Quarterly Report (10-q)

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 UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

(Mark One)

☒     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended October 31, 2021

 

or

 

☐     TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _________ to ___________

 

Commission File Number 333-146934

 

NORTHERN MINERALS & EXPLORATION LTD.

(Exact name of registrant as specified in its charter)

 

Nevada		98-0557171
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)
881 West State Road, Pleasant Grove, UT		84062
(Address of principal executive offices)		(Zip Code)

 

[phone]

(Registrant’s telephone number, including area code)

 

_____________________________________________________________

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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  ☒       No  ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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  ☒        No  ☐

 

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

 

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ☐   No  ☒

 

APPLICABLE ONLY TO CORPORATE ISSUERS

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. 76,052,338 common shares issued and December 15, 2021.

 

 

NORTHERN MINERALS & EXPLORATION LTD.

 

FORM 10-Q

 

For the Period ended October 31, 2021

 

TABLE OF CONTENTS

 

PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements		3
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations		14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		16
Item 4.	Controls and Procedures		16
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings		17
Item 1A.	Risk Factors		17
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		17
Item 3.	Defaults Upon Senior Securities		17
Item 4.	Mine Safety Disclosures		17
Item 5.	Other Information		17
Item 6.	Exhibits		18
	SIGNATURES		19

 

2

 

PART I – FINANCIAL INFORMATION

 

 Item 1. Financial Statements 

 

NORTHERN MINERALS & EXPLORATION LTD.

 

Condensed Consolidated Balance Sheets as of October 31, 2021 (unaudited) and July 31, 2021 (audited)		4
Condensed Consolidated Statements of Operations for the Three Months ended October 31, 2021 and 2020 (unaudited)		5
Condensed Consolidated Statement of Changes in Stockholders’ Equity (Deficit) for the Three Months ended October 31, 2021 and 2020 (unaudited)		6
Condensed Consolidated Statements of Cash Flows for the Three Months ended October 31, 2021 and 2020 (unaudited)		7
Notes to Condensed Consolidated Financial Statements (unaudited)		8

 

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NORTHERN MINERALS & EXPLORATION LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

		October 31,				July 31,
		2021				2021
ASSETS
Current Assets:
Cash		$	18,814			$	967
Total Current Assets			18,814				967
TOTAL ASSETS		$	18,814			$	967
LIABILITIES & STOCKHOLDERS’ DEFICIT
Current Liabilities:
Accounts payable		$	63,280			$	56,936
Accounts payable – related party			29,700				34,700
Accrued liabilities			341,928				348,344
Convertible debt			-				25,000
Loans payable			94,000				109,000
Loans payable – related party			23,210				23,210
Total Current Liabilities			552,118				597,190
TOTAL LIABILITIES			552,118				597,190
Commitments and Contingencies			-				-
Stockholders’ Deficit:
Preferred stock, $0.001 par value, 50,000,000 shares authorized; no shares issued			-				-
Common stock, $0.001 par value, 250,000,000 shares authorized; 81,052,338 shares issued, 76,052,338 shares outstanding as of October 31, 2021; 77,818,338 shares issued, 72,818,338 shares outstanding as of July 31, 2021			76,053				72,819
Common stock to be issued			-				18,000
Additional paid-in-capital			2,686,182				2,555,016
Accumulated deficit			(3,295,539	)			(3,242,058	)
Total Stockholders’ Deficit			(533,304	)			(596,223	)
TOTAL LIABILITIES & STOCKHOLDERS’ DEFICIT		$	18,814			$	967

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

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NORTHERN MINERALS & EXPLORATION LTD.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

		For the Three Months Ended October 31,
		2021				2020
Operating expenses:
Officer compensation		$	6,600			$	6,600
Consulting – related party			15,000				15,000
Professional fees			19,450				33,500
Mineral property expenditures			-				1,000
General and administrative expenses			10,447				5,121
Total operating expenses			51,497				61,221
Loss from operations			(51,497	)			(61,221	)
Other income (expense):
Interest expense			(1,984	)			(3,979	)
Other income			-				25,000
Total other (expense) income			(1,984	)			21,021
Loss before provision for income taxes			(53,481	)			(40,200	)
Provision for income taxes			-				-
Net Loss		$	(53,481	)		$	(40,200	)
Net loss per share from operations, basic and diluted		$	(0.00	)			(0.00	)
Weighted average number of common shares outstanding, basic and diluted			74,510,229				63,955,466

