UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
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|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2010
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission file number 0-52725
NORTHERN EMPIRE ENERGY CORP.
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(Exact name of registrant as specified in its charter)
Nevada 20-4765268
------------------------ ------------------------
(State of incorporation) (I.R.S. Employer ID No.)
118 8th Ave. NW, Calgary, Alberta T2M 0A4, Canada
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(Address of principal executive offices)(Zip Code)
Issuer's telephone number, including area code: (403) 456-2333
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days. Yes |X| No |_|
Indicate by check mark whether the Registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer or a smaller reporting company.
See definition of "accelerated filer and large accelerated filer" in Rule
12b-2 of the Exchange Act (Check one).
Large accelerated filer |_| Accelerated filer |_|
Non-accelerated filer |_| Smaller Reporting Company |X|
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). Yes |_| No |X|
As of November 23, 2009, the registrant's outstanding common stock consisted
of 20,276,547 shares, $0.001 Par Value. Authorized - 195,000,000 common
voting shares authorized and 67,000 preferred issued, 5,000,000 authorized.
Table of Contents
Northern Empire Energy Corp.
Index to Form 10-Q
For the Quarterly Period Ended March 31, 2010
Page
Part I. Financial Information
Item 1. Financial Statements
Balance Sheets as of March 31, 2010 and December 31, 2009 3
Statements of Income for the three months
months ended March 31, 2010 and 2009 4
Statements of Stockholders' Equity (Deficit) 5
Statements of Cash Flows for the three months
ended March 31, 2010 and 2009 6
Notes to Financial Statements 7-16
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 17
Item 3. Quantitative and Qualitative Disclosures About Market Risk 26
Item 4T. Controls and Procedures 26
Part II Other Information
Item 1. Legal Proceedings 28
Item 1A. Risk Factors 28
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 28
Item 3 -- Defaults Upon Senior Securities 28
Item 4 -- Submission of Matters to a Vote of Security Holders 28
Item 5 -- Other Information 28
Item 6. Exhibits 29
Signatures 30
2
Part I. Financial Information
Item 1. Financial Statements
NORTHERN EMPIRE ENERGY CORP.
(An Exploration Stage Company)
Balance Sheets
as of as of
March 31, December 31,
2009 2008
(Unaudited) (Audited)
------------- -------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 9,362 $ 35,855
------------- -------------
TOTAL CURRENT ASSETS 9,362 35,855
------------- -------------
PROPERTY AND EQUIPMENT, net
Deposits - -
Oil and gas properties 1 1
------------- -------------
TOTAL OTHER ASSETS 1 1
------------- -------------
------------- -------------
TOTAL ASSETS $ 9,363 $ 35,856
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 25,180 $ 19,969
Accounts payable - related party 93,243 76,256
------------- -------------
TOTAL CURRENT LIABILITIES 118,423 96,225
------------- -------------
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, $0.001 par value, 5,000,000
shares authorized; 62,500 and 62,500 shares
issued and outstanding as of 3/31/10 and
12/31/09, respectively 63 63
Common stock, $0.001 par value, 195,000,000
shares authorized; 20,827,216 and
20,827,216 shares issued and outstanding
as of 3/31/10 and 12/31/09, respectively 20,827 20,827
Stock payable: 615,347 shares 615 615
Additional paid-in capital 2,144,427 2,144,427
Deficit accumulated during the exploration
stage (2,283,178) (2,237,991)
Accumulated other comprehensive income 8,187 11,690
------------- -------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (109,059) (60,369)
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 9,363 $ 35,856
============= =============
The accompanying notes are an integral part of these condensed financial
statements.
3
NORTHERN EMPIRE ENERGY CORP.
(An Exploration Stage Company)
Statements of Operations
Three Months April 24, 2006
Ended Ended (inception ) to
March 31, March 31, March 31,
2010 2009 2010
------------- ------------- -------------
REVENUES $ - $ - $ 19,491
OPERATING EXPENSES
General and administrative 29,635 40,947 1,744,536
Professional fees 15,500 13,425 74,996
------------- ------------- -------------
TOTAL OPERATING EXPENSES 45,135 54,372 1,819,532
------------- ------------- -------------
LOSS FROM OPERATIONS (45,135) (54,372) (1,800,041)
------------- ------------- -------------
OTHER EXPENSES:
Foreign currency transaction
gain (loss) (52) (71) (11,615)
Loss on impairment of oil
and gas rights - - (471,523)
------------- ------------- -------------
TOTAL OTHER EXPENSE (52) (71) (483,137)
------------- ------------- -------------
NET LOSS (45,187) (54,443) (2,283,178)
------------- ------------- -------------
OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation
adjustment (3,503) (318) 8,187
------------- ------------- -------------
COMPREHENSIVE LOSS $ (48,690) $ (54,761) $ (2,274,991)
============= ============= =============
NET LOSS PER SHARE - BASIC $ (0.00) $ (0.00)
============= =============
WEIGHTED AVERAGE COMMON
EQUIVALENT SHARES OUTSTANDING-
BASIC AND DILUTED 20,827,216 18,636,481
============= =============
The accompanying notes are an integral part of these condensed financial
statements
4
NORTHERN EMPIRE ENERGY CORP.
