Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q/A
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 2009
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________________ To ______________________
Commission file number 000-53462
BUCKINGHAM EXPLORATION INC.
(Exact name of registrant as specified in its charter)
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Nevada
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98-054-3851
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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Suite 418-831 Royal Gorge Blvd.
Cañon City, CO 81212, USA
(Address of principal executive offices)
(604) 737-0203
(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 require to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ 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 definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
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 No þ
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Check whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes o No o
APPLICABLE ONLY TO CORPORATE ISSUERS
As of October 20, 2009 the registrant’s outstanding common stock consisted of 45,026,850 shares.
EXPLANATORY NOTE
This Form 10-Q/A amends the Form 10-Q for the three months ended August 31, 2009 filed by Buckingham Exploration Inc. (“we”, “us”, “our” or the “Company”) with the Securities and Exchange Commission on October 20, 2009 and restates its unaudited financial statements for the three months ended August 31, 2009, the notes thereto and related disclosure, to reflect an adjustment to the accounting and disclosure of the settlement of the convertible debentures issued by us on September 24, 2008. As a result, the unaudited interim financial statements included in the originally filed Form 10-Q should not be relied upon.
In addition, this Form 10-Q/A amends the originally filed Form 10-Q to clarify certain disclosure relating to the business of the Company upon disposal of its subsidiaries and to correct certain typographical errors. These errors were discovered during the course of the review of the Company’s disclosure in connection with the recent restatements of its financial statements as disclosed in the Form 8-K filed on September 21, 2010.
On September 24, 2008, we entered into secured convertible debenture purchase agreements with three investors pursuant to which we sold three convertible debentures to the investors in the aggregate amount of $500,000 and we also granted to them warrants to purchase up to an aggregate of 12,500 shares of our common stock at an exercise price of $40 per share exercisable for a period of 2 years. The debentures accrued interest at a rate of 10% per annum and were convertible into shares of our common stock at a price of $20 per share. As collateral security, we granted the investors a security interest in all the right, title and interest of all of our present and future assets.
On August 27, 2009, we entered into a settlement agreement with one of the debentureholders, Regal Uranium Inc. (“Regal”), subsequent to an event of default under the terms of the debentures, to settle the outstanding debenture in the amount of $150,000 plus accrued interest. Under the terms of the settlement agreement, we agreed to transfer all of our interest in our wholly-owned subsidiaries, Hyde Park Uranium Inc. and Alpha Beta Uranium Inc., to Regal along with all of our property and equipment and intellectual property rights related to these properties. Regal agreed to pay us $50,000 and had the other two debentures in the aggregate amount of $350,000 assigned to it.
An amount receivable from Regal of $32,970 should have been recognized in connection with the settlement agreement. In addition, Regal should have been considered a related party as the sole director and officer of the Company was a director of Regal and owned 15% of the outstanding common stock of Regal at the time of the transaction. Accordingly, a gain on discontinued operations from the debenture settlement of $453,987 should have been recorded as a capital transaction in additional paid-in capital and the unaudited financial statements and the notes thereto included herein have been restated to reflect this adjustment and disclosure of the related party transaction, and corresponding amendments have been made to the discussion under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” relating to the amount receivable and debentures.
On June 5, 2009, we entered into agreements with two debenture holders, Regal and Joerg Gruber, to issue a total of 2,367,400 restricted common shares at $0.01 per share in full consideration of $23,674 in interest accrued up to May 31, 2009. The settlement of accrued interest was recorded to equity as common stock subscribed. The shares have not yet been issued.
Accordingly, the interest payable of $23,674 on the convertible debt to Regal and Joerg Gruber should have been treated as a liability, and the unaudited financial statements and the notes thereto included herein have been restated to reflect this adjustment and disclosure of the related party transaction, and corresponding amendments have been made to the discussion under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” relating to the liabilities.
Except as stated above, no other information has been changed from the originally filed Form 10-Q and this Form 10-Q/A does not reflect events occurring after the filing of the Form 10-Q.
The Company has included new certifications of its sole officer pursuant to Sections 302 and 906 of the Sarbanes Oxley Act with this Form 10-Q/A.
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Table of Contents
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2
The unaudited interim consolidated financial statements of Buckingham Exploration Inc. (the “Company”, “Buckingham”, “we”, “our”, “us”) follow. All currency references in this report are in US dollars unless otherwise noted.
Buckingham Exploration Inc.
(An Exploration Stage Company)
August 31, 2009
(Expressed in US dollars)
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Balance Sheets
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F-1 |
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Statements of Operations
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F-2 |
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Statements of Cash Flows
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F-3 |
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Notes to the Financial Statements
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F-4 |
3
Buckingham Exploration Inc.
(An Exploration Stage Company)
Balance Sheets
(Expressed in US dollars)
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August 31,
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May 31,
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|||||||
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2009
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2009
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$
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$
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|||||||
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(unaudited)
(As Restated –
Note 11)
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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
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539 | 3,272 | ||||||
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Receivables (Note 4)
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35,455 | 2,188 | ||||||
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Prepaid expenses and deposits
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– | 1,073 | ||||||
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Total Current Assets
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35,994 | 6,533 | ||||||
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Net Assets of Discontinued Operations (Note 9)
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– | 18,039 | ||||||
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Total Assets
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35,994 | 24,572 | ||||||
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LIABILITIES AND STOCKHOLDERS’ DEFICIT
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Current Liabilities
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Accounts payable (Note 4)
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203,757 | 154,993 | ||||||
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Accrued liabilities (Notes 4 and 6)
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13,985 | 36,291 | ||||||
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Secured convertible debentures (Note 6)
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– | 411,407 | ||||||
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Total Current Liabilities
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217,742 | 602,691 | ||||||
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Commitments and Contingencies (Notes 1 and 10)
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Stockholders’ Deficit
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Preferred Stock, 20,000,000 shares authorized, $0.0001 par value,
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None issued and outstanding
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– | – | ||||||
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Common Stock, 80,000,000 shares authorized, $0.0001 par value
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45,026,850 and 44,012,250 shares issued and outstanding, respectively
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4,503 | 4,401 | ||||||
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Additional Paid-in Capital
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6,943,761 | 6,479,730 | ||||||
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Deficit Accumulated During the Exploration Stage
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(7,130,012 | ) | (7,062,250 | ) | ||||
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Total Stockholders’ Deficit
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(181,748 | ) | (578,119 | ) | ||||
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Total Liabilities and Stockholders’ Deficit
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35,994 | 24,572 | ||||||
The accompanying notes are an integral part of these financial statements
F-1
Buckingham Exploration Inc.