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

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NORTHERN MINERALS & EXPLORATION LTD.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

FOR THE THREE MONTHS ENDED OCTOBER 31, 2021 AND 2020

(Unaudited)

 

			Common			Common Stock				Additional Paid-in				Common Stock To				Accumulated
			Stock			Amount				Capital				be Issued				Deficit				Total
Balance, July 31, 2020			63,078,479			$	63,079			$	2,184,218			$	-			$	(2,999,090	)		$	(751,793	)
Common stock issued for cash			1,000,000				1,000				29,000				50,000				-				80,000
Net loss			-				-				-				-				(40,200	)			(40,200	)
Balance, October 31, 2020			64,078,479			$	63,079			$	2,213,218			$	50,000			$	(3,039,290	)		$	(711,993	)

 

			Common			Common Stock				Additional Paid-in				Common Stock To				Accumulated
			Stock			Amount				Capital				be Issued				Deficit				Total
Balance, July 31, 2021			72,818,338			$	72,819			$	2,555,016			$	18,000			$	(3,242,058	)		$	(596,223	)
Common stock issued for cash			50,000				50				4,950				-				-				5,000
Common stock issued for cash – related party			2,700,000				2,700				78,300				(18,000	)			-				63,000
Common stock issued for conversion of debt and accrued interest			484,000				484				47,916				-				-				48,400
Net loss			-				-				-				-				(53,481	)			(53,481	)
Balance, October 31, 2021			76,052,338			$	76,053			$	2,686,182			$	-			$	(3,295,539	)		$	(533,304	)

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

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NORTHERN MINERALS & EXPLORATION LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

		For the Three Months Ended October 31,
		2021				2020
Cash Flows from Operating Activities:
Net loss		$	(53,481	)		$	(40,200	)
Adjustments to reconcile net loss to net cash used in Operating activities:
Changes in Operating Assets and Liabilities:
Accounts payables and accrued liabilities			6,345				(24,678	)
Accounts payable – related party			(5,000	)			3,979
Accrued interest			1,983				-
Net cash used in operating activities			(50,153	)			(60,899	)
Cash Flows used in Investing Activities:			-				-
Cash Flows from Financing Activities:
Proceeds from loan payable			5,000				-
Repayment of loan payable			(5,000	)			(5,000	)
Proceeds from the sale of common stock			68,000				80,000
Net cash provided by financing activities			68,000				75,000
Net increase in cash			17,847				14,101
Cash at beginning of the year			967				6,840
Cash at end of the year		$	18,814			$	20,941
Cash paid during the period for:
Interest		$	-			$	-
Taxes		$	-			$	-
Supplemental disclosure of non-cash activity:
Conversion of debt and accrued interest		$	48,400			$	-

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

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Northern Minerals & Exploration Ltd.

Notes to Consolidated Financial Statements

October 31, 2021

(Unaudited)

 

NOTE 1 - ORGANIZATION AND BUSINESS OPERATIONS

 

Northern Minerals & Exploration Ltd. (the “Company”) is an emerging natural resource company operating in oil and gas production in central Texas and exploration for gold and silver in northern Nevada.

 

The Company was incorporated in Nevada on December 11, 2006 under the name Punchline Entertainment, Inc. On August 22, 2012, the Company’s board of directors approved an agreement and plan of merger to effect a name change of the Company from Punchline Entertainment, Inc. to Punchline Resources Ltd. On July 12, 2013, the stockholders approved an amendment to change the name of the Company from Punchline Resources Ltd. to Northern Mineral & Exploration Ltd. FINRA approved the name change on August 13, 2013.

 

On November 22, 2017, the Company created a wholly owned subsidiary, Kathis Energy LLC (“Kathis”) for the purpose of conducting oil and gas drilling programs in Texas.

 

On December 14, 2017, Kathis Energy, LLC and other Limited Partners, created Kathis Energy Fund 1, LP, a limited partnership created for raising investor funds.