(An Exploration Stage Company)
Statement of Stockholders' Deficit
Deficit Total
Preferred Accumulated Accumulated Stock
Stock Common Stock Common Stock Additional During the Other holders'
-------------- ---------------------- Stock Pay- Paid-In Exploration Comprehensive Equity
Shares Amount Shares Amount Issuable able Capital Stage Income (Deficit)
-------- ----- ------------ --------- -------- ---- ------------ ------------ --------- ----------
Balance,
April 24,
2006 - $ - - $ - $ - - $ - $ - $ - $ -
Shares
issued
for cash
at $0.001
per
share - - 361,900 362 - - 3,257 - - 3,619
Shares
issued
for equipment
at $0.01
per
share
75,000 75 - - - - 7,425 - - 7,500
Deemed
interest
from
beneficial
conversion
feature on
preferred
stock - - - - - - 1,492,500 - - 1,492,500
Shares
issued
for cash
at $0.01
per
share - - 61,200 61 - - 6,059 - - 6,120
Net loss
for the
year
ended
December 31,
2006 - - - - - - - (1,486,543) - (1,486,543)
-------- ----- ------------ --------- -------- ---- ------------ ------------ --------- ----------
Balance,
December 31,
2006
75,000 75 423,100 423 - - 1,509,241 (1,486,543) - 23,196
Net loss
for the
year
ended
December 31,
2007 - - - - - - - (15,934) - (15,934)
-------- ----- ------------ --------- -------- ---- ------------ ------------ --------- ----------
Balance,
December 31,
2007
75,000 75 423,100 423 - - 1,509,241 (1,502,477) - 7,262
Shares
issued
for cash
at $0.001
per
share - - 18,000,000 18,000 - - 162,000 - - 180,000
Shares
cancelled
from prior
officer
for cash
and assets
of the
Company - - (361,900) (362) (54,388) (54,750)
Foreign
currency
translation
adjust-
ment - - - - - - - - (514) (514)
Net loss
for the
year
ended
December 31,
2008 - - - - - - - (94,322) - (94,322)
-------- ----- ------------ --------- -------- ---- ------------ ------------ --------- ----------
Balance,
December 31,
2008
75,000 75 18,061,200 18,061 - - 1,616,853 (1,596,799) (514) 37,677
Contributed
capital
from
officer - - - - - - 1,425 1,425
Conversion
of preferred
shares
into
common
stock
(8,000) (8) 1,600,000 1,600 - - (1,592) - - -
Private
Placement - - 615,347 615 368,593 - - 369,208
Private
Placement 266,016 266 160,044 - - 160,310
Conversion
of preferred
shares
into
common
stock
(4,500) (5) 900,000 900 (896) -
Foreign
currency
translation
adjust-
ment - - - - - - - - 12,203 12,203
Net loss
for the
year
ended
December 31,
2009 - - - - - - - (641,192) - (641,192)
-------- ----- ------------ --------- -------- ---- ------------ ------------ --------- ----------
Balance,
December 31,
2009
62,500 63 20,827,216 20,827 615,347 615 2,144,427 (2,237,991) 11,690 (60,369)
Foreign
currency
translation
adjust-
ment - - - - - - - - (3,503) (3,503)
Net loss
for the
period
ended
March 31,
2010 - - - - - - - (45,187) - (45,187)
-------- ----- ------------ --------- -------- ---- ------------ ------------ --------- ----------
Balance,
December 31,
2009
62,500 63 20,827,216 20,827 615,347 615 2,144,427 (2,283,178) 8,187 (109,059)
======== ===== ============ ========= ======== ==== ============ ============ ========= ==========
The accompanying notes are an integral part of these financial statements.
5
NORTHERN EMPIRE ENERGY CORP.
(An Exploration Stage Company)
Statements of Cash Flows
Three Months April 24, 2006
Ended Ended (inception ) to
March 31, March 31, March 31,
2010 2009 2010
------------- ------------- -------------
CASH FLOW FROM OPERATING ACTIVITIES:
Net loss $ (45,187) $ (54,443) $ (2,283,178)
Adjustment to reconcile net loss
to net cash used in operating
activities:
Depreciation - 2,750
Beneficial conversion feature - - 1,492,500
Impairment of asset - - 471,523
Changes in operating assets and
liabilities:
Increase in:
Accounts payable and
accrued expenses 22,198 (7,058) 118,423
------------- ------------- -------------
Net cash used in operating
activities (22,990) (61,500) (197,984)
------------- ------------- -------------
CASH FLOW FROM INVESTING ACTIVITIES:
Cash paid for prior ownership - - (50,000)
Deposits for purchase of oil
and gas properties - 40,920 (471,524)
------------- ------------- -------------
Net cash used in investing
activities - 40,920 (521,524)
------------- ------------- -------------
CASH FLOW FROM FINANCING ACTIVITIES:
Contributed capital from officer - 1,425 1,425
Common stock issued for cash - - 719,257
------------- ------------- -------------
Net cash provided by financing
activities - 1,425 720,682
------------- ------------- -------------
NET INCREASE (DECREASE) IN CASH (22,990) (19,155) 1,175
EFFECT OF FOREIGN CURRENCY
TRANSLATION ADJUSTMENT (3,503) (318) 8,187
CASH AND CASH EQUIVALENTS,
Beginning of period 35,855 45,458 -
------------- ------------- -------------
CASH AND CASH EQUIVALENTS,
End of period $ 9,362 $ 25,985 $ 9,362
============= ============= =============
The accompanying notes are an integral part of these condensed financial
statements
6
NORTHERN EMPIRE ENERGY CORP.
(An Exploration Stage Company)
Notes to the Financial Statements
NOTE 1 - BUSINESS AND ORGANIZATION
Northern Empire Energy Corporation (The Company) was organized on April 24,
2006, under the laws of the State of Nevada. The Company is engaged in the
acquisition with the intent to develop mineral properties. Pursuant to
Financial Accounting Standards Board (FASB) Accounting Standards Codification
("ASC") Topic 915-10 ("ASC 915-10"), "Development Stage Entities," the
Company is classified as an exploration stage company.
NOTE 2 - GOING CONCERN
These financial statements have been prepared in accordance with generally
accepted accounting principles applicable to a going concern which
contemplates the realization of assets and the satisfaction of liabilities
and commitments in the normal course of business. As of March 31, 2010, the
Company has accumulated operating losses of approximately $2,283,178 since
inception. The Company's ability to continue as a going concern is
contingent upon the successful completion of additional financing
arrangements and its ability to achieve and maintain profitable operations.
Management plans to raise equity capital to finance the operating and capital
requirements of the Company. Amounts raised will be used to further
development of the Company's products, to provide financing for marketing and
promotion, to secure additional property and equipment, and for other working
capital purposes. While the Company is putting forth its best efforts to
achieve the above plans, there is no assurance that any such activity will
generate funds that will be available for operations.
These conditions raise substantial doubt about the Company's ability to
continue as a going concern. These financial statements do not include any
adjustments that might arise from this uncertainty.
7
NORTHERN EMPIRE ENERGY CORP.
(An Exploration Stage Company)
Notes to the Financial Statements
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES
The Company's financial statements are prepared using the accrual method of
accounting. The Company has elected a December 31 year-end.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles in the United States of America 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.
Revenue Recognition
The Company recognizes revenue on an accrual basis. Revenue is generally
realized or realizable and earned when all of the following criteria are met:
1) persuasive evidence of an arrangement exists between the Company and our
customer(s); 2) services have been rendered; 3) our price to our customer is
fixed or determinable; and 4) collectability is reasonably assured.