(An Exploration Stage Company)
Statements of Operations
(Expressed in US dollars)
(Unaudited)
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For the
Three Months
Ended
August 31,
2009
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For the
Three Months
Ended
August 31,
2008
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Accumulated
from April 4,
2006
(Date of
Inception) to
August 31,
2009
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| $ | $ | $ | ||||||||||
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(As Restated –
Note 11)
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(As Restated –
Note 11)
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|||||||||||
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Revenue
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– | – | – | |||||||||
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Expenses
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General and administrative (Note 4)
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30,437 | 138,438 | 1,623,001 | |||||||||
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Professional fees
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12,517 | 33,995 | 389,947 | |||||||||
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Total Expenses
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42,954 | 172,433 | 2,012,948 | |||||||||
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Net Loss Before Other Income (Expenses)
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(42,954 | ) | (172,433 | ) | (2,012,948 | ) | ||||||
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Other Income (Expenses)
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Interest income
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– | 24 | 2,276 | |||||||||
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Miscellaneous income
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– | – | 1,467 | |||||||||
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Interest expense
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(12,055 | ) | (5,102 | ) | (58,922 | ) | ||||||
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Accretion of convertible debenture discount
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(8,433 | ) | – | (31,396 | ) | |||||||
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Total Other Income (Expenses)
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(20,488 | ) | (5,078 | ) | (86,575 | ) | ||||||
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Net Loss From Continuing Operations
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(63,442 | ) | (177,511 | ) | (2,099,523 | ) | ||||||
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Loss from Discontinued Operations (Note 9)
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(4,320 | ) | (61,821 | ) | (5,030,489 | ) | ||||||
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Net Loss
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(67,762 | ) | (239,332 | ) | (7,130,012 | ) | ||||||
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Net Loss Per Share – Basic and Diluted
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Net Loss Before Discontinued Operations
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(0.00 | ) | (0.01 | ) | ||||||||
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Discontinued Operations
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(0.00 | ) | (0.00 | ) | ||||||||
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Net Loss
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(0.00 | ) | (0.01 | ) | ||||||||
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Weighted Average Shares Outstanding
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44,972,000 | 41,112,512 | ||||||||||
The accompanying notes are an integral part of these financial statements
F-2
Buckingham Exploration Inc.
(An Exploration Stage Company)
Statements of Cash Flows
(Expressed in US dollars)
(Unaudited)
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For the
Three Months
Ended
August 31,
2009
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For the
Three Months
Ended
August 31,
2008
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Accumulated
from April 4,
2006
(Date of
Inception) to
August 31,
2009
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||||||||||
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$
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$
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$
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||||||||||
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(As Restated –
Note 11)
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(As Restated –
Note 11)
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Operating Activities
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Net loss for the period
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(67,762 | ) | (239,332 | ) | (7,130,012 | ) | ||||||
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Adjustments to reconcile net loss to net cash used in operating activities
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Accretion of convertible debenture discount
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8,433 | – | 31,396 | |||||||||
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Amortization
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– | – | – | |||||||||
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Common shares issued for services
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– | – | 32,000 | |||||||||
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Impairment of mineral property costs
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– | – | 4,530,125 | |||||||||
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Stock-based compensation
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33,820 | 35,229 | 609,940 | |||||||||
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Loss from discontinued operations
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1,087 | 2,946 | 37,785 | |||||||||
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Changes in operating assets and liabilities
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Accounts payable and accrued liabilities
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15,086 | 9,934 | 187,908 | |||||||||
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Other receivables
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(297 | ) | 2,966 | (2,485 | ) | |||||||
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Prepaid expenses
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– | (14,186 | ) | (1,043 | ) | |||||||
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Due to related parties
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– | – | (12,083 | ) | ||||||||
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Net Cash Used in Operating Activities
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(9,633 | ) | (202,443 | ) | (1,716,469 | ) | ||||||
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Investing Activities
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Acquisition of mineral properties
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– | – | (2,230,125 | ) | ||||||||
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Acquisition of property and equipment
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– | – | (84,733 | ) | ||||||||
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Proceeds from disposal of property and equipment
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– | – | 29,996 | |||||||||
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Net Cash Used in Investing Activities
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– | – | (2,284,862 | ) | ||||||||
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Financing Activities
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Advances from related parties
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6,900 | 135,841 | 187,445 | |||||||||
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Proceeds from note payable
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– | – | 23,362 | |||||||||
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Repayment of note payable
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– | – | (23,362 | ) | ||||||||
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Proceeds from loans payable
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– | 85,000 | 375,000 | |||||||||
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Repayment of loans payable
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– | – | (25,000 | ) | ||||||||
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Proceeds from the issuance of common stock
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– | – | 3,661,575 | |||||||||
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Proceeds from common stock subscription
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– | – | 10,350 | |||||||||
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Share issuance costs
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– | – | (207,500 | ) | ||||||||
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Net Cash Provided by Financing Activities
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6,900 | 220,841 | 4,001,870 | |||||||||
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(Decrease) Increase In Cash
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(2,733 | ) | 18,398 | 539 | ||||||||
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Cash - Beginning of Period
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3,272 | 10,969 | – | |||||||||
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Cash – End of Period
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539 | 29,367 | 539 | |||||||||
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Non-Cash Investing and Financing Activities:
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Convertible debt issued to settle loans payable
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– | – | 350,000 | |||||||||
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Convertible debt issued to settle related party advances
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– | – | 150,000 | |||||||||
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Common stock issued for mineral property acquisitions
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– | – | 2,200,000 | |||||||||
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Common stock issued for finders fee
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– | – | 100,000 | |||||||||
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Common shares issued for services
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– | – | 172,000 | |||||||||
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Disposal of property and equipment for debt settlement
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16,952 | – | 16,952 | |||||||||
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Settlement of debt
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453,987 | – | 453,987 | |||||||||
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Supplemental Disclosures
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||||||||||||
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Interest paid
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– | – | 21,897 | |||||||||
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Income tax paid
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– | – | – | |||||||||
The accompanying notes are an integral part of these financial statements
F-3
Buckingham Exploration Inc.
(An Exploration Stage Company)
Notes to Financial Statements
(Expressed in US dollars)
(Unaudited)
1. Nature of Operations and Continuance of Business
Buckingham Exploration Inc. (the “Company”) was incorporated in the State of Nevada on April 4, 2006. The Company is an Exploration Stage Company, as defined by Statement of Financial Accounting Standard (“SFAS”) No.7 “Accounting and Reporting for Development Stage Enterprises”. The Company’s principal business is the acquisition and exploration of mineral properties. The Company does not presently have any mineral properties.
These financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has never generated revenues since inception and has never paid any dividends and is unlikely to pay dividends or generate earnings in the immediate or foreseeable future. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing to continue operations, and the attainment of profitable operations. As at August 31, 2009, the Company has an accumulated deficit of $7,130,012. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
There can be no assurance that the Company will be able to raise sufficient funds to pay the expected operating expenses for the next twelve months.
The Company currently trades on the OTCBB under the symbol ‘BUKX.OB’.
2. Summary of Significant Accounting Policies
(a) Basis of Presentation and Consolidation
These financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States, and are expressed in US dollars. Until August 27, 2009, the financial statements include the accounts of the Company and its wholly-owned subsidiaries, Hyde Park Uranium, Inc. and Alpha Beta Uranium, Inc. The Company entered into an agreement dated August 27, 2009 for the settlement of the outstanding convertible debenture described in Note 9. Under the terms of the agreement, the Company agreed to transfer all of the issued and outstanding shares of its wholly-owned subsidiaries, Hyde Park Uranium, Inc and Alpha Beta Uranium, Inc., and all of the property and equipment and mineral properties of the Company and its wholly-owned subsidiaries to Regal to settle the convertible debenture. The Company’s fiscal year-end is May 31.
(b) Interim Financial Statements
The interim unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Securities and Exchange Commission (“SEC”) Form 10-Q. They do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Therefore, these financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the year ended May 31, 2009, included in the Company’s Annual Report on Form 10-K filed on September 15, 2009 with the SEC.
The financial statements included herein are unaudited; however, they contain all normal recurring accruals and adjustments that, in the opinion of management, are necessary to present fairly the Company’s financial position at August 31, 2009 and 2008, and the results of its operations and cash flows for the three months ended August 31, 2009 and 2008. The results of operations for the three months ended August 31, 2009 are not necessarily indicative of the results to be expected for future quarters or the full year.
F-4
Buckingham Exploration Inc.
(An Exploration Stage Company)
Notes to Financial Statements
(Expressed in US dollars)
(Unaudited)
2. Summary of Significant Accounting Policies (continued)
(c) Use of Estimates
The preparation of the financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company regularly evaluates estimates and assumptions related to long lived assets, stock-based compensation expense, secured convertible debentures and deferred income tax asset allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
(d) Cash and Cash Equivalents
The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents.
