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EX-32.2 - SCOUT EXPLORATION 10Q, CERTIFICATION 906, CFO - Scout Exploration, Incscoutexh32_2.htm
EX-31.2 - SCOUT EXPLORATION 10Q, CERTIFICATION 302, CFO - Scout Exploration, Incscoutexh31_2.htm
EX-32.1 - SCOUT EXPLORATION 10Q, CERTIFICATION 906, CEO - Scout Exploration, Incscoutexh32_1.htm
EX-31.1 - SCOUT EXPLORATION 10Q, CERTIFICATION 302, CEO - Scout Exploration, Incscoutexh31_1.htm



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q

x           Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2011

o           Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from _____________ to _____________

Commission File Number 0 - 52280

SCOUT EXPLORATION, INC.
(Exact name of Small Business Issuer as specified in its charter)

Nevada
98-0504670
(State or other jurisdiction of incorporation)
(IRS Employer Identification No.)

609-475 Howe Street, Vancouver, BC V6C 2B3
(Address of principal executive offices)

(604) 608-6314
 (Issuer’s telephone number)

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 o   No þ

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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes o   No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
 
Large accelerated filer
o
Accelerated filer
o
 
Non-accelerated filer
o
Smaller reporting company
þ
 
 
 

 
 
 

 
 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o   Noþ
 
There are 13,947,000 common shares of Scout Exploration, Inc. issued and outstanding as of September 17, 2012.
 
 
 
PART I - FINANCIAL INFORMATION
 
 
Item 1.
Financial Statements
 
 
 

Scout Exploration, Inc.
(an Exploration Stage Enterprise)

Interim Financial Statements
(Unaudited) (presented in US dollars)

March 31, 2011
 
 
 
 
 
 
 







 
1

 
 
 
INDEX

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2

 
 
 
   
Scout Exploration, Inc.
           
(an Exploration Stage Company)
           
Interim Balance Sheets
           
(Unaudited) (Presented in US Dollars)
           
             
   
(Unaudited)
March 31,
2011
   
September 30,
2010
 
             
Assets
           
Current
           
Cash
  $ 2,581     $ 59  
   
                 
Liabilities
               
Current
               
Accounts payable and accrued liabilities (note 5)
  $ 304,632     $ 268,207  
Notes payable (note 4)
    20,738       14,336  
Due to related parties (note 5)
    22,778       22,778  
      348,148       305,321  
                 
Stockholders' Deficit
               
Preferred stock
               
Authorized: 1,000,000 shares with par value of $0.01
               
Issued: Nil (September 30, 2010 - Nil)
    -       -  
Common stock
               
Authorized: 50,000,000 shares with par value of $0.001
               
Issued: 8,947,000 (September 30, 2010 - 8,947,000)
    8,947       8,947  
Subscriptions received in advance
    4,100       4,100  
Subscriptions receivable
    (5,246 )     (5,246 )
Additional paid in capital
    996,853       996,853  
Deficit accumulated during the exploration stage
    (1,350,221 )     (1,309,916 )
      (345,567 )     (305,262 )
    $ 2,581     $ 59  
   
                 
Going Concern (Note 1)
               

 
 
 
 
The accompanying notes are an integral part of the interim financial statements.

 
3

 
 
 
   
Scout Exploration, Inc.
                                         
(an Exploration Stage Company)
                                     
Interim Statements of Stockholders' Deficit
                               
(Unaudited) (Presented in US Dollars)
                                     
                                           
From Incorporation on February 1, 1999 to March 31, 2011
 
                                           
                                 