Advertising
Advertising is expensed when incurred. There has been no advertising during
the period.
Income taxes
The Company accounts for its income taxes in accordance with FASB ASC Topic
740-10, "Income Taxes", which requires recognition of deferred tax assets and
liabilities for future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities
and their respective tax bases and tax credit carry-forwards. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply
to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period
that includes the enactment date.
8
NORTHERN EMPIRE ENERGY CORP.
(An Exploration Stage Company)
Notes to the Financial Statements
Net Loss Per Common Share
FASB ASC Topic 260-10, "Earnings per Share", requires presentation of "basic"
and "diluted" earnings per share on the face of the statements of operations
for all entities with complex capital structures. Basic earnings per share is
computed by dividing net income by the weighted average number of common
shares outstanding for the period. Diluted earnings per share reflect the
potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted during the period. Dilutive
securities having an anti-dilutive effect on diluted earnings per share are
excluded from the calculation.
Oil and Gas Properties
The Company follows the full cost method of accounting for its oil and gas
operations whereby all costs related to the acquisition of methane,
petroleum, and natural gas interests are capitalized. Under this method, all
productive and non-productive costs incurred in connection with the
exploration for and development of oil and gas reserves are capitalized. Such
costs include land and lease acquisition costs, annual carrying charges of
non-producing properties, geological and geophysical costs, costs of drilling
and equipping productive and non-productive wells, and direct exploration
salaries and related benefits. Proceeds from the disposal of oil and gas
properties are recorded as a reduction of the related capitalized costs
without recognition of a gain or loss unless the disposal would result in a
change of 20 percent or more in the depletion rate. The Company currently
operates solely in the U.S.
Depreciation and depletion of proved oil and gas properties is computed on
the units-of-production method based upon estimates of proved reserves, as
determined by independent consultants, with oil and gas being converted to a
common unit of measure based on their relative energy content.
The costs of acquisition and exploration of unproved oil and gas properties,
including any related capitalized interest expense, are not subject to
depletion, but are assessed for impairment either individually or on an
aggregated basis. The costs of certain unevaluated leasehold acreage are also
not subject to depletion. Costs not subject to depletion are periodically
assessed for possible impairment or reductions in recoverable value. If a
reduction in recoverable value has occurred, costs subject to depletion are
increased or a charge is made against earnings for those operations where a
reserve base is not yet established.
9
NORTHERN EMPIRE ENERGY CORP.
(An Exploration Stage Company)
Notes to the Financial Statements
Estimated future removal and site restoration costs are provided over the
life of proven reserves on a units-of-production basis. Costs, which include
production equipment removal and environmental remediation, are estimated
each period by management based on current regulations, actual expenses
incurred, and technology and industry standards. The charge is included in
the provision for depletion and depreciation and the actual restoration
expenditures are charged to the accumulated provision amounts as incurred.
The Company applies a ceiling test to capitalized costs which limits such
costs to the aggregate of the estimated present value, using a ten percent
discount rate of the estimated future net revenues from production of proven
reserves at year end at market prices less future production, administrative,
financing, site restoration, and income tax costs plus the lower of cost or
estimated market value of unproved properties. If capitalized costs are
determined to exceed estimated future net revenues, a write-down of carrying
value is charged to depletion in the period.
Fixed Assets
Furniture, fixtures and equipment are stated at cost less accumulated
depreciation. Depreciation is provided for in amounts sufficient to relate
the cost of depreciable assets to operations over their estimated service
lives, principally on a straight-line basis.
Stock-Based Compensation
The Company has adopted FASB ASC Topic 718-10, "Compensation- Stock
Compensation" ("ASC 718-10") which requires the measurement and recognition
of compensation expense for all stock-based payment awards made to employees
and directors. Under the fair value recognition provisions of ASC 718-10,
stock-based compensation cost is measured at the grant date based on the
value of the award and is recognized as expense over the vesting period.
Determining the fair value of stock-based awards at the grant date requires
considerable judgment, including estimating the expected future volatility of
our stock price, estimating the expected length of term of granted options
and selecting the appropriate risk-free rate. There is no established trading
market for our stock.
Financial instruments
The fair value of the Company's financial assets and financial liabilities
approximate their carrying values due to the immediate or short-term maturity
of these financial instruments.
10
NORTHERN EMPIRE ENERGY CORP.
(An Exploration Stage Company)
Notes to the Financial Statements
NOTE 4 - RELATED PARTY TRANSACTIONS
As of March 31, 2010 and December 31, 2009, a company affiliated with an
officer of the Company and the officer was owed a total of $93,243 and
$76,256, respectively, for consulting related fees and various expenses paid
on the Company's behalf. The unsecured obligations are due on demand and are
non-interest bearing. The obligations are included in the accompanying
financial statements as accounts payable - related party.
On December 16, 2009, the Company entered into a purchase of petroleum and
natural gas rights on nine sections of land in central Alberta, Canada. In
the purchase and sale agreement both the buyer and the seller share the same
address.
The seller is not a related party to Northern Empire Energy Corp. as defined
in the ASC 804. Due to the Company's minimal financial position, the Company
is occasionally utilizing office space leased by the seller, at no charge.
The principals of the buyer and seller are long time associates but they are
not affiliates. Neither can "significantly influence the other to an extent
that one or more of the transacting parties might be prevented from fully
pursuing its own separate interests."
NOTE 5 - CONCENTRATION OF CREDIT RISK
Cash Balances
The Company maintains its cash in various financial institutions in both the
United States and Canada. Balances maintained in the United States are
insured by the Federal Deposit Insurance Corporation (FDIC). This government
corporation insured balances up to $100,000 through October 13, 2008. As of
October 14, 2008 all non-interest bearing transaction deposit accounts at an
FDIC-insured institution, including all business checking deposit accounts
that do not earn interest, are fully insured for the entire amount in the
deposit account. This unlimited insurance coverage is temporary and will
remain in effect for participating institutions until December 31, 2009. All
other deposit accounts at FDIC-insured institutions are insured up to at
least $250,000 per depositor until December 31, 2013. Balances maintained in
Canada are insured by the Canada Deposit Insurance Corporation for balances
up to $100,000 at each bank. As of March 31, 2010, the Company did not have
any cash balances that were greater than the insured amount for both the FDIC
and CDIC.
