Attached files
| file | filename |
|---|---|
| EX-31.1 - EXH 31-1 CERTIFICATION - HOMELAND RESOURCES LTD. | exh31-1_certification.htm |
| EX-32.1 - EXH 32-1 CERTIFICATION - HOMELAND RESOURCES LTD. | exh32-1_certification.htm |
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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[X]
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended October 31, 2010
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[ ]
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from ________________ to _______________
333-147501
(Commission file number)
HOMELAND RESOURCES LTD.
(Exact name of registrant as specified in its charter)
|
Nevada
(State or other jurisdiction
Of incorporation or organization)
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26-0841675
(IRS Employer
Identification No.)
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6801 Los Trechos NE, Albuquerque New Mexico 87109
(Address of principal executive offices) (Zip Code)
(505) 264-0600
(Registrant’s telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year, if changed since last report)
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.
[x] Yes [ ] No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
[ ] Yes [ ] No (Not Required)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
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Accelerated filer [ ]
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Non-accelerated filer [ ]
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Smaller reporting company [x]
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
[ ] Yes [ x ] No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 60,200,000 shares of Common Stock, $0.0001 par value, as of December 15, 2010
(A Development Stage Company)
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Page
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||
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PART I.
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UNAUDITED FINANCIAL INFORMATION
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|
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Item 1.
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Interim Financial Statements
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Balance Sheets
October 31, 2010 (unaudited) and July 31, 2010
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3
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|
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Statements of Operations (unaudited)
Three Months Ended October 31, 2010 and 2009
and Cumulative Amounts from July 8, 2003 (Inception) to October 31, 2010
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4
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Statement of Stockholders’ Equity (Deficit) (unaudited)
Cumulative Amounts from July 8, 2003 (Inception) to October 31, 2010
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5
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Statements of Cash Flows (unaudited)
Three Months Ended October 31, 2010 and 2009
and Cumulative Amounts from July 8, 2003 (Inception) to October 31, 2010
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7
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Notes to Financial Statements (unaudited)
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8
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Item 2.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
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12
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Item 3.
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Quantitative and Qualitative Disclosures About Market Risk
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13
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Item 4.
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Controls and Procedures
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13
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PART II.
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OTHER INFORMATION
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Item 1.
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Legal Proceedings
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14
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Item 1A.
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Risk Factors
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14
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Item 2.
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Unregistered Sales of Equity Securities and Use of Proceeds
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14
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Item 3.
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Defaults Upon Senior Securities
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14
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Item 4.
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(Removed and Reserved)
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14
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Item 5.
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Other Information
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14
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Item 6.
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Exhibit Index
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14
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Signatures
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16
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2
(A Development Stage Company)
BALANCE SHEETS
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October 31,
2010
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July 31,
2010
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|||||||
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(Unaudited)
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||||||||
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ASSETS
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||||||||
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Current Assets
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||||||||
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Cash and cash equivalents
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$
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16,843
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$
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2,491
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||||
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Total Current Assets
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16,843
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2,491
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||||||
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Deferred financing costs, net
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16,750
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4,375
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||||||
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Oil and Gas Properties at Cost - full cost method
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554,398
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293,696
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||||||
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Total Assets
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$
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587,991
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$
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300,562
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||||
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LIABILITIES AND STOCKHOLDERS’ (DEFICIT)
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||||||||
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Current Liabilities
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||||||||
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Accounts payable and accrued liabilities
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$
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89,101
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$
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81,388
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||||
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Accounts payable – related party
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113,354
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106,055
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||||||
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Notes payable
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105,000
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105,000
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||||||
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Total Current Liabilities
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307,455
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292,443
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||||||
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Long Term Liabilities
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||||||||
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Notes payable
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435,000
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115,000
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||||||
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Asset retirement obligation
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1,193
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1,171
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||||||
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Total Liabilities
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743,648
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408,614
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Stockholders’ (Deficit)
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||||||||
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Preferred stock - $0.0001 par value; authorized – 250,000,000 shares
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||||||||
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Issued and outstanding – nil
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-
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-
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||||||
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Common stock - $0.0001 par value; authorized – 500,000,000 shares
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||||||||
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Issued and outstanding – 60,200,000 shares at October 31, 2010 and 60,500,00 at July 31, 2010
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6,020
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6,005
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||||||
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Paid in capital
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41,980
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28,495
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||||||
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(Deficit) accumulated during the development stage
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(203,657
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)
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(142,552
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)
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||||
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Total stockholders’ (deficit)
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(155,657
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)
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(108,052
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)
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||||
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Total Liabilities and Stockholders’ (Deficit)
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$
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587,991
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$
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300,562
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||||
The accompanying notes are an integral part of these unaudited interim financial statements.