            Deficit
       
   
Shares of
         
Additional
   
Subscriptions
         
       accumulated
 
   
common
   
Capital
   
paid-in
   
received
   
Subscriptions
   
during the
       
   
stock
   
stock
   
capital
   
in advance
   
receivable
   
exploration stage
   
Total
 
                                           
Balance February 1, 1999
    -     $ -     $ -     $ -     $ -     $ -     $ -  
Subscriptions received in advance
    -       -       -       37,100       -       -       37,100  
Net loss for the period
    -       -       -       -       -       (32,002 )     (32,002 )
Balance September 30, 1999
    -       -       -       37,100       -       (32,002 )     5,098  
Net loss for the year
    -       -       -       -       -       (3,829 )     (3,829 )
Balance September 30, 2000
    -       -       -       37,100       -       (35,831 )     1,269  
Issue common shares for cash
    3,700,000       3,700       33,300       (37,000 )     -       -       -  
Net loss for the year
    -       -       -       -       -       (3,754 )     (3,754 )
Balance September 30, 2001
    3,700,000       3,700       33,300       100       -       (39,585 )     (2,485 )
Net loss for the year
    -       -       -       -       -       (3,216 )     (3,216 )
Balance September 30, 2002
    3,700,000       3,700       33,300       100       -       (42,801 )     (5,701 )
Net loss for the year
    -       -       -       -       -       (3,120 )     (3,120 )
Balance September 30, 2003
    3,700,000       3,700       33,300       100       -       (45,921 )     (8,821 )
Net loss for the year
    -       -       -       -       -       (3,127 )     (3,127 )
Balance September 30, 2004
    3,700,000       3,700       33,300       100       -       (49,048 )     (11,948 )
Net loss for the year
    -       -       -       -       -       (10,776 )     (10,776 )
Balance September 30, 2005
    3,700,000       3,700       33,300       100       -       (59,824 )     (22,724 )
Issue common shares for cash
    1,700,000       1,700       83,300       -       -       -       85,000  
Issue common shares for mineral property
    500,000       500       24,500       -       -       -       25,000  
Net loss for the year
    -       -       -       -       -       (85,201 )     (85,201 )
Balance September 30, 2006
    5,900,000       5,900       141,100       100       -       (145,025 )     2,075  
Issuance of common stock 
                                                 
for cash and subscription receivable
    1,400,000       1,400       208,600       -       (75,000 )     -       135,000  
Net loss
    -       -       -       -       -       (131,869 )     (131,869 )
Balance September 30, 2007
    7,300,000       7,300       349,700       100       (75,000 )     (276,894 )     5,206  
Cash received for
                                                 
subscriptions receivable
    -       -       -       -       75,000       -       75,000  
Issuance of common stock
                                                 
for consulting services
    150,000       150       74,850       -       -       -       75,000  
Issuance of common stock for cash
    1,397,000       1,397       557,403       4,000       (23,000 )     -       539,800  
Net loss
    -       -       -       -       -       (792,378 )     (792,378 )
Balance September 30, 2008
    8,847,000       8,847       981,953       4,100       (23,000 )     (1,069,272 )     (97,372 )
Cash received for
                                                 
subscriptions receivable
    -       -       -       -       17,754       -       17,754  
Shares issued for  consulting services
    100,000       100       14,900       -       -       -       15,000  
Net loss
    -       -       -       -       -       (167,156 )     (167,156 )
Balance September 30, 2009
    8,947,000       8,947       996,853       4,100       (5,246 )     (1,236,428 )     (231,774 )
Net loss
    -       -       -       -       -       (73,488 )     (73,488 )
Balance September 30, 2010
    8,947,000       8,947       996,853       4,100       (5,246 )     (1,309,916 )     (305,262 )
Net loss
    -       -       -       -       -       (40,305 )     (40,305 )
Balance March 31, 2011
    8,947,000     $ 8,947     $ 996,853     $ 4,100     $ (5,246 )   $ (1,350,221 )   $ (345,567 )
   
 
 
The accompanying notes are an integral part of the interim financial statements.

 
4

 

   
Scout Exploration, Inc.
                             
(an Exploration Stage Company)
                             
Interim Statements of Operations
                             
(Unaudited) (Presented in US Dollars)
                             
                               
   
Cumulative from inception through
March 31,
   
Three months ended
March 31,
   
Six months ended
March 31,
 
   
2011
   
2011
   
2010
   
2011
   
2010
 
                               
Administrative expenses
                             
Accounting and audit
  $ 196,406     $ 2,000     $ 4,000     $ 4,000     $ 8,000  
Bank charges and interest
    16,686       820       1,921       2,499       1,961  
Consulting fees
    117,983       -       -       -       -  
Directors’ fees (note 5)
    110,000       6,000       6,000       12,000       12,000  
Filing fees, dues and subscriptions
    18,144       1,320       833       1,320       833  
Foreign exchange loss (gain)
    29,980       4,534       4,349       7,752       6,327  
Legal
    138,207       -       485       -       1,296  
Magazine rights
    5,100       -       -       -       -  
Management fees
    35,575       -       -       -       -  
Office and administration (note 5)
    176,200       11,534       10,291       11,534       20,431  
Promotion and travel
    57,144       -       -       -       -  
Transfer agent
    21,176       600       600       1,200       1,200  
      922,601       26,808       28,479       40,305       52,048  
                                         
Resource property expenses
                                       
Acquisition costs
    30,000       -       -       -       -  
Exploration costs
    860       -       -       -       -  
      30,860       -       -       -       -  
                                         
Loss from impairment of investment
    396,760       -       -       -       -  
                                         
Loss and comprehensive loss
  $ (1,350,221 )   $ (26,808 )   $ (28,479 )   $ (40,305 )   $ (52,048 )
                                         
Basic and diluted loss per share
          $ (0.00 )   $ (0.00 )   $ (0.00 )   $ (0.01 )
                                         
Basic and diluted weighted average
shares outstanding
      8,947,000       8,947,000       8,947,000       8,947,000  
   
 
 
 
 
 
 
 
The accompanying notes are an integral part of the interim financial statements.
 