11
NORTHERN EMPIRE ENERGY CORP.
(An Exploration Stage Company)
Notes to the Financial Statements
NOTE 6 - OIL AND GAS PROPERTIES
On December 16, 2009, the Company entered into a "Formal option to Purchase
and Sale Agreement of Petroleum and Natural Gas Rights" with Angels
Exploration Fund, Inc., and Alberta Corporation. The Company agreed to
purchase certain petroleum and natural gas rights within the Province of
Alberta for a total purchase price of $471,524 ($500,000 Canadian Dollars).
The properties are not producing as of March 31, 2010 and have not yet been
amortized on the balance sheet. As a part of the agreements, the Company has
a minimum lease rental fee obligation of $8,064 per year for 5 years,
starting December 18, 2009 an ending December 18, 2014.
The Company believes the property is located in a merited geological setting
with complete infrastructures, pipelines within the area. The Company needs
to be successful in raising additional capital in order to conduct
exploration and drill wells on the property, until this happens we have no
way of projecting cash flows without a test well. Therefore the property was
written down/impaired to $1 as of December 31,2009, and a loss was recognized
in the financial statements in the amount of $471,523.
NOTE 7 - STOCKHOLDER'S EQUITY
As of March 31, 2010 there were 20,827,216 shares of common stock issued and
outstanding, 615,347 shares of common stock issuable, and 62,500 shares of
preferred stock issued and outstanding.
On April 24, 2006 (inception), the Company issued 3,619,000 shares of its
$0.001 par value common stock to its sole shareholder for $3,619.
On April 24, 2006, the Company issued 75,000 shares of its $0.001 par value
preferred stock in exchange for telephone calling equipment valued at $7,500.
Each share of the Convertible Preferred Stock can be exchanged for two
hundred (200) shares of Common Stock of the corporation. This Series A
preferred stock was issued with a beneficial conversion feature totaling
$1,492,500 measured as the difference between the $0.01 offering price of the
underlying common stock and the conversion benefit price of $1.99 per share.
This non-cash expense related to the beneficial conversion features of those
securities and is recorded with a corresponding credit to paid-in-capital. If
the preferred stock were to be converted into common stock, the common stock
would be increased by 15,000,000 shares.
On December 31, 2006, the Company issued 61,000 shares of its $0.01 par value
common stock pursuant to a regulation 504 offering for $6,120.
12
NORTHERN EMPIRE ENERGY CORP.
(An Exploration Stage Company)
Notes to the Financial Statements
On November 17, 2008, the Company issued 18,000,000 shares of its par value
$0.001 common stock for $180,000 in cash to the CEO of the Company.
On January 30, 2008, the Company initiated a ten-for-one reverse stock split
for its issued and outstanding common and preferred stock. This reverse
stock split had no effect on the authorized number of common shares or
preferred shares, and did not affect the par value of the stock. The
financial statements reflect the reverse stock split on a retroactive basis.
On November 17, 2008, David Gallagher, a former officer and director of the
Company, returned his 361,900 restricted shares of common stock to the
corporate treasury in exchange for $50,000 and the Company's specialized
phone equipment with a book value of $4,750. The shares were then canceled
by the Company's transfer agent.
On February 27, 2009, 8,000 preferred shares of stock were converted into
1,600,000 shares of common stock at a conversion rate of 200 to 1.
On September 10, 2009, the Company conducted a private placement of 615,347
shares of common stock at $0.60 per share for a total of $369,208. As of
December 31, 2009, the shares had not yet been issued by the transfer agent
and are recorded as stock payable on the Statement of Stockholder's Equity.
The principal amount of each Unit of this offering includes a Unit which
consists of one common share of the Company at $0.60 per share and one
warrant to purchase a Common Share for two years at $1.00 per share.
On October 2, 2009, 4,500 preferred shares of stock were converted into
900,000 shares of common stock at a conversion rate of 200 to 1.
On December 15, 2009, the Company conducted a private placement of 266,016
shares of common stock at $0.60 per share for a total of $160,310. The
principal amount of each Unit of this offering includes a Unit which consists
of one common share of the Company at $0.60 per share and one warrant to
purchase a Common Share for two years at $1.00 per share.
13
NORTHERN EMPIRE ENERGY CORP.
(An Exploration Stage Company)
Notes to the Financial Statements
NOTE 8 - RECENT ACCOUNTING PRONOUNCEMENTS
In January 2010, the FASB issued Accounting Standards Update 2010-01, "Equity
(Topic 505): Accounting for Distributions to Shareholders with Components of
Stock and Cash (A Consensus of the FASB Emerging Issues Task Force)". This
amendment to Topic 505 clarifies the stock portion of a distribution to
shareholders that allows them to elect to receive cash or stock with a limit
on the amount of cash that will be distributed is not a stock dividend for
purposes of applying Topics 505 and 260. Effective for interim and annual
periods ending on or after December 15, 2009, and would be applied on a
retrospective basis. The Company does not expect the provisions of ASU 2010-
01 to have a material effect on the financial position, results of operations
or cash flows of the Company.
In January 2010, the FASB (Financial Accounting Standards Board) issued
Accounting Standards Update 2010-03 (ASU 2010-03), Extractive Activities-Oil
and Gas (Topic 932): Oil and Gas Reserve Estimation and Disclosures. This
amendment to Topic 932 has improved the reserve estimation and disclosure
requirements by (1) updating the reserve estimation requirements for changes
in practice and technology that have occurred over the last several decades
and (2) expanding the disclosure requirements for equity method investments.
This is effective for annual reporting periods ending on or after December
31, 2009. However, an entity that becomes subject to the disclosures because
of the change to the definition oil- and gas- producing activities may elect
to provide those disclosures in annual periods beginning after December 31,
2009. Early adoption is not permitted. The Company does not expect the
provisions of ASU 2010-03 to have a material effect on the financial
position, results of operations or cash flows of the Company.
In January 2010, the FASB (Financial Accounting Standards Board) issued
Accounting Standards Update 2010-04 (ASU 2010-04), Accounting for Various
Topics-Technical Corrections to SEC Paragraphs.
In January 2010, the FASB (Financial Accounting Standards Board) issued
Accounting Standards Update 2010-05 (ASU 2010-05), Compensation - Stock
Compensation (Topic 718). This standard codifies EITF Topic D-110 Escrowed
Share Arrangements and the Presumption of Compensation.