3
HOMELAND RESOURCES LTD.
(A Development Stage Company)
UNAUDITED STATEMENTS OF OPERATIONS
|
Three Months Ended
October 31,
2010
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Three Months Ended
October 31,
2009
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Cumulative
Amounts From
Inception on
(July 8, 2003)
To
October 31,
2010
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||||||||||
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REVENUES
|
$
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-
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$
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-
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$
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387
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||||||
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OPERATING EXPENSES
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||||||||||||
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General and administrative
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30,140
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8,842
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146,354
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|||||||||
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Consulting fees – related party
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22,500
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-
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37,500
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|||||||||
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Mineral exploration costs
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-
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1,000
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6,543
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|||||||||
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Impairment on mineral property
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-
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-
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875
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|||||||||
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Oil and gas property operating costs
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-
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-
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1,310
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|||||||||
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Loss on disposal of oil and gas property
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-
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-
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330
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|||||||||
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TOTAL OPERATING EXPENSES
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(52,640
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)
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(9,842
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)
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(192,912
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)
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||||||
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LOSS FROM OPERATIONS
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(52,640
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)
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(9,842
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)
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(192,525
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)
|
||||||
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OTHER EXPENSES
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||||||||||||
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Interest expense
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7,340
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-
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9,882
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|||||||||
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Amortization of deferred financing costs
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1,125
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-
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1,250
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|||||||||
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TOTAL OTHER EXPENSES
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8,465
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-
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11,132
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|||||||||
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Net loss
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$
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(61,105
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)
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$
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(9,842
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)
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$
|
(203,657
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)
|
|||
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Net Loss Per Common Share
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||||||||||||
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Basic and Diluted
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$
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(0.001
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)
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$
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(0.001
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)
|
||||||
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Weighted average number of common shares outstanding
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||||||||||||
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Basic and Diluted
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60,125,543
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60,000,000
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||||||||||
The accompanying notes are an integral part of these unaudited interim financial statements.
4
HOMELAND RESOURCES LTD.
(A Development Stage Company)
UNAUDITED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
| Common Stock | ||||||||||||||||||||
|
Number
of Shares
|
Amount |
Paid in
Capital
|
Deficit Accumulated During the Development Stage | Total Stockholders' Equity (Deficit) | ||||||||||||||||
