Novis
------------------------------------
Richard Novis
President, Secretary, Treasurer,
Chief Executive Officer and Director
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated:
SIGNATURE CAPACITY IN WHICH SIGNED DATE
- --------- ------------------------ ----
/s/ Richard Novis President, Secretary, Treasurer, September 28, 2006
- --------------------------- Chief Executive Officer, principal
Richard Novis accounting officer, principal financial
officer and Director
II-5