14
NORTHERN EMPIRE ENERGY CORP.
(An Exploration Stage Company)
Notes to the Financial Statements
In January 2010, the FASB (Financial Accounting Standards Board) issued
Accounting Standards Update 2010-06 (ASU 2010-06), Fair Value Measurements
and Disclosures (Topic 820): Improving Disclosures about Fair Value
Measurements. This amendment to Topic 820 has improved disclosures about
fair value measurements on the basis of input received from the users of
financial statements. This is effective for interim and annual reporting
periods beginning after December 15, 2009, except for the disclosures about
purchases, sales, issuances, and settlements in the roll forward of activity
in Level 3 fair value measurements. Those disclosures are effective for
fiscal years beginning after December 15, 2010, and for interim periods
within those fiscal years. Early adoption is permitted. The Company does
not expect the provisions of ASU 2010-06 to have a material effect on the
financial position, results of operations or cash flows of the Company.
In February 2010, the FASB (Financial Accounting Standards Board) issued
Accounting Standards Update 2010-08 (ASU 2010-08), Technical Corrections to
Various Topics. This amendment eliminated inconsistencies and outdated
provisions and provided the needed clarifications to various topics within
Topic 815. The amendments are effective for the first reporting period
(including interim periods) beginning after issuance (February 2, 2010),
except for certain amendments. The amendments to the guidance on accounting
for income taxes in reorganization (Subtopic 852-740) should be applied to
reorganizations for which the date of the reorganization is on or after the
beginning of the first annual reporting period beginning on or after December
15, 2008. For those reorganizations reflected in interim financial
statements issued before the amendments in this Update are effective,
retrospective application is required. The clarifications of the guidance on
the embedded derivates and hedging (Subtopic 815-15) are effective for fiscal
years beginning after December 15, 2009, and should be applied to existing
contracts (hybrid instruments) containing embedded derivative features at the
date of adoption. The Company does not expect the provisions of ASU 2010-08
to have a material effect on the financial position, results of operations or
cash flows of the Company.
In February 2010, the FASB issued Accounting Standards Update 2010-09 (ASU
2010-09), Subsequent Events (TOPic 855), amending guidance on subsequent
events to alleviate potential conflicts between FASB guidance and SEC
requirements. Under this amended guidance, SEC filers are no longer required
to disclose the date through which subsequent events have been evaluated in
originally issued and revised financial statements. This guidance was
effective immediately and we adopted these new requirements for the period
ended March 31, 2010. The adoption of this guidance did not have a material
impact on our financial statements.
15
NORTHERN EMPIRE ENERGY CORP.
(An Exploration Stage Company)
Notes to the Financial Statements
In April 2010, the FASB (Financial Accounting Standards Board) issued
Accounting Standards Update 2010-14 (ASU 2010-14), Accounting for Extractive
Activities - Oil and Gas. This amendment makes amendments to paragraph 932-
10-S99-1 due to SEC release No. 33-8995, Modernization of Oil and Gas
Reporting. The Company does not expect the provisions of ASU 2010-14 to have
a material effect on the financial position, results of operations or cash
flows of the Company.
The company evaluated all of the other recent accounting pronouncements
through ASU 2010-19 and deemed that they were immaterial.
NOTE 9 - SUBSEQUENT EVENTS
None
16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Item 2. - Management's Discussion and Analysis of Financial Condition and
Results of Operations
Forward-Looking Information
The Company may from time to time make written or oral "forward-looking
statements" including statements contained in this report and in other
communications by the Company, which are made in good faith by the Company
pursuant to the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995.
These forward-looking statements include statements of the Company's plans,
objectives, expectations, estimates and intentions, which are subject to
change based on various important factors (some of which are beyond the
Company's control). The following factors, in addition to others not listed,
could cause the Company's actual results to differ materially from those
expressed in forward looking statements: the strength of the domestic and
local economies in which the Company conducts operations, the impact of
current uncertainties in global economic conditions and the ongoing financial
crisis affecting the domestic and foreign banking system and financial
markets, including the impact on the Company's suppliers and customers,
changes in client needs and consumer spending habits, the impact of
competition and technological change on the Company, the Company's ability to
manage its growth effectively, including its ability to successfully integrate
any business which it might acquire, and currency fluctuations. All forward-
looking statements in this report are based upon information available to
the Company on the date of this report. The Company undertakes no obligation
to publicly update or revise any forward-looking statement, whether as a
result of new information, future events, or otherwise, except as required
by law.
Critical Accounting Policies
- ----------------------------
There have been no material changes to our critical accounting policies and
estimates from the information provided in Item 7, "Management's Discussion
and Analysis of Financial Condition and Results of Operations", included in
our Registration Statement for the fiscal year ended December 31, 2009.
17
Results of Operations
- ---------------------
History and Organization
- ------------------------
The Company was organized April 24, 2006 (Date of Inception) under the laws
of the State of Nevada, as Political Calls, Inc. The original business plan
of the Company consisted of marketing telephone broadcasting messages for
political campaigns. On November 23, 2008, the Board of Directors and the
majority vote of the Company's shareholders voted and approved a name change
of the Company from Political Calls, Inc. to Northern Empire Energy Corp., to
better reflect the Company's new business direction.
Our common stock is quoted for trading on the OTC Bulletin Board under the
symbol NOEE. Our principal executive offices are located at 118 8th Ave. NW,
Calgary, Alberta T2M 0A4, Canada. Our telephone number is (403) 456-2333.
Our Business
- ------------
Northern Empire Energy Corp. is an emerging oil and gas exploration company
that focuses on the acquisition of oil and natural gas interests; including
leases, wells, mineral rights, working interests, royalty interests,
overriding royalty interests, net profits interests, and production payments
in Canada. We intend to pursue prospects in partnership with other companies
with exploration, development and production expertise. We will also pursue
alliances with partners in the areas of geological and geophysical services
and prospect generation, evaluation and prospect leasing. The acquisition,
drilling and development of oil and gas is capital intensive and the level of
performance and outcome attainable by an oil and gas company is proportional
to the amount of available capital. Therefore, a principal part of our plan
of operations is to acquire the additional capital required to finance our
future operations.