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Balance, July 8, 2003 (Date of incorporation)
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- | $ | - | $ | - | $ | - | $ | - | |||||||||||
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Loss for the period
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- | - | - | - | - | |||||||||||||||
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Balance, July 31, 2003
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- | - | - | - | - | |||||||||||||||
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Issuance of common stock for cash at $0.005 per share:
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||||||||||||||||||||
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August 2003
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30,000,000 | 3,000 | 12,000 | - | 15,000 | |||||||||||||||
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Net loss for the year
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- | - | - | (1,731 | ) | (1,731 | ) | |||||||||||||
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Balance, July 31, 2004
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30,000,000 | 3,000 | 12,000 | (1,731 | ) | 13,269 | ||||||||||||||
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Issuance of common stock for cash at $0.005 per share:
|
||||||||||||||||||||
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August 2004
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20,650,000 | 2,065 | 8,260 | - | 10,325 | |||||||||||||||
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May 2005
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9,350,000 | 935 | 3,740 | - | 4,675 | |||||||||||||||
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Net loss for the year
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- | - | - | (7,890 | ) | (7,890 | ) | |||||||||||||
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Balance, July 31, 2005
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60,000,000 | 6,000 | 24,000 | (9,621 | ) | 20,379 | ||||||||||||||
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Net loss for the year
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- | - | - | (2,846 | ) | (2,846 | ) | |||||||||||||
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Balance, July 31, 2006
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60,000,000 | 6,000 | 24,000 | (12,467 | ) | 17,533 | ||||||||||||||
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Net loss for the year
|
- | - | - | (21,884 | ) | (21,884 | ) | |||||||||||||
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Balance, July 31, 2007
|
60,000,000 | 6,000 | 24,000 | (34,351 | ) | (4,351 | ) | |||||||||||||
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Net loss for the year
|
- | - | - | (29,576 | ) | (29,576 | ) | |||||||||||||
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Balance, July 31, 2008
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60,000,000 | 6,000 | 24,000 | (63,927 | ) | (33,927 | ) | |||||||||||||
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Net loss for the year
|
- | - | - | (21,526 | ) | (21,526 | ) | |||||||||||||
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Balance, July 31, 2009
|
60,000,000 | 6,000 | 24,000 | (85,453 | ) | (55,453 | ) | |||||||||||||
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Issuance of common shares in connection with debt
|
50,000 | 5 | 4,495 | - | 4,500 | |||||||||||||||
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Net loss for the year
|
- | - | - | (57,099 | ) | (57,099 | ) | |||||||||||||
The accompanying notes are an integral part of these unaudited interim financial statements.
5
| Common Stock | ||||||||||||||||||||
|
Number
of Shares
|
Amount |
Paid in
Capital
|
Deficit Accumulated During the Development Stage | Total Stockholders' Equity (Deficit) | ||||||||||||||||
|
Balance, July 31, 2010
|
60,050,000 | 6,005 | 28,495 | (142,552 | ) | (108,052 | ) | |||||||||||||
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Issuance of common shares in connection with debt
|
150,000 | 15 | 13,485 | - | 13,500 | |||||||||||||||
|
Net loss for the year
|
- | - | - | (61,105 | ) | (61,105 | ) | |||||||||||||
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Balance, October 31, 2010
|
60,200,000 | $ | 6,020 | $ | 41,980 | $ | (203,657 | ) | $ | (155,657 | ) |
The accompanying notes are an integral part of these unaudited interim financial statements.
6
HOMELAND RESOURCES LTD.
(A Development Stage Company)
UNAUDITED STATEMENTS OF CASH FLOWS
|
Three Months
Ended
October 31,
2010
|
Three Months Ended
October 31,
2009
|
Cumulative
Amounts From
Inception on
(July 8, 2003)
To
October 31,
2010
|
||||||||||
|
OPERATING ACTIVITIES
|
||||||||||||
|
Net loss
|
$
|
(61,105
|
)
|
$
|
(9,842
|
)
|
$
|
(203,657
|
)
|
|||
|
Adjustments to reconcile net loss to net cash provided by (used
in) operating activities:
|
||||||||||||
|
Impairment on mineral property
|
-
|
-
|
875
|
|||||||||
|
Loss on disposal of interest in oil and gas property
|
-
|
-
|
330
|
|||||||||
|
Amortization of deferred financing costs
|
1,125
|
-
|
1,250
|
|||||||||
|
Change in non-cash working capital items:
|
||||||||||||
|
Increase in accounts payable and accrued liabilities
|
7,713
|
9,753
|
89,101
|
|||||||||
|
Increase in accounts payable and accrued expenses – related party
|
7,299
|
- |
113,354
|
|||||||||
|
Net cash (used in) provided by operating activities
|
(44,968
|
)
|
(89
|
) |
1,253
|
|||||||
|
INVESTING ACTIVITIES
|
||||||||||||
|
Purchase of interests in oil and gas properties
|
(260,680
|
)
|
-
|
(557,034
|
)
|
|||||||
|
Disposal of interest in oil and gas property
|
-
|
-
|
3,500
|
|||||||||
|
Purchase of undeveloped mineral property
|
-
|
-
|
(876
|
)
|
||||||||
|
Net cash (used in) investing activities
|
(260,680
|
)
|
-
|
(554,410
|
)
|
|||||||
|
FINANCING ACTIVITIES
|
||||||||||||
|
Proceeds from notes payable
|
320,000
|
-
|
540,000
|
|||||||||
|
Sale of common stock
|
-
|
-
|
30,000
|
|||||||||
|
Net cash provided by financing activities
|
320,000
|
-
|
570,000
|
|||||||||
|
Net increase (decrease) in cash and cash equivalents
|
14,352
|
(89
|
) |
16,843
|
||||||||
|
Cash and cash equivalents, beginning of periods
|
2,491
|
89
|
-
|
|||||||||
|
Cash and cash equivalents, end of periods
|
$
|
16,843
|
$
|
-
|
$
|
16,843
|
||||||
|
Supplemental disclosures of non-cash investing and financing activities
|
||||||||||||
|
Common shares issued in connection with debt as
Deferred financing costs
|
$
|
13,500
|
$
|
-
|
$
|
18,000
|
||||||
The accompanying notes are an integral part of these unaudited interim financial statements.