 

On May 7, 2018, the Company created ENMEX LLC, a wholly owned subsidiary in Mexico, for the purposes of managing and operating its investments in Mexico including but not limited to the Joint Venture opportunity being negotiated with Pemer Bacalar on the 61 acres on the Bacalar Lagoon on the Yucatan Peninsula. There was no activity from inception to date.

 

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

 

Basis of presentation

The Company’s unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The accompanying unaudited condensed financial statements reflect all adjustments, consisting of only normal recurring items, which, in the opinion of management, are necessary for a fair statement of the results of operations for the periods shown and are not necessarily indicative of the results to be expected for the full year ending July 31, 2022. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended July 31, 2021.

 

Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates.

 

Cash and Cash Equivalents

The Company considers all cash accounts, which are not subject to withdrawal restrictions or penalties, and all highly liquid debt instruments purchased with a maturity of three months or less as cash and cash equivalents. The carrying amount of financial instruments included in cash and cash equivalents approximates fair value because of the short maturities for the instruments held. The Company had no cash equivalents as of October 31, 2021 and 2020.

 

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Kathis Energy LLC, Kathis Energy Fund 1, LLP and Enmex Operations LLC. All financial information has been prepared in conformity with accounting principles generally accepted in the United States of America. All significant intercompany transactions and balances have been eliminated.

 

Revenue Recognition

Revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration that an entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amount of revenue that is recorded reflects the consideration that the Company expects to receive in exchange for those goods. The Company applies the following five-step model in order to determine this amount: (i) identification of the promised goods in the contract; (ii) determination of whether the promised goods are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.

 

The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. Once a contract is determined to be within the scope of ASC 606 at contract inception, the Company reviews the contract to determine which performance obligations the Company must deliver and which of these performance obligations are distinct. The Company recognizes as revenues the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied or as it is satisfied. Generally, the Company’s performance obligations are transferred to customers at a point in time, typically upon delivery.

 

Accounts Receivable

Revenues that have been recognized but not yet received are recorded as accounts receivable. Losses on receivables will be recognized when it is more likely than not that a receivable will not be collected. An allowance for estimated uncollectible amounts will be recognized to reduce the amount of receivables to its net realizable value. The allowance for uncollectible amounts is evaluated quarterly.

 

Long Lived Assets

Property consists of mineral rights purchases as stipulated by underlying agreements and payments made for oil and gas exploration rights. Our company assesses the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. When we determine that the carrying value of long-lived assets may not be recoverable based upon the existence of one or more indicators of impairment and the carrying value of the asset cannot be recovered from projected undiscounted cash flows, we record an impairment charge. Our company measures any impairment based on a projected discounted cash flow method using a discount rate determined by management to be commensurate with the risk inherent in the current business model. Significant management judgment is required in determining whether an indicator of impairment exists and in projecting cash flows.

 

Mineral Property Acquisition and Exploration Costs

Mineral property acquisition and exploration costs are expensed as incurred until such time as economic reserves are quantified. Cost of lease, exploration, carrying and retaining unproven mineral lease properties are expensed as incurred. We have chosen to expense all mineral exploration costs as incurred given that it is still in the exploration stage. Once our company has identified proven and probable reserves in its investigation of its properties and upon development of a plan for operating a mine, it would enter the development stage and capitalize future costs until production is established. When a property reaches the production stage, the related capitalized costs will be amortized over the estimated life of the probable-proven reserves. When our company has capitalized mineral properties, these properties will be periodically assessed for impairment of value and any diminution in value.

 

Oil and Gas Properties

The Company follows the successful efforts method of accounting for its oil and gas properties. Under this method of accounting, all property acquisition costs and costs of exploratory and development wells are capitalized when incurred, pending determination of whether the well found proved reserves. If an exploratory well does not find proved reserves, the costs of drilling the well are charged to expense. The costs of development wells are capitalized whether those wells are successful or unsuccessful. Other exploration costs, including certain geological and geophysical expenses and delay rentals for oil and gas leases, are charged to expense as incurred. Maintenance and repairs are charged to expense, and renewals and betterments are capitalized to the appropriate property and equipment accounts. Depletion and amortization of oil and gas properties are computed on a well-by-well basis using the units-of-production method. Although the Company has recognized minimal levels of production and revenue, none of its property have proved reserves. Therefore, the Company’s properties are designated as unproved properties.