Business Strategy
- -----------------
In pursuing our operations strategy, our primary focus will be directed
towards the following:
Exploration Activities
- ----------------------
We intend to conduct exploration and development programs to grow proven
reserves, production and cash flow. We participate by acquiring working
interests in our projects and we continually review opportunities generated
by industry partners
18
Strategic Acquisitions
- ----------------------
We plan to review opportunities to acquire (i) producing properties in our
target areas that contain proved reserve value as well as meaningful
exploitation and exploration upside potential; and (ii) small to mid-size
energy companies that, along with our current management expertise, would
display profitability, strong revenue growth and significant cash flows.
We intend to use the services of independent consultants and contractors to
perform various professional services, including reservoir engineering, land,
legal, and environmental services. As a non-operator working interest owner,
we intend to rely on the services private contractors to drill, produce and
market our natural gas and oil.
Seasonality
- -----------
The exploration for oil and natural gas reserves depends on access to areas
where operations are to be conducted. Seasonal weather variations, including
freeze-up and break-up affect access in certain circumstances. Natural gas is
used principally as a heating fuel and for power generation. Accordingly,
seasonal variations in weather patterns affect the demand for natural gas.
Depending on prevailing conditions, the prices received for sales of natural
gas are generally higher in winter than summer months, while prices are
generally higher in summer than spring and fall months.
Our Exploration Property
- ------------------------
We entered into an Option Agreement with Maguire Resources Ltd., a
corporation having an office at 300-840 6th Ave SW T2P 3E5 in the City of
Calgary, in the Province of Alberta, Canada. Maquire has granted an option
to the Registrant to earn a 40% interest in the Turin Project by incurring
100% of the drilling and completion costs up to a five well drilling program.
This a non-operating working interest and/or royalty owner participation
position in oil and gas project is located in the Turin area of south-east
Alberta, Canada, specifically section 28, township 10, range 19 west of the
4th meridian.
The option interest consists of several potential hydrocarbon zones in the
area including (starting from the shallowest formation), the Milk River,
Second White Specks, Barons, Bow Island, Glauconite and the Lower Mannville
sandstones plus the Livingston Carbonate.
The option, if exercised, will allow the Registrant to acquire up to a 40%
non-operating working interest, subject to a 31% G.O.R. (Gross Overriding
Royalty) by incurring expenditures of $2 million, 100% of the drilling and
completion costs in a five well drilling program. By drilling an initial
well on the Turin Project the Company can earn 25% of a shut-in gas well
subject to a 31% G.O.R. (Gross Overriding Royalty) by incurring 100% of
completion and tie in costs, located in the land of interest.
19
Competition
- -----------
The oil and natural gas industry is highly competitive. This includes but is
not limited to:
o locating and acquiring exploratory drilling prospects,
o locating and acquiring economically desirable producing properties; and
o finding equipment and labor to operate and maintain their properties.
Properties in which we may acquire an interest will encounter strong
competition from other oil and gas producers, including many that will
possess substantially greater financial resources than us. Competition could
reduce the availability of properties of merit or increase the cost of
acquiring the properties.
We will be competing with other oil and gas exploration companies for
financing from a limited number of investors that are prepared to make
investments in junior oil and gas exploration companies. The presence of
competing oil and gas exploration companies may impact our ability to raise
the necessary capital to fund the acquisition and exploration programs if
investors view investments in competitors as more attractive based on the
merit of the oil and gas properties and the price of the investment offered
to investors.
Northern Empire Energy Corp. Funding Requirements
- -------------------------------------------------
We do not have sufficient capital to fully develop our business plan.
Management anticipates the Company will need to raise at least $2,000,000.
There is no assurance that we will have revenue in the future or that we will
be able to secure the necessary funding to develop our business. Without
additional funding, it is most likely that our business model will not
succeed, and we shall be forced to curtail or even cease our operations.
Future funding could result in potentially dilutive issuances of equity
securities, the incurrence of debt, contingent liabilities and/or
amortization expenses related to goodwill and other intangible assets, which
could materially adversely affect the Company's business, results of
operations and financial condition.
20
Results of Operations for the quarter ended March 31, 2010
- ----------------------------------------------------------
During the three months ended March 31, 2010, the Company had a net loss
of $(45,187) versus a net loss of $(54,443) for the same period last
year. For the three months ending March 31, 2010, the Company experienced
general and administrative expenses of $29,635.
For the period since inception through March 31, 2010, we generated limited
revenues of $19,491. Since our inception on April 24, 2006 we experienced an
accumulated net loss of $(2,283,178). The bulk of this loss is due to the
beneficial conversion feature of the Company's preferred stock. We
anticipate our operating expenses will increase as we start to develop oil
wells. We also anticipate that our ongoing operating expenses will increase
since we are a reporting company under the Securities Exchange Act of 1934.
Revenues
- --------
During the three month period ended March 31, 2010, the Company generated
no revenues. Since inception on April 24, 2006, the Company has generated
limited revenues of $19,491.
Plan of Operation
- -----------------
Management does not believe that the Company will be able to generate any
significant profit during the coming year. Management believes that general
and administrative costs and well as building its infrastructure will most
likely curtail any significant profits.
Management believes the Company can sustain itself for the next twelve
months. Management has agreed to keep the Company funded at its own expense,
without seeking reimbursement for expenses paid. The Company's need for
capital may change dramatically if it can generate additional revenues from
its operations. In the event the Company requires additional funds, the
Company will have to seek loans or equity placements to cover such cash
needs. There are no assurances additional capital will be available to the
Company on acceptable terms.
21
Going Concern
- -------------
Going Concern - The Company experienced operating losses since its inception
on April 24, 2006 through the period ended March 31, 2010. The financial
statements have been prepared assuming the Company will continue to operate
as a going concern which contemplates the realization of assets and the
settlement of liabilities in the normal course of business. No adjustment
has been made to the recorded amount of assets or the recorded amount or
classification of liabilities which would be required if the Company were
unable to continue its operations. (See Financial Footnote 2)
Expected purchase or sale of plant and significant equipment
- ------------------------------------------------------------
We do not anticipate the purchase or sale of any plant or significant
equipment; as such items are not required by us at this time.
Significant changes in the number of employees
- ----------------------------------------------
As of March 31, 2010, we did not have any employees. We are dependent
upon our sole officer and director for our future business development. As
our operations expand we anticipate the need to hire additional employees,
consultants and professionals; however, the exact number is not quantifiable
at this time.