7
HOMELAND RESOURCES LTD.
(A Development Stage Company)
NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS
October 31, 2010
NOTE 1 - BASIS OF PRESENTATION
The interim financial statements of Homeland Resources Ltd. (“we,” “us,” “our,” “Homeland” or the “Company”) are unaudited and contain all adjustments (consisting primarily of normal recurring accruals) necessary for a fair statement of the results for the interim periods presented. Results for interim periods are not necessarily indicative of results to be expected for a full year or for previously reported periods due in part, but not limited to, interest rates, drilling risks, geological risks, the timing of acquisitions, and our ability to obtain additional capital. You should read these interim financial statements in conjunction with the audited financial statements and notes thereto included in Homeland’s Annual Report on Form 10-K for the year ended July 31, 2010. The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
NOTE 2 - DEVELOPMENT STAGE
For all periods prior to October 31, 2010, the Company considered itself a development stage enterprise and a mining company in the exploration stage. As of October 31, 2010, the Company has invested approximately $557,034 in oil and gas properties, and is participating in drilling and seismic programs. As a result, we have determined that as of October 31, 2010, the Company is no longer considered a mining company in the exploration stage, but rather a development stage enterprise. We will continue to evaluate our status as a development stage Company as our business continues to develop.
NOTE 3 - LIQUIDITY
As of October 31, 2010, we had a working capital deficit of $290,612 and for the three months ended October 31, 2010, our cash used in operating activities amounted to $44,968. We estimate our minimum investment needs during the remainder of 2010 to be $150,000 related to participation in drilling and seismic programs. Our results of operations resulted in a deficit accumulated during the development stage of $203,657 as of October 31, 2010. We have participated in the drilling of test wells on undeveloped properties. We plan further potential participation in drilling and seismic operations for the remainder of 2010 and future periods. During the three months ended October 31, 2010 the Company, borrowed $320,000 (Note 7). We will need to raise equity or borrow additional capital to finance our operating deficit and our continued participation in planned activities. If additional financing is not available, we will be compelled to reduce the scope of our business activities. If we are unable to fund our operating cash flow needs and planned capital investments, it may be necessary to sell a portion of our interest in our oil and gas properties.
NOTE 4 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Accounting standards-setting organizations frequently issue new or revised accounting rules. We regularly review all new pronouncements that have been issued since the filing of our Form 10K for the year ended July 31, 2010 to determine their impact, if any, on our financial statements.
On August 2, 2010, the FASB issued ASU 2010-21, “Accounting for Technical Amendments to Various SEC Rules and Schedules—Amendments to SEC Paragraphs Pursuant to Release No. 33-9026: Technical Amendments to Rules, Forms, Schedules and Codification of Financial Reporting Policies.” The ASU reflects changes made by the SEC in Final Rulemaking Release No. 33-9026 , which was issued in April 2009 and amended SEC requirements in Regulation S-X (17 CFR 210.1-01 et seq.) and Regulation S-K ( 17 CFR 229.10 et seq.) and made changes to financial reporting requirements in response to the FASB's issuance of SFAS No. 141(R), “Business Combinations” (ASC 805), and SFAS No. 160 , “Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51” ( FASB ASC 810). The provisions of ASU 2010-21 did not have a material impact on the financial statements.