(e) Property and Equipment
Property and equipment comprised of office furniture and motor vehicles are recorded at cost and amortized using the declining balance method at 25% per annum.
(f) Basic and Diluted Net Earnings (Loss) Per Share
The Company computes net income (loss) per share in accordance with SFAS No. 128, "Earnings per Share" which requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of common shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period including stock options, using the treasury stock method, and convertible preferred stock, using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential common shares if their effect is anti-dilutive. 6,580,000 outstanding warrants and 3,025,000 options issuable have been excluded from the three month ended August 31, 2009 calculation as they would be anti-dilutive.
Components of basic and diluted earnings per share for the three month period ended August 31, 2009 and 2008 were as follows:
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For the three month period ended
|
||||||||
|
August 31,
2009
$
|
August 31,
2008
$
|
|||||||
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Net loss (A)
|
(67,762 | ) | (239,332 | ) | ||||
|
Weighted average outstanding shares of common stock – Basic (B)
|
44,972,000 | 41,112,512 | ||||||
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Dilutive securities - Diluted (C)
|
9,605,000 | 12,405,000 | ||||||
| 54,577,000 | 63,517,512 | |||||||
|
Loss per share:
|
||||||||
|
Basic (A/B)
|
(0.00 | ) | (0.01 | ) | ||||
|
Diluted (A/C)
|
(0.00 | ) | (0.00 | ) | ||||
F-5
Buckingham Exploration Inc.
(An Exploration Stage Company)
Notes to Financial Statements
(Expressed in US dollars)
(Unaudited)
2. Summary of Significant Accounting Policies (continued)
(g) Comprehensive Loss
SFAS No. 130, “Reporting Comprehensive Income,” establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As at August 31, 2009 and 2008 the Company has no items that represent a comprehensive loss and, therefore, has not included a schedule of comprehensive loss in the financial statements.
(h) Mineral Property Costs
The Company has been in the exploration stage since its inception on April 4, 2006 and has not yet realized any revenues from its planned operations. It is primarily engaged in the acquisition and exploration of mining properties. Mineral property exploration costs are expensed as incurred. Mineral property acquisition costs are initially capitalized when incurred using the guidance in EITF 04-02, “Whether Mineral Rights Are Tangible or Intangible Assets”. The Company assesses the carrying costs for impairment under SFAS 144, “Accounting for Impairment or Disposal of Long Lived Assets” at each fiscal quarter end. When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs then incurred to develop such property, are capitalized. Such costs will be amortized using the units-of-production method over the estimated life of the probable reserve. If mineral properties are subsequently abandoned or impaired, any capitalized costs will be charged to operations.
(i) Asset Retirement Obligations
The Company records the fair value of an asset retirement obligation as a liability for closure and removal costs associated with the legal obligations upon retirement or removal of any tangible long-lived assets that result from the acquisition, construction, development and/or normal use of assets in accordance with Statements of Financial Accounting Standards No. 143, "Accounting for Asset Retirement Obligations". The initial recognition of any liability will be capitalized as part of the asset cost and depreciated over its estimated useful life. To date, the Company has not incurred any asset retirement obligations.
(j) Long-Lived Assets
In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset and its fair value which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value.
F-6
Buckingham Exploration Inc.
(An Exploration Stage Company)
Notes to Financial Statements
(Expressed in US dollars)
(Unaudited)
2. Summary of Significant Accounting Policies (continued)
(k) Financial Instruments
SFAS No. 157 “Fair Value Measurements” requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. SFAS No. 157 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. SFAS No. 157 prioritizes the inputs into three levels that may be used to measure fair value:
Level 1
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level 3
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
The Company’s financial instruments consist principally of cash, receivables, and accounts payable. Pursuant to SFAS No. 157, the fair value of our cash equivalents is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. The Company believes that the recorded values of all of the other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.
(l) Income Taxes
The Company accounts for income taxes using the asset and liability method in accordance with SFAS No. 109, “Accounting for Income Taxes”. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.
(m) Stock-Based Compensation
The Company records stock-based compensation in accordance with SFAS No. 123R, “Share Based Payments”, using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued. During the three month period ended August 31, 2009, the Company recorded stock-based compensation of $nil (2008 - $35,229) as general and administrative expense.
F-7
Buckingham Exploration Inc.
(An Exploration Stage Company)
Notes to Financial Statements
(Expressed in US dollars)
(Unaudited)
2. Summary of Significant Accounting Policies (continued)
(n) Foreign Currency Translation
The Company’s functional and reporting currency is the United States dollar. Monetary assets and liabilities denominated in foreign currencies are translated in accordance with SFAS No. 52 “Foreign Currency Translation”, using the exchange rate prevailing at the balance sheet date. Gains and losses arising on settlement of foreign currency denominated transactions or balances are included in the determination of income. Foreign currency transactions are primarily undertaken in Canadian dollars. The Company has not, to the date of these financials statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.
(o) Recent Accounting Pronouncements
In June 2009, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles – a replacement of FASB Statement No. 162”. The FASB Accounting Standards Codification (“Codification”) will become the source of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission “SEC” under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. On the effective date of this statement, the Codification will supersede all then-existing non-SEC accounting and reporting standards. All other non-grandfathered non-SEC accounting literature not included in the Codification will become non-authoritative. This statement is effective for financial statements issued for interim and annual periods ending after September 30, 2009. The adoption of this statement is not expected to have a material effect on the Company’s financial statements.
In June 2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No. 46(R)”. The objective of this statement is to improve financial reporting by enterprises involved with variable interest entities. This statement addresses (1) the effects on certain provisions of FASB Interpretation No. 46 (revised December 2003), “Consolidation of Variable Interest Entities”, as a result of the elimination of the qualifying special-purpose entity concept in SFAS No. 166, “Accounting for Transfers of Financial Assets”, and (2) concern about the application of certain key provisions of FASB Interpretation No. 46(R), including those in which the accounting and disclosures under the Interpretation do not always provide timely and useful information about an enterprise’s involvement in a variable interest entity. This statement is effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter. Earlier application is prohibited. The adoption of this statement is not expected to have a material effect on the Company’s financial statements.
In June 2009, the FASB issued SFAS No. 166, “Accounting for Transfers of Financial Assets – an amendment of FASB No. 140”. The object of this statement is to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial statements about a transfer of financial assets; the effects of a transfer on its financial position, financial performance, and cash flows; and a transferor’s continuing involvement, if any, in transferred financial assets. This statement addresses (1) practices that have developed since the issuance of SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities”, that are not consistent with the original intent and key requirements of that statement and (2) concerns of financial statement users that many of the financial assets (and related obligations) that have been derecognized should continue to be reported in the financial statements of transferors. SFAS No. 166 must be applied as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter. Earlier application is prohibited. This statement must be applied to transfers occurring on or after the effective date. Additionally, on and after the effective date, the concept of a qualifying special-purpose entity is no longer relevant for accounting purposes. The disclosure provisions of this statement should be applied to transfers that occurred both before and after the effective date of this statement. The adoption of this statement is not expected to have a material effect on the Company’s financial statements.
F-8
Buckingham Exploration Inc.