Liquidity and Capital Resources
- -------------------------------
The Company has limited financial resources available, which has had an
adverse impact on the Company's liquidity, activities and operations. These
limitations have adversely affected the Company's ability to obtain certain
projects and pursue additional business. As of March 31, 2010, the
company has current assets of $9,363 and currently liabilities of $118,423.
Without realization of additional capital, it would be unlikely for the
Company to continue as a going concern. In order for the Company to remain
a Going Concern it will need to find additional capital. Additional working
capital may be sought through additional debt or equity private placements,
additional notes payable to banks or related parties (officers, directors or
stockholders), or from other available funding sources at market rates of
interest, or a combination of these. The ability to raise necessary
financing will depend on many factors, including the nature and prospects of
any business to be acquired and the economic and market conditions prevailing
at the time financing is sought. No assurances can be given that any
necessary financing can be obtained on terms favorable to the Company, or
at all.
22
Notwithstanding, management anticipates the Company will require additional
capital of approximately $2,000,000 to further the Company's business plan.
Management plans to raise the monies by selling equity in the Company.
There can be no assurance that additional capital will be available to the
Company.
As a result of our the Company's current limited available cash, no officer
or director received compensation through the three months ended March 31,
2010. No officer or director received stock options or other non-cash
compensation since the Company's inception through March 31, 2010. The
Company has no employment agreements in place with its officers. Nor does
the Company owe its officers any accrued compensation, as the Officers agreed
to work for company at no cost, until the company can become profitable on a
consistent Quarter-to-Quarter basis.
Off-Balance Sheet Arrangements
- ------------------------------
We do not have any off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, changes
in financial condition, revenues or expenses, results or operations,
liquidity, capital expenditures or capital resources that is material to
investors.
Critical Accounting Policies and Estimates
- ------------------------------------------
Revenue Recognition: We recognize revenue from product sales once all of the
following criteria for revenue recognition have been met: pervasive evidence
that an agreement exists; the services have been rendered; the fee is fixed
and determinable and not subject to refund or adjustment; and collection of
the amount due is reasonable assured.
New Accounting Standards
- ------------------------
In January 2010, the FASB issued Accounting Standards Update 2010-01, "Equity
(Topic 505): Accounting for Distributions to Shareholders with Components of
Stock and Cash (A Consensus of the FASB Emerging Issues Task Force)". This
amendment to Topic 505 clarifies the stock portion of a distribution to
shareholders that allows them to elect to receive cash or stock with a limit
on the amount of cash that will be distributed is not a stock dividend for
purposes of applying Topics 505 and 260. Effective for interim and annual
periods ending on or after December 15, 2009, and would be applied on a
retrospective basis. The Company does not expect the provisions of ASU 2010-
01 to have a material effect on the financial position, results of operations
or cash flows of the Company.
23
In January 2010, the FASB (Financial Accounting Standards Board) issued
Accounting Standards Update 2010-03 (ASU 2010-03), Extractive Activities-Oil
and Gas (Topic 932): Oil and Gas Reserve Estimation and Disclosures. This
amendment to Topic 932 has improved the reserve estimation and disclosure
requirements by (1) updating the reserve estimation requirements for changes
in practice and technology that have occurred over the last several decades
and (2) expanding the disclosure requirements for equity method investments.
This is effective for annual reporting periods ending on or after December
31, 2009. However, an entity that becomes subject to the disclosures because
of the change to the definition oil- and gas- producing activities may elect
to provide those disclosures in annual periods beginning after December 31,
2009. Early adoption is not permitted. The Company does not expect the
provisions of ASU 2010-03 to have a material effect on the financial
position, results of operations or cash flows of the Company.
In January 2010, the FASB (Financial Accounting Standards Board) issued
Accounting Standards Update 2010-04 (ASU 2010-04), Accounting for Various
Topics-Technical Corrections to SEC Paragraphs.
In January 2010, the FASB (Financial Accounting Standards Board) issued
Accounting Standards Update 2010-05 (ASU 2010-05), Compensation - Stock
Compensation (Topic 718). This standard codifies EITF Topic D-110 Escrowed
Share Arrangements and the Presumption of Compensation.
In January 2010, the FASB (Financial Accounting Standards Board) issued
Accounting Standards Update 2010-06 (ASU 2010-06), Fair Value Measurements
and Disclosures (Topic 820): Improving Disclosures about Fair Value
Measurements. This amendment to Topic 820 has improved disclosures about
fair value measurements on the basis of input received from the users of
financial statements. This is effective for interim and annual reporting
periods beginning after December 15, 2009, except for the disclosures about
purchases, sales, issuances, and settlements in the roll forward of activity
in Level 3 fair value measurements. Those disclosures are effective for
fiscal years beginning after December 15, 2010, and for interim periods
within those fiscal years. Early adoption is permitted. The Company does
not expect the provisions of ASU 2010-06 to have a material effect on the
financial position, results of operations or cash flows of the Company.
In February 2010, the FASB (Financial Accounting Standards Board) issued
Accounting Standards Update 2010-08 (ASU 2010-08), Technical Corrections to
Various Topics. This amendment eliminated inconsistencies and outdated
provisions and provided the needed clarifications to various topics within
Topic 815. The amendments are effective for the first reporting period
(including interim periods) beginning after issuance (February 2, 2010),
except for certain amendments. The amendments to the guidance on accounting
for income taxes in reorganization (Subtopic 852-740) should be applied to
reorganizations for which the date of the reorganization is on or after the
beginning of the first annual reporting period beginning on or after December
15, 2008. For those reorganizations reflected in interim financial
statements issued before the amendments in this Update are effective,
24
retrospective application is required. The clarifications of the guidance on
the embedded derivates and hedging (Subtopic 815-15) are effective for fiscal
years beginning after December 15, 2009, and should be applied to existing
contracts (hybrid instruments) containing embedded derivative features at the
date of adoption. The Company does not expect the provisions of ASU 2010-08
to have a material effect on the financial position, results of operations or
cash flows of the Company.
In February 2010, the FASB issued Accounting Standards Update 2010-09 (ASU
2010-09), Subsequent Events (TOPic 855), amending guidance on subsequent
events to alleviate potential conflicts between FASB guidance and SEC
requirements. Under this amended guidance, SEC filers are no longer required
to disclose the date through which subsequent events have been evaluated in
originally issued and revised financial statements. This guidance was
effective immediately and we adopted these new requirements for the period
ended March 31, 2010. The adoption of this guidance did not have a material
impact on our financial statements.