8
HOMELAND RESOURCES LTD.
(A Development Stage Company)
NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS
October 31, 2010
There were various other updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company's financial position, results of operations or cash flows.
NOTE 5 – EARNINGS PER SHARE
Basic loss per share is calculated by dividing net loss by the weighted average number of common shares outstanding for the period. Diluted loss per share is calculated by dividing net loss by the weighted average number of common shares and dilutive common stock equivalents outstanding. During the periods presented, there were no common stock equivalents outstanding.
NOTE 6 – OIL AND GAS PROPERTIES
As of October 31, 2010 and July 31, 2010, the Company’s oil and gas property interests are as follows:
|
October 31, 2010
|
July 31, 2010
|
|||||||
|
Oil and Gas Properties
|
||||||||
|
Washita Bend 3D Exploration Project
|
$ | 337,424 | $ | 203,109 | ||||
|
2010-1 Drilling Program
|
215,780 | 89,416 | ||||||
|
Asset Retirement Cost
|
1,193 | 1,171 | ||||||
|
Total
|
$ | 554,398 | $ | 293,696 | ||||
Washita Bend 3D Exploration Project
As of October 31, 2010 we own a 5% working interest in the Washita Bend 3D Exploration Project. The project provides for the acquisition of approximately 135 miles of 3D seismic data to identify drillable prospects in a study area comprising 119,680 acres in Oklahoma. The Washita prospect area is located in Cleveland, Garvin, McCain and Pottawatomie Counties, Oklahoma. As of October 31, 2010, approximately 5,100 acres had been acquired and permitting was underway. The Company anticipates that data acquisition will begin in December 2010 and analysis of data will be ongoing. Drilling on the prospect may commence in late winter or early spring 2011, pending results of the seismic analysis. In connection with the participation in the seismic and lease acquisition agreement, the Company will be carried, by the seller, in a 10% working interest to casing point in the first eight wells in the Washita Bend prospect area. The Company’s total funding expenditure related to this project amounted to $337,424 as of October 31, 2010.
2010–1 Drilling Program
As of October 2010, we own a 5% working interest in a Drilling Program located in Garvin County, Oklahoma. As of October 31, 2010 we had participated in the drilling of four exploratory wells on the prospect acreage. Of the four wells that we had participated in as of October 31, 2010 three were in various stages of testing and/or completion. Subsequent to October 31, 2010, two of these three wells entered into production and one was prepared to enter into production (Note 13).
NOTE 7 – NOTES PAYABLE
|
October 31, 2010
|
July 31, 2010
|
|||||||
|
Radium Ventures 6.5%*
|
$ | 55,000 | $ | 55,000 | ||||
|
Radium Ventures 6.5%*
|
50,000 | 50,000 | ||||||
|
Radium Ventures 7.5%*
|
435,000 | 115,000 | ||||||
|
Total
|
$ | 540,000 | $ | 220,000 | ||||
9
HOMELAND RESOURCES LTD.
(A Development Stage Company)
NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS
October 31, 2010
NOTE 7 – NOTES PAYABLE (cont.)
* The accrued interest expense related to these notes amounted to $9,882 at October 31, 2010 and has been included in accrued liabilities on the Company’s balance sheet.
In August, September and October 2010, the Company borrowed $160,000, $30,000 and $130,000 under the terms of our $1,000,000 loan facility. These advances bear interest at 7.5% respectively and are payable within 36 months. In connection with these advances, the Company has issued 150,000 shares of its common stock. (Note 9)
NOTE 8 - DEFERRED FINANCING COSTS
As of October 31, 2010 we have recorded $18,000 in deferred financing costs in connection with the cumulative issuance of 200,000 shares of our common stock in connection with our $1,000,000 loan facility (Note 9). We considered ASC 835-30, Interest – Imputation of Interest in recording these amounts. The Company recognizes debt issue costs on the balance sheet as deferred charges, and amortizes the balance over the term of the related debt. The Company amortized $1,125 of deferred financing costs for the period ended October 31, 2010.