 

Unproved property costs are not subject to amortization and consist primarily of leasehold costs related to unproved areas. Unproved property costs are transferred to proved properties if the properties are subsequently determined to be productive and are assigned proved reserves. Proceeds from sales of partial interest in unproved leases are accounted for as a recovery of cost without recognizing any gain until all cost is recovered. Unproved properties are assessed periodically for impairment based on remaining lease terms, drilling results, reservoir performance, commodity price outlooks or future plans to develop acreage.

 

Asset Retirement Obligation

Accounting Standards Codification (“ASC”) Topic 410, Asset Retirement and Environmental Obligations (“ASC 410”) requires an entity to recognize the fair value of a liability for an asset retirement obligation in the period in which it is incurred. The net estimated costs are discounted to present values using credit-adjusted, risk-free rate over the estimated economic life of the oil and gas properties. Such costs are capitalized as part of the related asset. The asset is depleted on the equivalent unit-of-production method based upon estimates of proved oil and natural gas reserves. The liability is periodically adjusted to reflect (1) new liabilities incurred, (2) liabilities settled during the period, (3) accretion expense and (4) revisions to estimated future cash flow requirements. To date, the Company has very few operating wells. Currently, the Company has one working well. Because there is only one active well on the Ritchie Lease with a 24% working interest, the Company estimates the asset retirement obligation to be trivial and has not recorded an ARO liability.

 

Basic and Diluted Earnings Per Share

Net income (loss) per common share is computed pursuant to ASC 260-10-45, Earnings per Share—Overall—Other Presentation Matters. Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock and potentially outstanding shares of common stock during the period.

 

For the three months ended October 31, 2021, the Company had 1,911,330 of potentially dilutive shares from warrants. For the three months ended October 31, 2020, the Company had 2,564,365 of potentially dilutive shares. The shares consisted of common shares and warrants from convertible debt of 1,709,397 and 854,968, respectively.

 

Recently issued accounting pronouncements

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)—Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. ASU 2020-06 reduces the number of accounting models for convertible debt instruments and convertible preferred stock. For convertible instruments with conversion features that are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging, or that do not result in substantial premiums accounted for as paid-in capital, the embedded conversion features no longer are separated from the host contract. ASU 2020-06 also removes certain conditions that should be considered in the derivatives scope exception evaluation under Subtopic 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity, and clarify the scope and certain requirements under Subtopic 815-40. In addition, ASU 2020-06 improves the guidance related to the disclosures and earnings-per-share (EPS) for convertible instruments and contract in entity’s own equity. ASU 2020-06 is effective for public business entities that meet the definition of a Securities and Exchange Commission (SEC) filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Board specified that an entity should adopt the guidance as of the beginning of its annual fiscal year. The Company is currently evaluation the impact this ASU will have on its consolidated financial statements.

 

The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations. 

 

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NOTE 3 - GOING CONCERN

 

The accompanying financial statements are prepared and presented on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Accordingly, they do not include any adjustments relating to the realization of the carrying value of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. Since inception to October 31, 2021, the Company has an accumulated deficit of $3,295,539. The Company intends to fund operations through equity financing arrangements, which may be insufficient to fund its capital expenditures, working capital and other cash requirements for the next twelve months. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

NOTE 4 - OIL AND GAS PROPERTIES

 

Active Projects:

 

The Company currently has one active lease. We hold a 24% working interest in one producing well (“Concho Richey #1”) on the lease and a 100% working interest in the remainder of the 206-acre J. E Richey Lease.

 

NOTE 5 – WINNEMUCCA MOUNTAIN PROPERTY

 

On September 14, 2012, we entered into an option agreement with AHL Holdings Ltd., and Golden Sands Exploration Inc. (“Optionors”), wherein we acquired an option to purchase an 80% interest in and to certain mining claims, which claims form the Winnemucca Mountain Property in Humboldt County, Nevada (“Property”). This property currently is comprised of 138 unpatented mining claims covering approximately 2,700 acres.