 
5

 

 
   
Scout Exploration, Inc.
                 
(an Exploration Stage Company)
                 
Interim Statements of Cash Flows
                 
(Unaudited) (Presented in US Dollars)
                 
                   
   
Cumulative from inception through
March 31,
   
Six months ended
March 31,
 
   
2011
   
2011
   
2010
 
                   
Cash flows from operating activities
                 
Net loss
  $ (1,350,221 )   $ (40,305 )   $ (52,048 )
Adjustments to reconcile net loss to net cash
                       
used in operating activities
                       
Services settled by issuance of stock
    115,100       -       -  
Loss from impairment of investment
    396,760       -       -  
Expenses paid by subsidiary and forgiven
    20,480       -       -  
Unrealized foreign exchange
    16,821       5,593       5,593  
Accrued interest
    5,738       1,402       1,854  
Changes in operating assets and liabilities
                       
Accounts payable and accrued liabilities
    292,217       31,110       34,415  
      (503,105 )     (2,200 )     (10,186 )
                         
Cash flows from investing activities
                       
Acquisition of investment
    (417,240 )     -       -  
                         
Cash flows from financing activities
                       
Proceeds from Issuance of common stock
    889,554       -       -  
Advances from related parties
    22,778       -       1,050  
Proceeds from issuance of note
    15,000       5,000       10,000  
Repayment of bank indebtedness
    -       -       (282 )
      927,332       5,000       10,768  
                         
Effect of exchange rate changes on cash
    (4,406 )     (278 )     (278 )
                         
(Decrease) increase in cash
    2,581       2,522       304  
                         
Cash at beginning of the period
    -       59       -  
                         
Cash at end of the period
  $ 2,581     $ 2,581     $ 304  
                         
                         
Supplemental disclosure with respect to cash flows (Note 6)
                 
 
 
 
 
The accompanying notes are an integral part of the interim financial statements.
 
 
6

 
 

Scout Exploration, Inc.
Notes to the Interim Financial Statements
(Unaudited) (Presented in US dollars)

March 31, 2011

 
1.
Nature of operations and going concern
 
Scout Exploration, Inc. (the “Company”) was incorporated in the State of Nevada on February 1, 1999. The Company was initially engaged in the business of designing, developing and marketing educational products. On April 10, 2006 the Company changed its name from Virtual Curricula Corp. to Scout Exploration, Inc.
 
The Company’s continuing operations, as intended, are dependent on management’s ability to raise required funding through future equity issuances, asset sales or a combination thereof, which is not assured. These financial statements have been prepared on a going concern basis, which assumes the realization of assets and liquidation of liabilities in the normal course of business.
 
At March 31, 2011, the Company had suffered losses from exploration stage activities to date, and has a working capital deficit of $318,759. Although management is currently attempting to implement its business plan, and is seeking additional sources of equity or debt financing, there is no assurance these activities will be successful. These factors raise substantial doubt about the ability of the Company to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
2.
Basis of presentation
 
The interim financial statements presented herein have been prepared by the Company in accordance with the accounting policies in its audited financial statements for the year ended September 30, 2010 and should be read in conjunction with the notes thereto.
 
In the opinion of management, all adjustments (consisting only of normal recurring adjustments) which are necessary to provide a fair presentation of operating results for the interim period presented have been made. The results of operations for the period presented is not necessarily indicative of the results to be expected for the year.
 
Interim financial data presented herein are unaudited, except for the balance sheet at September 30, 2010, which has been derived from the audited financial statements at that date.
 
3.
Resource properties
 
On March 4, 2006 the Company signed a letter of agreement with a non-arms length private Canadian Corporation for a 100% interest in and to the Wheaton River AAV 1-9 Claims situated in the Whitehorse Mining District of the Yukon Territory, Canada. Terms of the purchase require a cash payment of $5,000 by March 31, 2006 (paid) and $20,000 on or before September 30, 2006 (subsequently deferred until such a time as the Company is able to secure financing), and the issuance of 500,000 common shares of the Company (issued at fair value of $0.05 per common share). The Vendor will retain a 3% net smelter royalty, up to 2% of which can be re-purchased for $2,000,000.
 