As of October 31, 2010, the Company had no shares of preferred stock outstanding and 60,200,000 shares of common stock outstanding. All shares referenced in these financial statements reflect the share split effected on July 1, 2009.
In August 2003, the Company issued 30,000,000 shares of common stock at $0.0005 per share for gross proceeds of $15,000.
During the year ended July 31, 2005, the Company issued 30,000,000 shares of common stock at $0.0005 per share for gross proceeds of $15,000.
On July 1, 2009, the Company completed a 10-for-1 forward stock split. This resulted in the Company increasing its authorized shares of common stock from 75,000,000 shares at a par value of $0.001 per share to 750,000,000 common shares at a par value of $0.0001 per share. Each outstanding share of common stock was converted into ten (10) shares of common stock.
On July 7, 2010, the Company issued 50,000 shares of common stock at $0.09 per share. The shares were issued in connection with the loan commitment with Radium Ventures Corp. (“Radium”) signed on May 15, 2010.
During the year ended July 31, 2010, the Company increased the number of authorized preferred stock to 250,000,000 shares with a par value of $0.0001 per share. Of this amount, 10,000,000 shares of preferred stock will be designated as Series A Preferred Stock, with a par value of $0.0001 per share.
During the year ended July 31, 2010, the Company decreased the number of authorized common stock to 500,000,000 shares with a par value of $0.0001 per share.
On August 16, 2010, the Company issued 50,000 shares of common stock at $0.09 per share. The shares were issued in connection with the loan commitment with Radium signed on May 15, 2010.
On September 22, 2010, the Company issued 50,000 shares of common stock at $0.09 per share. The shares were issued in connection with the loan commitment with Radium signed on May 15, 2010.
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HOMELAND RESOURCES LTD.
(A Development Stage Company)
NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS
October 31, 2010
NOTE 9 - COMMON STOCK (cont.)
On October 7, 2010, the Company issued 50,000 shares of common stock at $0.09 per share. The shares were issued in connection with the loan commitment with Radium signed on May 15, 2010.
NOTE 10 – COMMITMENTS AND CONTINGENCIES
Although not completely estimable as of October 31, 2010, based on the terms of the Company’s original agreements with the operator, the Company anticipates additional expenditures related to its share of the drilling program may exceed $75,000 for the remainder of calendar 2010, and that additional expenditures related to its seismic program may approach $75,000 for the remainder of calendar 2010. In addition, should the Company choose to terminate its involvement in the seismic program, the Company may incur significant additional liabilities per the terms of its initial agreement with the operator.
NOTE 11 – RECLASSIFICATIONS
Certain prior period amounts have been reclassified in the unaudited financial statements to conform to current period presentation. Such reclassifications have had no effect on the net loss.
NOTE 12 – RELATED PARTY TRANSACTIONS
As of October 31, 2010, the Company owed $113,354 to a related party. As of October 31, 2010, amounts payable to the related party included $37,500 in connection with consulting services provided to the Company, while remaining amounts owed were related to reimbursement for expense paid on behalf of the Company. The Company made no cash payments to related parties during the quarter ended.
The Company has evaluated all transactions through the date of issuance of these financial statements, and except as discussed below there are no further subsequent events that would require disclosure.
In November and December 2010, two of our exploratory wells as described in (Note 6) went into production and were flowing initial rates of 384 barrels of oil per day (BOPD) and 60 BOPD, respectively. A third was being prepared for production with flow rates to be measured upon connection.
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General
Our original business plan was to proceed with the exploration of the Home Ranch Prospect to determine whether there were commercially exploitable reserves of minerals located on the property comprising such mineral claims. In 2010, we determined that our ability to explore for minerals on these claims had become economically non-feasible and we therefore suspended our activities on the Home Ranch Prospect indefinitely in order to focus on our oil and gas interests. We did not conduct any operations or exploration activities on the Home Ranch Prospect during the period ended October 31, 2010. At the time of this report, we do not know when or if we will proceed with the Home Ranch Prospect.