 

On July 23, 2018, the Company entered into a New Option Agreement with the Optioners. This agreement provided for the payment of $25,000 and the issuance of 3,000,000 shares of the Company’s common stock and work commitments. The Company issued the shares and made the initial payment of $25,000 per the terms of the July 31, 2018 agreement. The second payment of $25,000 per the terms of the agreement was not paid when it became due on August 31, 2018 causing the Company to default on the terms of the July 23, 2018 agreement.

 

On March 25, 2019 the Company entered into a New Option Agreement with the Optionors. As stated in the New Option Agreement the Company has agreed to certain terms and conditions to have the right to earn an 80% interest in the Property, these terms include cash payments, issuance of common shares of the Company and work commitments. 

 

The Company’s firm commitments per the March 25, 2019 option agreement total $381,770 of which cash payments total $181,770 and a firm work commitment of $200,000. These commitments include payments for rentals payable to BLM and also for the staking of new claims adjoining the existing claims. The work commitment was to be conducted prior to December 31, 2020. As of October 31, 2021 and July 31, 2021, the Company has accounted for $285,453 and $285,453, respectively, in its accrued liabilities.

 

The Company has received notice, effective October 27, 2020, that its Option Agreement to earn an interest in the Winnemucca Mountain Gold Property has been terminated for being in default of certain terms and conditions of the Agreement. Management is in discussions with the principals of the Winnemucca property to resolve any outstanding obligations.

 

During the year ended July 31, 2021, the Company received notice of the current amount due resulting in the reduction of the liability to $285,453. As a result, the Company recognized a gain on debt forgiveness of $23,616.

 

The Company does not fully agree with the amount due and is working to resolve the issue.

 

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NOTE 6 - CONVERTIBLE DEBT

 

On October 20, 2017, the Company executed a convertible promissory note for $25,000 with a third party. The note accrues interest at 6%, matures in two years and is convertible into shares of common stock at maturity, at a minimum of $0.10 per share, at the option of the holder. During the three months ended October 31, 2021, the note holder converted the $25,000 of principal and $6,000 of interest into 310,000 shares of common stock.

 

NOTE 7 – LOANS PAYABLE

 

On April 16, 2017, the Company executed a promissory note for $15,000 with a third party. The note matures in two years and interest is set at $3,000 for the full two years. As of October 31, 2021, there is $15,000 and $5,250 of principal and accrued interest, respectively, due on this loan. As of July 31, 2021, there is $15,000 and $4,875 of principal and accrued interest, respectively, due on this loan. This loan is currently in default.

 

On June 11, 2020, a third party loaned the Company $14,000. On September 9, 2020, the Company repaid $5,000 on this loan. On March 3, 2021, the party loaned another $5,000 to the Company. The loan is unsecured, non-interest bearing and due on demand.

 

As of October 31. 2021, the Company owed $5,000 to a third party. The loan is unsecured, non-interest bearing and due on demand.

 

During the year ended July 31, 2020, a third party loaned the Company $15,000. The loan is unsecured, bears interest at 8% per annum and matures on September 1, 2021. During the three months ended October 31, 2021, the note holder converted the $15,000 of principal and $2,400 of interest into 174,000 shares of common stock.

 

During the year ended July 31, 2020, a third party loaned the Company $60,000. The loan is unsecured, bears interest at 8% per annum and matures on September 1, 2021. As of October 31, 2021, there is $9,955 of interest accrued on this note.

 

NOTE 8 - COMMON STOCK

 

During the three months ended October 31, 2021, the Company sold 50,000 shares of common stock at $0.10 per share for total cash proceeds of $5,000.

 

As discussed in Note 6 a note holder converted their note in full into 310,000 shares of common stock.

 

As discussed in Note 7 a note holder converted their note in full into 174,000 shares of common stock.

 

Refer to Note 11 for stock issued to related parties.

 

NOTE 9 – WARRANTS

 

The Company issued 1,911,330 warrants as part of a debt conversion (Note 6). The warrants were evaluated for purposes of classification between liability and equity. The warrants do not contain features that would require a liability classification and are therefore considered equity. The Black Scholes pricing model was used to estimate the fair value of $72,631 of the Warrants with the following inputs: stock price of $0.04, exercise price of $0.08, 2-year term, volatility of 313%, and a risk free rate of 0.19.