(An Exploration Stage Company)
Notes to Financial Statements
(Expressed in US dollars)
(Unaudited)
2. Summary of Significant Accounting Policies (continued)
(o) Recent Accounting Pronouncements (continued)
In May 2009, FASB issued SFAS No. 165, “Subsequent Events”. SFAS 165 establishes general standards of for the evaluation, recognition and disclosure of events and transactions that occur after the balance sheet date. Although there is new terminology, the standard is based on the same principles as those that currently exist in the auditing standards. The standard, which includes a new required disclosure of the date through which an entity has evaluated subsequent events, is effective for interim or annual periods ending after June 15, 2009. The adoption of SFAS 165 did not have a material effect on the Company’s financial statements.
In June 2008, the FASB issued FASB Staff Position EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities”. FSP EITF 03-6-1 addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting, and therefore need to be included in the computation of earnings per share under the two-class method as described in FASB Statement of Financial Accounting Standards No. 128, “Earnings per Share.” FSP EITF 03-6-1 is effective for financial statements issued for fiscal years beginning on or after December 15, 2008 and earlier adoption is prohibited. The adoption of this statement did not have a material effect on the Company’s financial statements.
In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities – an amendment to FASB Statement No. 133”. SFAS No. 161 is intended to improve financial standards for derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity's financial position, financial performance, and cash flows. Entities are required to provide enhanced disclosures about: (a) how and why an entity uses derivative instruments; (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations; and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. It is effective for financial statements issued for fiscal years beginning after November 15, 2008, with early adoption encouraged. The adoption of this statement did not have a material effect on the Company’s financial statements.
In December 2007, the FASB issued SFAS No. 141R, “Business Combinations”. This statement replaces SFAS 141 and defines the acquirer in a business combination as the entity that obtains control of one or more businesses in a business combination and establishes the acquisition date as the date that the acquirer achieves control. SFAS 141R requires an acquirer to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values as of that date. SFAS 141R also requires the acquirer to recognize contingent consideration at the acquisition date, measured at its fair value at that date. This statement is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008, and earlier adoption is prohibited. The adoption of this statement did not have a material effect on the Company's financial statements.
In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements Liabilities –an Amendment of ARB No. 51”. This statement amends ARB 51 to establish accounting and reporting standards for the Noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. This statement is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008, and earlier adoption is prohibited. The adoption of this statement did not have a material effect on the Company's future financial statements.
(p) Reclassification
Certain reclassifications have been made to the prior period’s financial statements to conform to the current period’s presentation.
F-9
Buckingham Exploration Inc.
(An Exploration Stage Company)
Notes to Financial Statements
(Expressed in US dollars)
(Unaudited)
3. Mineral Properties
On May 9, 2007, the Company entered into a purchase agreement with Pikes Peak Resources, Inc. (“Pikes”), a British Columbia corporation, for the acquisition of 29 unpatented mining claims located in Teller County, Colorado. The purchase consideration for the claims was $1,000,000, payable as to $500,000 cash and the issuance of 5,000,000 common shares of the Company with a fair value of $500,000. Pikes will receive net returns royalty of 2% of the proceeds of minerals mined and sold from the claims. The Company reimbursed $3,700 to Pikes for the costs of locating the claims. The Company has an option to purchase the royalty for $1,000,000 as adjusted for inflation. The Company has also agreed to buy back shares of common stock from Pikes at prevailing market price up to $150,000 for any taxes payable by Pikes as a result of the transaction. Pikes shall also have the option to repurchase the claims upon abandonment by the Company. As it has not been determined whether there are proven or probable reserves on the property, the Company recognized an impairment loss of $1,100,000 of mineral property acquisition costs for the year ended May 31, 2007. The Company transferred all mineral properties to Regal Uranium Inc. pursuant to the Settlement and Execution Agreement (Note 9).
On July 27, 2007, the Company entered into an exploration agreement with an option to purchase a property known as High Park Trails Ranch in Teller County, Colorado. The property adjoins the Company’s High Park Uranium Project. Pursuant to the terms of the option agreement, the Company paid an option payment of $100,000 on July 27, 2007 to acquire the surface and mineral estates over 265 acres, with a further payment of $2,900,000 at the end of a twelve month period to exercise the non-exclusive option to purchase the property. During the option period, the Company has full access to the property to conduct an exploration and drill program to ascertain whether it wishes to exercise its option. The Company must also pay a production royalty of approximately 5% of the net returns generated by the Company from the exploration of the property. As it has not been determined whether there are proven or probable reserves on the property, the Company recognized an impairment loss of $100,000 of mineral property acquisition costs for the year ended May 31, 2008. During the year ended May 31, 2009, the Company decided not to pursue any further exploration of the property. The Company transferred all mineral properties to Regal Uranium Inc. pursuant to the Settlement and Execution Agreement (Note 9).
On August 27, 2007, the Company entered into an exclusive option agreement with Proteus Mining Limited (“Proteus”) for the acquisition of 939 unpatented lode mining claims located in Colorado. Proteus will also receive net returns royalty of 2% of the proceeds of minerals mined and sold from the claims. As at November 30, 2007, the Company had made payments of $1,375,000 relating to the acquisition of the mining claims. On January 21, 2008, the agreement was amended to acquire 419 unpatented lode mining claims in exchange for an additional $210,000 and the issuance of 3,000,000 common shares of the Company with a fair value of $1,500,000. As it has not been determined whether there are proven or probable reserves on the property, the Company recognized an impairment loss of $3,085,000 of mineral property acquisition costs for the year ended May 31, 2008. The Company transferred all mineral properties to Regal Uranium Inc. pursuant to the Settlement and Execution Agreement (Note 9).
4. Related Party Transactions
|
(a)
|
During the three month period ended August 31, 2009, the Company incurred $30,000 (August 31, 2008 - $70,000) for management services provided by the President of the Company.
|
|
(b)
|
On August 27, 2009, the Company entered into an Execution and Settlement Agreement with a related company, of which the sole director and officer of the Company was a director and owned 15% of the outstanding common stock of the related company (Note 6).
|
|
(c)
|
Included in accounts payable and accrued liabilities at August 31, 2009, is $122,267 (May 31, 2009 - $86,058) owing to the President of the Company, representing advances of $32,267 made to the Company, and unpaid management fees of $90,000.
|
|
(d)
|
Included in receivables is $32,970 owing from Regal Uranium Inc.
|
|
(e)
|
Included in accounts payable is $13,528 due to Regal Uranium Inc. for interest accrued to May 31, 2009 on a debenture that was settled on August 27, 2009.
|
F-10
Buckingham Exploration Inc.
(An Exploration Stage Company)
Notes to Financial Statements
(Expressed in US dollars)
(Unaudited)
5. Common Stock
On June 5, 2009, the Company issued 1,014,600 restricted common shares at $0.01 per share to a debenture holder in full consideration of $13,528 in accrued interest (Note 6).
6. Secured Convertible Debentures
On September 24, 2008, the Company entered into three secured convertible debenture purchase agreements with three investors providing for the sale of convertible debentures (the “Debentures”) in the aggregate principal amount of $500,000, and 5,000,000 warrants (the “Warrants”) to purchase 5,000,000 shares of the Company’s common stock, exercisable at a price of $0.10 per share until September 24, 2010.
The outstanding principal and accrued interest is payable by the Company in 24 equal monthly installments commencing September 24, 2009. Interest on the Debentures accrues monthly at a rate of 10% per annum. The investors may convert, at any time, any amount outstanding under the Debentures into shares of common stock of the Company at a conversion price of $0.05 per share.
In accordance with EITF 00-27 “Application of Issue No. 98-5 to Certain Convertible Instruments”, the Company has allocated the proceeds of issuance between the Debentures and the Warrants based on their relative fair values. Accordingly, the Company recognized the fair value of the Warrants of $111,556 as additional paid-in capital and an equivalent discount against the Debentures. The Company will recognize interest expense over the term of the Debentures of $111,556 resulting from the difference between the stated value and carrying value at the date of issuance. The carrying value of the Debentures will be accreted to the face value of $500,000 to maturity.