In April 2010, we acquired working interests in a seismic exploration program as well as a drilling program in an oil and gas property in Oklahoma, as further described above. Our present plan of operation is to continue to invest in oil and gas properties.
Oil and Gas Properties
Washita Bend 3D Exploration Project
In April 2010, the Company acquired a 5% working interest in the Washita Bend 3D Exploration Project. The purchase agreement provides for the acquisition of approximately 135 miles of 3D seismic data to identify drillable prospects in a study area comprising 119,680 acres in Oklahoma. The Washita prospect area is located in Cleveland, Garvin, McCain and Pottawatomie Counties. As of October 31, 2010, approximately 5,100 acres had been acquired and permitting was underway. The Company anticipates that data acquisition will begin in mid to late December 2010 and analysis of data will be ongoing. Drilling on the prospect may commence in late winter 2010 or early spring 2011, pending results of the seismic analysis. In connection with the participation in the seismic and lease acquisition agreement, the Company will be carried, by the seller, in a 10% working interest to casing point in the first eight wells in the Washita Bend prospect area.
2010–1 Drilling Program
In April 2010, the Company acquired a 5% working interest in the 2010-1 Drilling Program located in Garvin County, Oklahoma. As of October 31, 2010 we had participated in the drilling of four exploratory wells on the prospect acreage. Of the four wells that we had participated in as of October 31, 2010, three were in various stages of testing and or completion. Subsequent to the end of the period two of our exploratory wells went into production and were flowing initial rates of 384 BOPD and 60 BOPD, respectively. A third was being prepared for production with flow rates to be measured upon connection.
Loans
In August, September and October 2010, the Company borrowed $160,000, $30,000 and $130,000 under the terms of our $1,000,000 loan facility. These advances bear interest at 7.5% respectively and are payable within 36 months. In connection with these advances, the Company has issued 150,000 shares of its common stock.
Results of Operations
Three months ended October 31, 2010 compared to the three months ended October 31, 2009.
We had no revenues during the three months ended October 31, 2010 or 2009. During the three months ended October 31, 2010, we incurred expenses of $61,105, compared with $9,842 during the three months ended October 31, 2009, an increase of $51,263. The increase in our expenses was attributable to an increase in our general and administrative expenses, in particular, our accounting and audit, legal and website expenses, an increase in consulting fees with a related party, and an increase in interest expense and amortization of deferred financing costs.
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Liquidity and Capital Resources
As of October 31, 2010, we had cash and cash equivalents of $16,843, compared to cash and cash equivalents of $2,491 as of July 31, 2010. Our working capital deficit at October 31, 2010 was $290,612, compared to $289,952 as of July 31, 2010. Overall for the period we increased in our loans payable as our seismic and drilling programs continue to progress. Accordingly, the statement of cash flows reflects cash of $260,680 used for the purchase of oil and gas properties, and a total of $320,000 of cash provided by loans from Radium Ventures Corp.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of October 31, 2010.
Going Concern
In its report prepared in connection with our 2010 financial statements, our independent registered public accounting firm included an explanatory paragraph stating that, because we had an accumulated deficit of $142,552 and a working capital deficit of $289,952 at July 31, 2010, there was substantial doubt about our ability to continue as a going concern. At October 31, 2010, our deficit accumulated during the development stage was $203,657. Our continued existence will depend in large part upon our ability to raise sufficient capital through debt and or equity offerings. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Forward Looking Statements
Certain statements in this Quarterly Report on Form 10-Q, as well as statements made by us in periodic press releases and oral statements made by our officials to analysts and shareholders in the course of presentations about the Company, constitute “forward-looking statements”. Such forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward looking statements. Such factors include, among other things: (1) general economic and business conditions; (2) interest rate changes; (3) the relative stability of the debt and equity markets; (4) government regulations particularly those related to the natural resources industries; (5) required accounting changes; (6) disputes or claims regarding our property interests; and (7) other factors over which we have little or no control.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not required for smaller reporting companies.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures, as defined in Rule 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), are our controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Act is accumulated and communicated to our sole officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Rule 15d-15 under the Exchange Act, requires us to carry out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of October 31, 2010, being the date of our most recently completed fiscal period covered by this report. This evaluation was implemented under the supervision and with the participation of our sole officer, Armando Garcia. Based on this evaluation, Mr. Garcia concluded that the design and operation of our disclosure controls and procedures were not effective since the following material weaknesses existed:
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·
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We relied on external consultants for the preparation of our financial statements and reports. As a result, our sole officer may not be able to identify errors and irregularities in the financial statements and reports.