In April 2010, the FASB (Financial Accounting Standards Board) issued
Accounting Standards Update 2010-14 (ASU 2010-14), Accounting for Extractive
Activities - Oil and Gas. This amendment makes amendments to paragraph 932-
10-S99-1 due to SEC release No. 33-8995, Modernization of Oil and Gas
Reporting. The Company does not expect the provisions of ASU 2010-14 to have
a material effect on the financial position, results of operations or cash
flows of the Company.
The company evaluated all of the other recent accounting pronouncements
through ASU 2010-19 and deemed that they were immaterial.
25
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Not applicable.
Item 4T. Controls and Procedures
(a) Evaluation of Internal Controls and Procedures
Northern Empire Energy Corp. is committed to maintaining disclosure controls
and procedures that are designed to ensure that information required to be
disclosed in its Exchange Act reports is recorded, processed, summarized, and
reported within the time periods specified in the U.S. Securities and
Exchange Commission's rules and forms, and that such information is
accumulated and communicated to its management, including its Chief Executive
Officer and Chief Financial Officer, as appropriate to allow timely decisions
regarding required disclosure.
As required by Rule 13a-15(b) of the Exchange Act, Northern Empire Energy
Corp. has carried out an evaluation, under the supervision and with the
participation of its management, including its Chief Executive Officer and
the Chief Financial Officer, who is also the sole member of our Board of
Directors, to provide reasonable assurance regarding the reliability of
financial reporting and the reparation of the financial statements in
accordance with U. S. generally accepted accounting principles.
The evaluation examined those disclosure controls and procedures as of
September 30, 2009, the end of the period covered by this report. Based on
that evaluation, they concluded that, during the period covered by this
report, such internal controls and procedures were not effective to detect
the inappropriate application of US GAAP rules as more fully described below.
This was due to deficiencies that existed in the design or operation of our
internal controls over financial reporting that adversely affected our
internal controls and that may be considered to be material weaknesses.
The matters involving internal controls and procedures that our management
considered to be material weaknesses under the standards of the Public
Company Accounting Oversight Board were: (1) lack of a functioning audit
committee due to a lack of a majority of independent members and a lack of a
majority of outside directors on our board of directors, resulting in
ineffective oversight in the establishment and monitoring of required
internal controls and procedures; (2) inadequate segregation of duties
consistent with control objectives; and (3) ineffective controls over period
end financial disclosure and reporting processes. The aforementioned
material weaknesses were identified by our Chief Executive Officer in
connection with the review of our financial statements as of September 30,
2009.
26
Management believes that the material weaknesses set forth in items (2)
and (3) above did not have an effect on our financial results. However,
management believes that the lack of a functioning audit committee and the
lack of a majority of outside directors on our board of directors results in
ineffective oversight in the establishment and monitoring of required
internal controls and procedures, which could result in a material
misstatement in our financial statements in future periods.
Additional procedures were performed in order for management to conclude with
reasonable assurance that the Company's financial statements contained in
this Quarterly Report on Form 10-Q present fairly, in all material respects,
the Company's financial position, results of operations and cash flows for
the periods presented.
This quarterly report does not include an attestation report of the
Corporation's registered public accounting firm regarding internal control
over financial reporting. Management's report was not subject to attestation
by the Corporation's registered public accounting firm pursuant to temporary
rules of the SEC that permit the Corporation to provide only the management's
report in this quarterly report.
(b) Management's Remediation Initiatives
- -----------------------------------------
In an effort to remediate the identified material weaknesses and other
deficiencies and enhance our internal controls, we have initiated, or plan to
initiate, the following series of measures:
We will create a position to segregate duties consistent with control
objectives and will increase our personnel resources and technical accounting
expertise within the accounting function when funds are available to us. We
plan to appoint one or more outside directors to our board of directors who
shall be appointed to an audit committee resulting in a fully functioning
audit committee who will undertake the oversight in the establishment and
monitoring of required internal controls and procedures such as reviewing
and approving estimates and assumptions made by management when funds are
available to us.
(c) Changes in internal controls over financial reporting
- ----------------------------------------------------------
There was no change in our internal controls over financial reporting that
occurred during the period covered by this report, that has materially
affected, or is reasonably likely to materially affect, our internal controls
over financial reporting.
27
PART II. OTHER INFORMATION
Item 1 -- Legal Proceedings
From time to time, we may become involved in various lawsuits and legal
proceedings, which arise in the ordinary course of business. However,
litigation is subject to inherent uncertainties, and an adverse result in
these or other matters may arise from time to time that may harm our
business.
We are not presently a party to any material litigation, nor to the knowledge
of management is any litigation threatened against us, which may materially
affect us.
Item 1A - Risk Factors
See Risk Factors set forth in Part I, Item 1A of the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 2009 and the discussion
in Item 1, above, under "Liquidity and Capital Resources."
Item 2 -- Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3 -- Defaults Upon Senior Securities
None.
Item 4 -- Submission of Matters to a Vote of Security Holders
None.
Item 5 -- Other Information
None.
28
Item 6 -- Exhibits
Incorporated by reference
-------------------------
Filed Period Filing
Exhibit Exhibit Description herewith Form ending Exhibit date
- -------------------------------------------------------------------------------
3.1 Articles of Incorporation, SB-2 3.1 02/21/2007
as currently in effect
- -------------------------------------------------------------------------------
3.2 Bylaws SB-2 3.2 02/21/2007
as currently in effect
- -------------------------------------------------------------------------------
3.3 Amended Articles of SB-2 3.3 02/21/2007
Incorporation
- -------------------------------------------------------------------------------
3.4 Amended Articles of 8-K 3.4 11/19/2008
of Incorporation
- -------------------------------------------------------------------------------
10.1 Option Agreement dated 8-K 10.2 11/19/2008
November 23, 2008
- -------------------------------------------------------------------------------
31.1 Certification of Chief X
Executive Officer,
pursuant to Section
302 of the Sarbanes-Oxley
Act
- -------------------------------------------------------------------------------
32.1 Certification of Chief X
Executive Officer,
pursuant to Section
906 of the Sarbanes-Oxley
Act
- -------------------------------------------------------------------------------
29
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Northern Empire Energy Corp.
----------------------------
Registrant
By: /s/ Jeffrey Cocks
------------------------------
Name: Jeffrey Cocks
Title: President/CFO/Director
Dated: May 17, 2010
------------
30