The Debentures are secured by a security interests in all current and future assets of the Company and its subsidiaries.
On June 5, 2009, the Company entered into agreements with the debenture holders to issue 3,382,000 restricted common shares to settle interest accrued up to May 31, 2009 in the amount of $33,820. The Company is obligated to issue the shares pursuant to the agreements. On June 5, 2009, the Company issued 1,014,600 restricted common shares to one of the debenture holders (Note 5 (a)). As at August 31, 2009, the Company has not yet issued the remaining 2,367,400 restricted common shares.
During the three months ended August 31, 2009, the Company incurred an Event of Default as defined in its debentures due to a financial difficulties clause. Accordingly, on August 27, 2009, the Company received a Notice of Default under the terms of its debenture with one of its debenture holders, Regal Uranium Inc. (“Regal”). The Company entered into an Execution and Settlement Agreement (the “Settlement Agreement”) dated August 27, 2009 with Regal for the settlement of the outstanding convertible debenture in the amount of $150,000 plus accrued interest. Under the terms of the Settlement Agreement, the Company agreed to transfer all of the issued and outstanding shares of its wholly-owned subsidiaries, Hyde Park Uranium, Inc and Alpha Beta Uranium, Inc., and all of the property and equipment and mineral properties of the Company and its wholly-owned subsidiaries to Regal. Regal has agreed to pay $50,000 to the Company, and had the remaining $350,000 of debentures assigned to Regal. As at August 27, 2009, accrued interest of $12,059 was included in accrued liabilities, and accumulated accretion expense of $8,433 increased the carrying value of the Debentures to $419,839. The Settlement Agreement was considered a related party transaction as the sole director and officer of the Company was a director of Regal and owned 15% of the outstanding common stock of Regal at the time of the transaction. Refer to Note 9.
F-11
Buckingham Exploration Inc.
(An Exploration Stage Company)
Notes to Financial Statements
(Expressed in US dollars)
(Unaudited)
7. Stock Options
In November 2007, the Company adopted a stock compensation plan (the “Stock Plan”) to issue up to 2,000,000 common shares to executives, employees and consultants. A total of 1,850,000 common shares are available for future issuance under the Stock Plan as of August 31, 2009.
In November 2007, the Company adopted a stock option plan (the "Plan") to grant options to executives, employees and consultants. Under the Plan, the Company may grant options to acquire up to 2,000,000 common shares of the Company. Options granted can have a term up to five years and an exercise price as determined by the Stock Option Committee or which represents the fair market value at the date of grant. Options vest as specified by the Stock Option Committee. A total of 1,975,000 common shares are available for future issuance under the Plan as of August 31, 2009. If not specified, the options shall vest as follows:
|
●
|
Directors and senior officials to Vice-president - 50% upon the grant date, and 50% after one calendar year
|
|
●
|
Employees -10% at the end of any probation period or three months from date of engagement and 5% at the end of each calendar month thereafter
|
|
●
|
Other option holders – 10% at the end of the first thirty days of engagement, 20% upon completion of 50% of first term or upon 50% of project completion term and the remainder 30 days thereafter
|
The following is a summary of the stock option activity for the three month period ended August 31, 2009.
|
Number of Options
|
Weighted Average
Exercise Price
|
Weighted Average Remaining
Contractual
Term (years)
|
Aggregate
Intrinsic
Value
|
|||||||||||||
|
Outstanding, May 31, 2009
|
3,025,000 | $ | 0.27 | |||||||||||||
|
Granted
|
– | – | ||||||||||||||
|
Outstanding, August 31, 2009
|
3,025,000 | $ | 0.27 | 0.99 | $ | – | ||||||||||
|
Exercisable, August 31, 2009
|
3,025,000 | $ | 0.27 | 0.99 | $ | – | ||||||||||
The following is a summary of the status of stock options outstanding and exercisable at August 31, 2009. As at August 31, 2009, there are no unvested options.
|
|
Remaining
|
|
|
|
Weighted Average
|
Contractual
|
|
Number Of Options
|
Exercise Price
|
Life (years)
|
|
2,000,000
|
$ 0.10
|
1.25
|
|
1,000,000
|
$ 0.60
|
0.50
|
|
25,000
|
$ 1.00
|
0.25
|
|
3,025,000
|
F-12
Buckingham Exploration Inc.
(An Exploration Stage Company)
Notes to Financial Statements
(Expressed in US dollars)
(Unaudited)
8. Warrants
The following is a summary of the warrant activity during the three month period ended August 31, 2009:
|
|
Weighted
Average
|
|||||||
|
Number Of Warrants
|
Exercise
Price
|
|||||||
|
Balance, May 31, 2009
|
10,080,000 | $ | 0.55 | |||||
|
Granted
|
– | – | ||||||
|
Exercised
|
– | – | ||||||
|
Expired
|
(3,500,000 | ) | $ | 1.00 | ||||
|
Balance, August 31, 2009
|
6,580,000 | $ | 0.32 | |||||
The following is a summary of the warrants outstanding at August 31, 2009:
|
Number Of Warrants
|
Weighted Average
Exercise Price
|
Expiry Date
|
|
650,000
|
$1.00
|
September 15, 2009
|
|
500,000
|
$1.00
|
September 30, 2009
|
|
200,000
|
$1.00
|
October 22, 2009
|
|
200,000
|
$1.00
|
November 2, 2009
|
|
30,000
|
$1.00
|
April 21, 2010
|
|
5,000,000
|
$1.00
|
September 24, 2010
|
|
6,580,000
|
$1.00
|
9. Discontinued Operations
The Company entered into an Execution and Settlement Agreement dated August 27, 2009 with Regal Uranium Inc. for the settlement of its outstanding convertible debentures and accrued interest in consideration for the transfer of all interests in the Company’s wholly-owned subsidiaries and its property and equipment and mineral properties. Regal is considered a related party as the sole director and officer of the Company was a director of Regal and owned 15% of the outstanding common stock of Regal at the time of the transaction. Accordingly, the gain on discontinued operations of $453,987 has been recorded in additional paid-in capital. Refer to Note 6.
Gain on disposal of discontinued operations is summarized as follows:
|
August 31,
2009
$
|
||||
|
Proceeds receivable from disposition
|
32,970 | |||
|
Prepaid expenses
|
(1,073 | ) | ||
|
Office furniture and equipment, net of accumulated depreciation of $12,190
|
(16,952 | ) | ||
|
Assumption of liabilities of subsidiaries
|
7,144 | |||
|
Accrued interest
|
12,059 | |||
|
Convertible debt, net of discount of $80,161
|
419,839 | |||
|
Gain on disposal of discontinued operations
|
453,987 | |||
F-13
Buckingham Exploration Inc.