 

 
7

 
 

Scout Exploration, Inc.
Notes to the Interim Financial Statements
(Unaudited) (Presented in US dollars)

March 31, 2011

 
4.
Notes payable
 
Notes payable comprise two notes.
 
The first note has a principal amount of $10,000, bears interest at 25% per annum, and was due on June 21, 2010. As further consideration the lender will be issued shares of the Company’s capital stock having an aggregate value of $2,500. The principal amount, interest, and shares are all still outstanding subsequent to the period ended March 31, 2011.
 
The second note has a principal amount of $5,000, bears interest at 15% per annum, and is due on demand.
 
5.
Related party transactions
 
 
a)
During the period ended March 31, 2011, directors’ fees of $12,000 (2010 - $12,000) were paid or accrued to two Directors of the Company.
 
 
b)
During the period ended March 31, 2011, office and administration fees and management fees of $11,534 (2010 - $20,431) were paid or accrued to corporations controlled by a Director of the Company.
 
 
c)
At March 31, 2011, $132,213 (September 30, 2010 - $106,604) owed to Directors and corporations controlled by a Director of the Company was included in accounts payable. The balance is due on demand, has no specific terms of repayments, is non-interest bearing and is unsecured, and accordingly fair value cannot be reliably determined.
 
 
d)
As of March 31, 2011, advances due to directors in the amount of $22,778 (September 30, 2010 – $22,778) are outstanding. The advances are due on demand, have no specific terms of repayment, are non-interest bearing and unsecured, and accordingly fair value cannot be reliably determined.
 
The above transactions occurred in the normal course of operations and were measured at the exchange value which represented the consideration established and agreed to by the related parties.
 
6.
Supplemental disclosure with respect to cash flows
 
Supplemental cash flow information for the six months ended March 31 is as follows:
 
   
2011
   
2010
 
Interest paid
  $ -     $ -  
Income taxes paid
  $ -     $ -  



 
8

 
 

Scout Exploration, Inc.
Notes to the Interim Financial Statements
(Unaudited) (Presented in US dollars)

March 31, 2011

 
7.
Financial instruments and risk management
 
 
a)
Fair value
 
The Company’s financial instruments include cash and accounts payable and accrued liabilities. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments. The fair value of these financial instruments approximates their carrying values, unless otherwise noted.
 
 
b)
Foreign exchange risk
 
The Company expects to raise equity predominantly in United States dollars. The Company is conducting business in Canada where financial transactions are based on the Canadian dollar. As such, the Company is subject to risks due to fluctuations in the exchange rates for the U.S. and Canadian dollar. The Company does not enter into derivative financial instruments to mitigate its exposure to foreign currency risk.
 
At March 31, 2011 the Company had the following financial assets and liabilities denominated in Canadian dollars:
 
   
CDN Dollars
 
Cash
  $ 99  
Accounts payable and accrued liabilities
  $ 138,333  

At March 31, 2011 CDN dollar amounts were converted at a rate of 0.97 Canadian dollars to 1 US dollar.
 
8.
Subsequent events
 
On September 14, 2011 and as amended on July 31, 2012, the Company entered into a letter of intent with IDS Offshore Inc. (“IDS”) pursuant to which the Company may acquire the exclusive rights to certain intellectual property and patents surrounding the rapid oil boom project held and developed by IDS (the “Project”), for total cash consideration of $4,265,000 payable at various dates over a 3 year period commencing on July 31, 2012, and issuance of 5,000,000 common shares of the Company on signing the amended letter of intent (issued), and a total 7,500,000 common shares of the Company upon completion of various phases of the Project.

In accordance with ASC 855 Company management reviewed all material events through filing of these financial statements and there are no additional material subsequent events to report.