 

		Number of Warrants				Weighted Average Exercise Price				Weighted Average Remaining Contract Term
Exercisable at July 31, 2020			500,000				0.15				.27
Granted			1,911,330				.08				2
Expired			(500,000	)			0.15				—
Exercised			—				—				—
Exercisable at July 31, 2021			1,911,330			$	0.15				2
Granted			—				—				—
Expired			—				—				—
Exercised			—				—				—
Exercisable at October 31, 2021			1,911,330			$	0.15				1.75

 

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NOTE 10 - COMMITTEMENTS AND CONTINGENCIES

 

On April 13, 2021, the Company entered into an agreement with Foster S. Zeiders, one of the owners of the Calihoma Partners LLC (“Fosters’). Per the terms of the agreement Foster is willing to transfer to NMEX Natural Gas LLC, (a subsidiary of the Company still to be created), all of his interest, including but not limited to a 35% back-in after payout interest in Calihoma Partners LLC which has 60% ownership in West Lenapah Project including the assets and project definition as described in the agreement. Foster hereby agrees to transfer one hundred (100%) percent of his membership interests in Calihoma Partners LLC, in exchange for 5,000,000 shares of common stock to be issued to him and an additional 5,000,000 shares to be issued pursuant to a specified timeframe.

 

During the initial period of this Agreement if either party hereto for reasonable cause determines that membership interests in Calihoma Partners LLC should no longer be held by NMEX Natural Gas LLC. Foster shall exchange his shares in Northern for the membership interests in NMEX Natural Gas LLC, and Northern will convey such membership interests to Foster in exchange for his stock in Northern, and NMEX Natural Gas LLC shall become wholly owned by Foster. Foster shall serve as Manager of NMEX Natural Gas LLC until Northern determines to convey the interests in Calihoma Partners or one year whichever is shorter. As of July 31, 2021, the initial 5,000,000 shares of common stock have been issued but are being held by the transfer agent pending final confirmation that the agreement is finalized.

 

NOTE 11 - RELATED PARTY TRANSACTIONS

 

For the three months ended October 31, 2021 and 2020, total payments of $20,000 and $15,000, respectively, were made to Noel Schaefer, a Director of the Company, for consulting services. As of October 31, 2021, and July 31, 2021 there is $27,500 and $32,500 credited to accounts payable.

 

As of October 31, 2021 and July 31, 2021, there is $2,200 and $2,200, respectively, credited to accounts payable for amounts due to Rachel Boulds, CFO, for consulting services.

 

On September 25, 2018, the Company executed a loan agreement with the wife of the CEO for $6,800. The loan was to be repaid by December 15, 2018, with an additional $680 to cover interest and fees. On October 10, 2018, the Company executed another loan agreement for $15,000. The loan was to be repaid by December 15, 2018, with an additional $1,500 to cover interest and fees. As of October 31, 2021, the Company owes $23,210 on this loan. This loan is in default.

 

Victor Miranda, a Director of the Company is also President and owner of Labrador Capital SAPI DE CV (“Labrador”), a major shareholder of the Company owning 8.8% of its issued and outstanding shares. The Company has entered into a Memorandum of Understanding with Labrador to jointly pursue developing real estate projects in Mexico.  As of the date of this report no projects have been identified to jointly pursue.  In the event of a decision to go forward with Labrador, Victor Miranda will abstain from voting to avoid any conflict of interest.

 

During the year ended July 31, 2021, Mr. Miranda purchased 600,000 shares of common stock at $0.03 per share for $18,000. The 600,000shares were issued during the three months ended October 31, 2021.

 

During the three months ended October 31, 2021, Mr. Miranda purchased 2,100,000 shares of common stock at $0.03 per share for $63,000.

 

NOTE 12 - SUBSEQUENT EVENTS

 

Management has evaluated subsequent events pursuant to the requirements of ASC Topic 855, from the balance sheet date through the date the financial statements were available to be issued, and has determined that no material subsequent events exist.