(An Exploration Stage Company)
Notes to Financial Statements
(Expressed in US dollars)
(Unaudited)
9. Discontinued Operations (continued)
The results of discontinued operations are summarized as follows:
|
Period from
|
||||||||||||
|
For three
months
|
For three
months
|
April 4,
2006
|
||||||||||
|
Ended
|
Ended
|
(Inception)
|
||||||||||
|
August 31,
|
August 31,
|
To August 31,
|
||||||||||
|
2009
|
2008
|
2009
|
||||||||||
|
Expenses
|
||||||||||||
|
Amortization
|
1,087 | 2,946 | 22,525 | |||||||||
|
General and administrative
|
3,233 | – | 67,478 | |||||||||
|
Impairment of mineral property costs
|
– | – | 4,530,126 | |||||||||
|
Professional fees
|
– | – | 10,382 | |||||||||
|
Mineral property costs
|
– | 58,875 | 385,920 | |||||||||
|
Loss on disposal of property and equipment
|
– | – | 14,058 | |||||||||
|
Net Loss from Discontinued Operations
|
$ | (4,320 | ) | $ | (61,821 | ) | $ | (5,030,489 | ) | |||
10. Commitments
|
(a)
|
On May 7, 2007, the Company entered into a management agreement (the “Agreement”) with the President of the Company for management services. Per the Agreement, the Company is required to pay $10,000 per month, commencing May 7, 2007, and will remain in effect on month-to-month basis until terminated by either party giving 14 days notice. The agreement was amended on April 30, 2008 to increase the monthly fee to $20,000 effective March 15, 2008. The agreement was amended on May 6, 2009 to reduce the monthly fee to $10,000 effective December 1, 2008.
|
|
(b)
|
On May 5, 2008 the Company entered into an agreement with a public relations consultant for a 12 month period commencing on May 5, 2008. The services to be provided pursuant to the agreement include, but are not limited to, the preparation and dissemination of press releases and other communications materials to increase investor awareness of the Company in Europe and North America. In consideration of the services to be provided, the Company is obligated to pay $15,000 (paid) and 250,000 restricted common shares of the Company (issued) and an additional $85,000 by July 5, 2008, which has not been paid due to dispute over non performance of the contractual obligations of the consultant. In October 2008, the Company issued a written notice of rescission of the agreement and cancellation of the 250,000 restricted common shares due to the failure of the public relations consultant to provide services in accordance of the agreement.
|
11. Restatement
On August 27, 2009, the Company entered into a settlement agreement with one of the debentureholders, Regal Uranium Inc. (“Regal”) subsequent to an event of default under the terms of the debentures, to settle the outstanding debenture in the amount of $150,000 plus accrued interest (Note 6). Under the terms of the settlement agreement, the Company agreed to transfer all of its interest in its wholly-owned subsidiaries, Hyde Park Uranium Inc. and Alpha Beta Uranium Inc., to Regal along with all of its property and equipment and intellectual property rights related to these properties. Regal agreed to pay $50,000 and had the other two debentures in the aggregate amount of $350,000 assigned to it.
An amount receivable from Regal of $32,970 should have been recognized in connection with the settlement agreement. In addition, Regal should have been considered a related party as the sole director and officer of the Company was a director of Regal and owned 15% of the outstanding common stock of Regal at the time of the transaction. Accordingly, a gain on discontinued operations of $453,987 should have been recorded as a capital transaction in additional paid in capital.
F-14
Buckingham Exploration Inc.
(An Exploration Stage Company)
Notes to Financial Statements
(Expressed in US dollars)
(Unaudited)
11. Restatement (continued)
On June 5, 2009, the Company entered into agreements with two debenture holders to issue a total of 2,367,400 restricted common shares at $0.01 per share in full consideration of $23,674 in interest accrued up to May 31, 2009. The settlement of accrued interest was recorded to equity as common stock subscribed. The shares have not yet been issued. Accordingly, the interest payable of $23,674 on the convertible debt should have been treated as a liability.
As a result, the Company is restating the August 31, 2009 interim financial statements filed on Form 10-Q. The effect of the restatement is to recognize the amount of proceeds received on the disposition, to reclassify the gain on disposal of discontinued operations of $453,987 from net loss to additional paid-in capital, and to reclassify the settlement of $23,674 in accrued interest from common stock subscribed to accounts payable and accrued liabilities.
The following tables illustrate the effects of the restatement on the August 31, 2009 financial statements:
|
Balance Sheets
|
August 312, 2009
|
|||||||||||
|
As Reported
$
|
Adjustment
$
|
As Restated
$
|
||||||||||
|
|
|
|
||||||||||
|
ASSETS
|
||||||||||||
|
Current Assets
|
||||||||||||
|
Receivables
|
2,485 | 32,970 | 35,455 | |||||||||
|
Total Current Assets
|
3,024 | 32,970 | 35,994 | |||||||||
|
Total Assets
|
3,024 | 32,970 | 35,994 | |||||||||
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
||||||||||||
|
Current Liabilities
|
||||||||||||
|
Accounts payable
|
190,229 | 13,528 | 203,757 | |||||||||
|
Accrued liabilities
|
3,839 | 10,146 | 13,985 | |||||||||
|
Total Current Liabilities
|
194,068 | 23,674 | 217,742 | |||||||||
|
Stockholders’ Deficit
|
||||||||||||
|
Additional Paid-In Capital
|
6,489,774 | 453,987 | 6,943,761 | |||||||||
|
Common Stock Subscribed
|
23,674 | (23,674 | ) | – | ||||||||
|
Deficit Accumulated During the Exploration Stage
|
(6,708,995 | ) | (421,017 | ) | (7,130,012 | ) | ||||||
|
Total Stockholders’ Deficit
|
(191,044 | ) | 9,296 | (181,748 | ) | |||||||
|
Total Liabilities and Stockholders’ Deficit
|
3,024 | 32,970 | 35,994 | |||||||||
|
Statements of Operartions
|
For the Three Months Ended August 31, 2009
|
|||||||||||
|
As Reported
$
|
Adjustment
$
|
As Restated
$
|
||||||||||
|
|
|
|
||||||||||
|
Discontinued Operations
|
||||||||||||
|
Gain on disposal of discontinued operations
|
421,017 | (421,017 | ) | – | ||||||||
|
Total Income (Loss) from Discontinued Operations
|
416,697 | (421,017 | ) | (4,320 | ) | |||||||
|
Net Income (Loss)
|
353,255 | (421,017 | ) | (67,762 | ) | |||||||
|
Net Income (Loss) Per Share – Basic and Diluted
|
||||||||||||
|
Net Income (Loss) Before Discontinued Operations
|
0.00 | (0.00 | ) | (0.00 | ) | |||||||
|
Discontinued Operations
|
0.01 | (0.01 | ) | (0.00 | ) | |||||||
|
Net Income (Loss)
|
0.01 | (0.01 | ) | (0.00 | ) | |||||||
F-15
Buckingham Exploration Inc.
(An Exploration Stage Company)
Notes to Financial Statements
(Expressed in US dollars)
(Unaudited)
11. Restatement (continued)
|
Statement of Operations
|
Accumulated from April 4, 2006 (Date of Inception) to August 31, 2009
|
|||||||||||
|
As Reported
$
|
Adjustment
$
|
As Restated
$
|
||||||||||
|
|
|
|
||||||||||
|
Discontinued Operations
|
||||||||||||
|
Gain on disposal of discontinued operations
|
421,017 | (421,017 | ) | – | ||||||||
|
Total Income (Loss) from Discontinued Operations
|
(4,609,472 | ) | (421,017 | ) | (5,030,489 | ) | ||||||
|
Net Income (Loss)
|
(6,708,995 | ) | (421,017 | ) | (7,130,012 | ) | ||||||
|
Statements of Cash Flows
|
For the Three Months Ended August 31, 2009
|
|||||||||||
|
As Reported
$
|
Adjustment
$
|
As Restated
$
|
||||||||||
|
Operating Activities
|
||||||||||||
|
Net income (loss) for the period
|
353,255 | (421,017 | ) | (67,762 | ) | |||||||
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||||||
|
Gain from settlement agreement
|
(421,017 | ) | 421,017 | – | ||||||||
|
Statements of Cash Flows
|
Accumulated from April 4, 2006 (Date of Inception) to August 31, 2009
|
|||||||||||
|
As Reported
$
|
Adjustment
$
|
As Restated
$
|
||||||||||
|
Operating Activities
|
||||||||||||
|
Net income (loss) for the period
|
(6,708,995 | ) | (421,017 | ) | (7,130,012 | ) | ||||||
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||||||
|
Gain from settlement agreement
|
(421,017 | ) | 421,017 | – | ||||||||
|
Non-Cash Investing and Financing Activities:
|
||||||||||||
|
Settlement of debt
|
453,987 | – | 453,987 | |||||||||
Effective this quarter, the Company implemented SFAS No. 165, “Subsequent Events” (“SFAS 165”). This standard establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued. The adoption of SFAS 165 did not impact the Company’s financial position or results of operations. The Company evaluated all events or transactions that occurred after August 31, 2009 up through October 19, 2009, the date the Company issued these financial statements. During this period, the Company did not have any material recognizable subsequent events.