 
 
 
 

 
 
 
9

 
 
 
Item 2
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
 
Cautionary Note Regarding Forward Looking Statements
 
This report contains forward-looking statements that involve risks and uncertainties, including statements regarding our capital needs, business plans and expectations. Such forward-looking statements involve risks and uncertainties regarding the market price of precious and base metals, oil and gas, availability of funds, government regulations, operating costs, exploration costs, outcomes of exploration programs and other factors. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. Forward-looking statements can be identified by terminology such as “may”, “will”, “should”, “expect”, “plan”, “intend”, “anticipate”, “believe”, “estimate”, “predict”, “potential” or “continue”, the negative of such terms or other comparable terminology. Our actual results may differ materially. In evaluating these statements, you should consider various factors. These factors may cause actual results to differ materially from any forward-looking statement. While these forward-looking statements are made in good faith and reflect our current judgment regarding our business plans, actual results from our operations will almost always vary, sometimes materially, from any future performance suggested herein.
 
General
 
The following discussion and analysis should be read in conjunction with our financial statements for the six months ended March 31, 2011, and notes related thereto appearing elsewhere in this report.
 
Plan of Operations
 
Over the next year our plan of operations is to review our existing mineral property, evaluate potential acquisitions of additional mineral properties, and secure financing for the Company to carry out its operations.
 
As of March 31, 2011, we had $2,581 cash on hand and negative working capital of $345,567.
 
We will need to obtain additional financing in order to continue our plan of operations.
 
We believe that debt financing will not be a feasible alternative, as we do not have sufficient unencumbered tangible assets to secure any debt financing. We anticipate that additional financing will be equity financing from the sale of our common stock. However, we do not have any financing arranged and nor can we provide investors with any assurance that we will be able to raise sufficient funding from such potential equity financings.  In the absence of such financing, we will not be able to continue exploration or development of our mineral claims and our business plan will then fail. Even if we are successful in obtaining equity financing to fund exploration of our mineral claims and acquisition of additional mineral properties as well as other operational costs, there is no assurance of success from such exploration activities. In the event we do not continue to obtain additional financing, we will be forced to abandon our mineral claims.
 
 
 
10

 
 
 
Future Financing
 
We anticipate we will continue to rely on equity sales of our common stock to finance our business operations. Issuances of additional shares will result in dilution to our existing shareholders. There is no assurance that we will achieve any additional sales of our equity securities or arrange for debt or other financing to fund our planned exploration or development activities.
 
Results of Operations
 
General and administrative expenses have decreased from $52,048 for the six months ended March 31, 2010 to $40,305 for the six months ended March 31, 2011, mainly due to reduced office and administration expenses.
 
Our loss for the six months ended March 31, 2011 was $40,305 as compared to $52,048 for the six months ended March 31, 2010.
 
Item 3
Quantitative and Qualitative Disclosures about Market Risk
 
Not applicable.
 
Item 4
Controls and Procedures
 
Disclosure Controls and Procedures
 
As required by Rule 13a-15 of the Exchange Act, our principal executive officer and principal financial officer evaluated our company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this report. Based on this evaluation, these officers concluded that as of the end of the period covered by this report, these disclosure controls and procedures were not effective to ensure that the information required to be disclosed by our company in reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities Exchange Commission and include controls and procedures designed to ensure that such information is accumulated and communicated to our company's management, including our company's principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. The conclusion that our disclosure controls and procedures were not effective was due to the presence of the following material weaknesses in internal control over financial reporting which are indicative of many small companies with small staff: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines. Management anticipates that such disclosure controls and procedures will not be effective until the material weaknesses are remediated.
 
We plan to take steps to enhance and improve the design of our internal controls over financial reporting. During the period covered by this quarterly report on Form 10-Q, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we plan to implement the following changes during our fiscal year ending September 30, 2011: (i) appoint additional qualified personnel to address inadequate
 
 
 
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segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out above are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.
 
Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake.
 
Changes in Internal Control over Financial Reporting
 
During the quarter ended March 31, 2011, there were no changes in our internal control over financial reporting or in other factors that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
PART II – OTHER INFORMATION
 
 
Item 1
LEGAL PROCEEDINGS.
 
None.
 
Item 2
UNREGISTERED SALES OF EQUITY SECURITIES.
 
None.
 
Item 3
DEFAULTS UPON SENIOR SECURITIES.
 
None.
 
Item 4
(REMOVED AND RESERVED)
 
 
Item 5
OTHER INFORMATION.
 
None.
 
Item 6
EXHIBITS
 
 
 
 
 
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SIGNATURES
 
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.
 
Date:  September 17, 2012
 
SCOUT EXPLORATION, INC.


By: /s/ John Roozendaal                                       
Name: John Roozendaal
Title: President and Chief Executive Officer


By: /s/ Jason Walsh                                                
Name: Jason Walsh
Title: Treasurer and Principal Accounting Officer
 
 
 
 
 
 
 
 
 
 
 
 

 
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