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We had a sole officer who was also the sole director. Therefore, there was an inherent lack of segregation of duties and a limited independent governing board.
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We relied on an external consultant for administration functions, some of which did not have standard procedures in place for formal review by our sole officer.
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As of November 1, 2010, we elected another director and believe that having two directors may address some of the weaknesses noted above.
Changes in Internal Controls Over Financial Reporting
In connection with the evaluation of our internal controls during our last fiscal quarter, our sole officer has concluded that there were changes in our internal control over financial reporting that occurred during the fiscal quarter ended October 31, 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
We implemented additional internal controls intended to remediate material weaknesses as cited in the prior fiscal year. As a result of additional control procedures implemented we deem that internal controls are sufficient so as to mitigate previously cited material weaknesses.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
Not required for smaller reporting companies.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
During the quarter ended October 31, 2010, the registrant issued 150,000 shares of its common stock to Radium Ventures Corp. in consideration for loan advances made by Radium. The shares were valued at $13,500 and were issued pursuant to the exemptions from registration contained in Regulation S promulgated under the Securities Act of 1933, as amended (the “Act”), and Section 4(2) of the Act.
Item 3. Defaults Upon Senior Securities
None.
Item 4. (Removed and Reserved)
Not applicable.
Item 5. Other Information
Not applicable
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Item 6. Exhibits
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Regulation S-K Number
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Exhibit
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3.1
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Articles of Incorporation (1)
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3.2
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Amendment to Articles of Incorporation (1)
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3.3
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Certificate of Change Pursuant to NRS 78.209 (2)
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3.4
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Bylaws (1)
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10.1
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Notice of Mining Claims HR #1-6, recorded by Luna County, New Mexico, on March 24, 2004 (1)
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10.2
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Confirmation of Agreement with Leroy Halterman dated August 1, 2007 (1)
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10.3
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Loan Commitment Letter from Wellington Financial Corporation dated August 1, 2007 (1)
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10.4
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Notice of Intent to Hold the HR #1-6 Lode Mining Claims, filed with the Bureau of Land Management on August 15, 2007 (1)
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10.5
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Notice of Intent to Hold the HR #1-6 Lode Mining Claims recorded by Luna County, New Mexico, on August 17, 2007 (1)
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10.6
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Loan Commitment dated April 19, 2010 from Radium Ventures Corp. (3)
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10.6
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Loan Commitment dated May 11, 2010 from Radium Ventures Corp. (3)
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10.6
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Loan Agreement dated May 15, 2010 from Radium Ventures Corp. (3)
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31.1
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Rule 15d-14(a) Certification of Armando Garcia
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32.1
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Certification of Armando Garcia Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act Of 2002
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________________________
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(1)
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Incorporated by reference to the exhibits to the registrant’s registration statement on Form SB-1 filed November 19, 2007, file number 333-147501.
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(2)
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Incorporated by reference to the exhibits to the registrant’s current report on Form 8-K filed June 29, 2009, file number 333-147501.
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(3)
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Incorporated by reference to the exhibits to the registrant’s current report on Form 8-K filed April 19, 2010, file number 333-147501
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SIGNATURES
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In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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HOMELAND RESOURCES LTD.
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Date: December 15, 2010
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By:
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/s/ Armando Garcia
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Armando Garcia
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President, Secretary, Treasurer
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(principal executive and financial officer)
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