F-16
Forward Looking Statements
This quarterly report on Form 10-Q/A contains forward-looking statements that involve risks and uncertainties. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology including "could", "may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "potential" and the negative of these terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially.
While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested in this report.
Business Overview
The following discussion and analysis should be read in conjunction with the Annual Report on Form 10-K/A of Buckingham Exploration Inc. (“Buckingham”, “we” or “our”) filed with the SEC on February 18, 2011.
We were incorporated as a Nevada company on April 4, 2006. We have been engaged in the acquisition, exploration and development of mineral properties since our inception. We have two wholly owned subsidiaries, Hyde Park Uranium Inc. Alpha Beta Uranium Inc., Colorado corporations through which we have acquired mineral claims in the state of Colorado. Our common stock became eligible for trading on the OTC Bulletin Board on May 8, 2007 under the ticker symbol “BUKX.OB”.
On September 24, 2008 we entered into secured convertible debenture purchase agreements with three investors whereby the investors invested $500,000 through the sale secured convertible debentures and we granted warrants to purchase 5,000,0000 shares of our common stock at an exercise price of $0.10 per shares for a period of 2 years. As collateral security we granted the investors a security interest in the right, title and interest of all of our present and future assets.
On August 27, 2009 we entered into a settlement agreement with one of the debentureholders, Regal Uranium Inc., after an event of default occurred pursuant to the terms of the secured convertible debenture purchase agreements. We have agreed to transfer collateral including all interests in our wholly-owned subsidiaries, Hyde Park Uranium Inc. and Alpha Beta Uranium Inc., to Regal Uranium along with all of our property and equipment and intellectual property rights. Regal Uranium has agreed to use its best efforts to have the remaining two debentures assigned to Regal Uranium. Further details concerning this matter are provided herein.
As a result of the foregoing, the operations of our subsidiaries have been presented on a discontinued basis in our consolidated financial statements for the three months ended August 31, 2009. Our sole officer is currently seeking new properties for acquisition.
Uncertainties
We are currently reviewing various properties for potential acquisition. We plan to undertake exploration of any properties we acquire. We anticipate that we will require additional financing in order to acquire and to pursue the exploration of any properties acquired. We do not have sufficient funds to acquire or to undertake exploration of any mineral claims acquired at present and there is no assurance that we will be able to obtain the necessary financing.
There is no assurance that a commercially viable mineral deposit exists on any mineral properties we acquire. Significant exploration will be required before a final evaluation as to the economic feasibility of mining of any such properties is determined. There is no assurance that further exploration will result in a final evaluation that a commercially viable mineral deposit exists on any of our mineral properties we acquire.
4
Results of Operations
Our results of operations are presented below:
|
For the
Three Months
Ended
August 31,
2009
$
|
For the
Three Months
Ended
August 31,
2008
$
|
Accumulated
from April 4,
2006
(Date of
Inception) to
August 31,
2009
$
|
||||||||||
|
Revenue
|
– | – | – | |||||||||
|
Expenses
|
||||||||||||
|
General and administrative (Note 4)
|
30,437 | 138,438 | 1,623,001 | |||||||||
|
Professional fees
|
12,517 | 33,995 | 389,947 | |||||||||
|
Total Expenses
|
42,954 | 172,433 | 2,012,948 | |||||||||
|
Net Loss Before Other Income (Expenses)
|
(42,954 | ) | (172,433 | ) | (2,012,948 | ) | ||||||
|
Other Income (Expenses)
|
||||||||||||
|
Interest income
|
– | 24 | 2,276 | |||||||||
|
Miscellaneous income
|
– | – | 1,467 | |||||||||
|
Interest expense
|
(12,055 | ) | (5,102 | ) | (58,922 | ) | ||||||
|
Accretion of convertible debenture discount
|
(8,433 | ) | – | (31,396 | ) | |||||||
|
Total Other Income (Expenses)
|
(20,488 | ) | (5,078 | ) | (86,575 | ) | ||||||
|
Net Loss From Continuing Operations
|
(63,442 | ) | (177,511 | ) | (2,099,523 | ) | ||||||
|
Loss from Discontinued Operations (Note 9)
|
(4,320 | ) | (61,821 | ) | (5,030,489 | ) | ||||||
|
Net Loss
|
(67,762 | ) | (239,332 | ) | (7,130,012 | ) | ||||||
|
Net Loss Per Share – Basic and Diluted
|
||||||||||||
|
Net Loss Before Discontinued Operations
|
(0.00 | ) | (0.01 | ) | ||||||||
|
Discontinued Operations
|
(0.00 | ) | – | |||||||||
|
Net Loss
|
(0.00 | ) | (0.01 | ) | ||||||||
|
Weighted Average Shares Outstanding
|
44,972,000 | 41,112,512 | ||||||||||
5
Since our inception on April 4, 2006 to August 31, 2009, we have not generated any revenue and we have incurred an accumulated deficit of $7,130,012. We may not generate significant revenues even if our exploration program indicates that mineral deposits may exist on our mineral claims. We anticipate that we will incur substantial losses over the next two years.
During the three months ended August 31, 2009, we attained a net loss of $67,762 compared to our net loss of $239,332 for the three months ended August 31, 2008. Our net loss per share was $0.00 for the three months ended August 31, 2009 and ($0.01) for the three months ended August 31, 2008
Our total expenses for the three months ended August 31, 2009 were $42,954 and consisted of $30,437 in general and administrative expenses, and $12,517 in professional fees. By comparison, our total expenses for the three months ended August 31, 2008 were $172,433, and consisted of $138,438 in general and administrative expenses, and $33,995 in professional fees. The decrease in total expenses was mainly due to reduced overhead expenses as a result of curtailing our exploration activities in response to a lack of financial resources.
Net loss from discontinued operations came to $4,320 for the three months ended August 31, 2009 and consisted of $1,087 in amortization and $3,233 in general and administrative expenses.
From April 4, 2006 (Date of Inception) to August 31, 2009 we accumulated total operating loss from discontinued operations of $5,030,489 including $22,525 in amortization cost, $67,479 in general and administrative expenses, $4,530,126 in impairment of mineral property costs, $10,382 in professional fees, $385,920 in mineral property costs, and $14,058 in loss on disposal of property and equipment.
Our professional fees consisted primarily of legal, accounting and auditing fees. Our general and administrative expenses consist of expenses not directly related to the exploration activities carried out by our subsidiaries and include management fees, consulting fees, foreign exchange loss, transfer agent and filing fees, office supplies, travel expenses, rent, communication expenses (cellular, internet, fax and telephone), bank changes, advertising and promotion costs, office maintenance, courier and postage costs and office equipment.
Liquidity and Capital Resources
As of August 31, 2009 we have a cash of $539, receivables of $35,455 and no prepaid expenses for total current assets of $35,994. Our working capital deficit is $181,748. Our deficit accumulated during the exploration stage was $7,130,012 and was funded through equity financing and shareholder loans. During the three months ended August 31, 2009, we received an advance of $6,900 from a related party. Since our inception on April 4, 2006 to August 31, 2009 we have raised net proceeds of $3,661,575 from the sale of our common stock.