 

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 

 

Forward-Looking Statements

 

This report on Form 10-Q contains certain forward-looking statements. All statements other than statements of historical fact are “forward-looking statements” for purposes of these provisions, including any projections of earnings, revenues, or other financial items; any statements of the plans, strategies, and objectives of management for future operation; any statements concerning proposed new products, services, or developments; any statements regarding future economic conditions or performance; statements of belief; and any statement of assumptions underlying any of the foregoing. Such forward-looking statements are subject to inherent risks and uncertainties, and actual results could differ materially from those anticipated by the forward-looking statements.

 

These forward-looking statements involve significant risks and uncertainties, including, but not limited to, the following: competition, promotional costs and the risk of declining revenues. Our actual results could differ materially from those anticipated in such forward-looking statements as a result of a number of factors. These forward-looking statements are made as of the date of this filing, and we assume no obligation to update such forward-looking statements. The following discusses our financial condition and results of operations based upon our unaudited financial statements which have been prepared in conformity with accounting principles generally accepted in the United States. It should be read in conjunction with our financial statements and the notes thereto included elsewhere herein.

 

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

 

As used in this quarterly report, the terms “we”, “us”, “our” and “our company” mean Northern Minerals & Exploration Ltd., unless otherwise indicated.

 

General Overview

 

We are an emerging natural resource company operating in oil and gas production in central Texas and exploration for gold and silver in northern Nevada.

 

Current Business

 

Refer to NOTE 4 and NOTE 5 for property information.

 

Results of Operations

 

Results of Operations for the Three Months Ended October 31, 2021 and 2020

 

We had not revenue for the three months ended October 31, 2021 and 2020.

 

Officer compensation

Officer compensation was $6,600 and $6,600 for the three months ended October 31, 2021 and 2020, respectively. Officer compensation is paid to our CFO.

 

Consulting – related party

Consulting – related party services were $15,000 and $15,000 for the three months ended October 31, 2021 and 2020, respectively. Fees of $5,000 per month are paid to Noel Schaefer, Director, but are recorded as consulting fees.

 

Professional fees

Professional fees were $19,450 and $33,500 for the three months ended October 31, 2021 and 2020, respectively, a decrease of $14,050 or 41%. Professional fees generally consist of legal, audit and accounting expense. The decrease can be attributed to a decrease in audit fees billed during the period.

 

Mineral property expenditures

Mineral property expenditures were $0 and $1,000 for the three months ended October 31, 2021 and 2020, respectively, a decrease of $1,000. The decrease in in the current period can be attributed to a decrease in expenditures while the Company pursues additional funding.

 

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General and administrative

General and administrative expense was $10,447 and $5,121 for the three months ended October 31, 2021 and 2020, respectively, an increase of $5,326 or 104%. The increase is mainly due to an increase in transfer agent fees.

 

Interest expense

During the three months ended October 31, 2021 and 2020 we had interest expense of $1,984 and $3,979, respectively.

 

Other income

During the three months ended October 31, 2020, we had other income of $25,000 that was received as a one-time payment pursuant to the terms of a joint venture agreement the we entered into.

 

Net Loss

For the three months ended October 31, 2021, we had a net loss of $53,481 as compared to a net loss of $40,200 for the three months ended October 31, 2020, an increase of $1,995, or 33%.

 

Liquidity and Financial Condition

 

Operating Activities

Cash used by operating activities was $50,153 for the three months ended October 31, 2021. Cash used for operating activities was $60,899 for the three months ended October 31, 2020.

 

Financing Activities

Net cash provided by financing activities was $68,000 for the three months ended October 31, 2021. We received $68,000 from the sale of our common stock.  Net cash provided by financing activities was $75,000 for the three months ended October 31, 2020. In the prior period we repaid $5,000 of a loan payable and sold common stock from cash proceeds of $80,000.

 

We had the following loans outstanding as of October 31, 2021:

 

On April 16, 2017, the Company executed a promissory note for $15,000 with a third party. The note matures in two years and interest is set at $3,000 for the full two years. As of October 31, 2021, there is $15,000 and $5,250 of principal and accrued interest, respectively, due on this loan. As of July 31, 2021, there is $15,000 and $4,875 of principal and accrued interest, respectively, due on this loan. This loan is currently in default.

 

On June 11, 2020, a third party loaned the Company $14,000. On September 9, 2020, the Company repaid $5,000 on this loan. On March 3, 2021, the party loaned another $5,000 to the Company. The loan is unsecured, non-interest bearing and due on demand.

 

As of October 31, 2021, the Company owed $5,000 to a third party. The loan is unsecured, non-interest bearing and due on demand.

 

During the year ended July 31, 2020, a third party loaned the Company $60,000. The loan is unsecured, bears interest at 8% per annum and matures on September 1, 2021. As of October 31, 2021, there is $9,955 of interest accrued on this note.

 

We will require additional funds to fund our budgeted expenses over the next twelve months. These funds may be raised through equity financing, debt financing, or other sources, which may result in further dilution in the equity ownership of our shares. There is still no assurance that we will be able to maintain operations at a level sufficient for an investor to obtain a return on his investment in our common stock. Further, we may continue to be unprofitable. We need to raise additional funds in the immediate future in order to proceed with our budgeted expenses.

 

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Off-Balance Sheet Arrangements

 

We have no 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 of operations, liquidity, capital expenditures or capital resources that is material to stockholders.

 

Critical Accounting Policies

 

Refer to Note 2 of our financial statements contained elsewhere in this Form 10-Q for a summary of our critical accounting policies and recently adopting and issued accounting standards.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk 

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and, as such, are not required to provide the information under this Item.

 

Item 4. Controls and Procedures 

 

We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”), 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 Securities and Exchange Commission's rules and forms and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer (our principal executive officer, principal financial officer and principal accounting officer), as appropriate to allow timely decisions regarding required disclosure.

 

We carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and chief financial officer (our principal executive officer, principal financial officer and principal accounting officer), of the effectiveness of the design and operation of our disclosure controls and procedures as of quarter covered by this report. Based on the evaluation of these disclosure controls and procedures the chief executive officer and chief financial officer (our principal executive officer, principal financial officer and principal accounting officer) concluded that our disclosure controls and procedures were not effective.

 

Changes in Internal Controls

 

During the quarter covered by this report there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 

 

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PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings

 

We know of no material, existing or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our company.

 

Item 1A. Risk Factors

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and, as such, are not required to provide the information under this Item.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

During the three months ended October 31, 2021, the Company sold 50,000 shares of common stock at $0.10 per share for total cash proceeds of $5,000.

 

During the three months ended October 31, 2021, the Company issued 484,000 shares for conversion of debt.

 

During the year ended July 31, 2021, Mr. Miranda purchased 600,000 shares of common stock at $0.03 per share for $18,000. The 600,000 shares were issued during the three months ended October 31, 2021.

 

During the three months ended October 31, 2021, Mr. Miranda purchased 2,100,000 shares of common stock at $0.03 per share for $63,000.

 

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

None.

 

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Item 6. Exhibits

 

Exhibit Number		Exhibit Description
31.1*		Section 302 Certification under Sarbanes-Oxley Act of 2002.
31.2*		Section 302 Certification under Sarbanes-Oxley Act of 2002.
32.1*		Section 906 Certification under Sarbanes-Oxley Act of 2002.
(101)**		Interactive Data File
101.INS		iXBRL Instance Document
101.SCH		iXBRL Taxonomy Extension Schema Document.
101.CAL		iXBRL Taxonomy Extension Calculation Link base Document.
101.DEF		iXBRL Taxonomy Extension Definition Link base Document.
101.LAB		iXBRL Taxonomy Extension Label Link base Document.
101.PRE		iXBRL Taxonomy Extension Presentation Link base Document.

_________________ 

*	(a) Filed herewith.

 

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SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

		NORTHERN MINERALS & EXPLORATION LTD.
		(Registrant)
Dated:  December 15, 2021		/s/ Ivan Webb
		Ivan Webb
		Chief Executive Officer
		/s/ Noel Schaefer
		Noel Schaefer
		Chief Operating Officer and Director
		/s/ Rachel Boulds
		Rachel Boulds
		Chief Financial Officer
		/s/ Victor Miranda
		Victor Miranda
		Director

 

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