During the three months ended August 31, 2009, we used net cash of $9,633 in operating activities and received net cash of $6,900 from financing activities. This compares to $202,443 of net cash used in operating activities and $220,841 net cash received from financing activities for the same period in 2008. We did not use any cash in, or receive any cash from, investing activities during the three months period ended August 31, 2009 as our financial resources were limited.
From April 4, 2006 (Date of Inception) to August 31, 2009 we used net cash of $1,716,469 in operating activities, $2,284,862 in investing activities, and received net cash of $4,001,870 from financing activities.
As of August 31, 2009, our cash of $539 is insufficient to cover our current monthly burn rate.
As of August 31, 2009 we had $539 in cash. We will receive an additional $50,000 in cash pursuant to the settlement agreement with Regal Uranium Inc. In order to acquire and explore new properties, we may incur expenses that outpace our cash resources. Should we require additional capital resources, we will proceed by way of private placements, loans or possibly a direct offering. There can be no assurance we will successfully raise sufficient capital to meet our future cash requirements.
6
On September 24, 2008, we entered into convertible debenture purchase agreements and granted 5,000,000 warrants to purchase one share each of Buckingham’s common stock at an exercise price of $0.10 per share for a period of 2 years. The total amount invested in Buckingham
was $500,000. The principal and accrued interest of the convertible debentures could be converted into common stock at the holder’s option at a price of $0.05 per share any time on or after October 25, 2008 until the full amount owed under each convertible debenture is repaid. Buckingham had reserved a minimum of 5,000,000 common shares pursuant to the holders’ options to have the convertible debentures repaid in shares.
Buckingham had the option, for a period of one year after September 24, 2008, of repaying any amounts borrowed and re-borrowing any amounts repaid under the convertible debentures without penalty or premium. The outstanding principal of the convertible debentures and interest accrued thereon at a rate of 10% per annum is repayable in equal monthly installments over a 24 month period starting one year after September 24, 2008. The convertible debentures carried a security interest in all current and future assets of Buckingham and its subsidiaries.
The debenture was secured by a security interesting all our current and future assets and assets of our subsidiaries.
On June 5, 2009, we entered into agreements with debenture holders to issue 3,382,000 restricted common shares to settle interest accrued up to May 31, 2009 in the amount of $33,820. We issued 1,014,600 restricted common shares to one of the debenture holders.
During the three months ended August 31, 2009, we defaulted on the convertible debentures and received a notice of default under the terms of the debenture with Regal Uranium Inc. We subsequently entered in an Execution and Settlement Agreement (the “Settlement Agreement”) dated August 27, 2009 with Regal Uranium Inc. for the settlement of the outstanding convertible debenture in the amount of $150,000 plus accrued interest. In accordance with the Settlement Agreement, we agreed to transfer all of our issued and outstanding shares in our wholly-owned subsidiaries, Hyde Park Uranium Inc. and Alpha Beta Uranium, Inc. and all of our property and equipment and our mineral properties to Regal Uranium Inc.
Future Financings
We have no revenues, have achieved losses since inception, and rely upon the sale of our securities to fund operations. We will not generate revenues even if our exploration program indicates that a mineral deposit may exist on any mineral claims acquired. Accordingly, we will be dependent on future additional financing in order to maintain our operations and continue our exploration activities.
We will require additional financing in order to proceed with the exploration of any mineral properties acquired. We plan to complete private placement sales of our common stock in order to raise the funds necessary to pursue our plan of operations. Issuances of additional shares will result in dilution to our existing shareholders. We currently do not have any arrangements in place for the completion of any private placement financings and there is no assurance that we will be successful in completing any private placement financings.
If we are unable to achieve the necessary additional financing, then we plan to reduce the amounts that we spend on our prospective acquisitions, exploration activities and administrative expenses in order to stay within the amount of capital resources that are available to us. Specifically, we anticipate that we would defer drilling programs and certain acquisitions pending our obtaining additional financing. Still, even in light of our plan to scale back our operations, if we do not achieve additional financing, our current cash and working capital will be not be sufficient to enable us to sustain our operations and our interests in our mineral properties for the next twelve months.
Product Research and Development
We do not anticipate spending any material amounts in connection with product research and development activities during the next twelve months.
Acquisition of Plant and Equipment and Other Assets
We do not anticipate the sale or acquisition of any material properties, plant or equipment during the next twelve months. Any acquisitions are subject to obtaining additional financing.
7
Off-Balance Sheet Arrangements
We have no significant 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.
Inflation
The amounts presented in the financial statements do not provide for the effect of inflation on our operations or financial position. The net operating losses shown would be greater than reported if the effects of inflation were reflected either by charging operations with amounts that represent replacement costs or by using other inflation adjustments.
Audit Committee
The functions of the audit committee are currently carried out by our Board of Directors. Our Board of Directors has determined that we do not have an audit committee financial expert on our Board of Directors carrying out the duties of the audit committee. Our Board of Directors has determined that the cost of hiring a financial expert to act as a director of us and to be a member of the audit committee or otherwise perform audit committee functions outweighs the benefits of having a financial expert on the audit committee.
Disclosure Controls
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 the information we are required to disclose 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, as appropriate to allow timely decisions regarding required disclosure. We carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the evaluation of these disclosure controls and procedures, and on the material weaknesses in our internal control over financial reporting identified in our Annual Report on Form 10-K/A for the period ended May 31, 2009, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective.
Changes in internal control
We have not been able to implement any of the recommended changes to control over financial reporting listed in our Annual Report on Form 10-K/A for the year ended May 31, 2009. As such, there were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) promulgated under the Exchange Act) during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
8
Management is not aware of any legal proceedings contemplated by any governmental authority or any other party against us. None of our directors, officers or affiliates: (i) are a party adverse to us in any legal proceedings, or (ii) have an adverse interest to us in any legal proceedings. Management is not aware of any other legal proceedings that have been threatened against us.
On June 5, 2009, we issued 1,014,600 restricted common shares at $0.01 per share to a debenture holder in consideration of interest payable to the debenture holder totaling $10,146, or $0.01 per share. The debenture holder is a non US investor. These securities were issued without a prospectus pursuant to Regulation S of the Securities Act.
On June 5, 2009, we entered into an agreement with a debenture holder to issue 1,352,800 restricted common shares at $0.01 per share in full consideration of $13,528 in interest accrued up to May 31, 2009. As at August 31, 2009, the shares were not yet issued.
On June 5, 2009, we entered into an agreement with a debenture holder to issue 1,014,600 restricted common shares at $0.01 per share in full consideration of $10,146 in interest accrued up to May 31, 2009. As at August 31, 2009, the shares were not yet issued.
Our reliance upon the exemption under of Regulation S of the Securities Act was based on the fact that the sale of the securities was completed in an "offshore transaction", as defined in Rule 902(h) of Regulation S. We did not engage in any directed selling efforts, as defined in Regulation S, in the US in connection with the sale of the securities. The investor was not a US person, as defined in Regulation S, and was not acquiring the securities for the account or benefit of a US person.
None.
None.
None
|
Exhibit Number
|
Exhibit Description
|
|
10.2
|
Execution and Settlement Agreement with Regal Uranium Inc. (1)
|
(1) Included as an exhibit with our Form 10-K filed September 15, 2009.
9
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.
|
Buckingham Exploration Inc.
|
|
|
(Registrant)
|
|
|
/s/ Christopher Robin Relph
|
|
|
Date: March 2, 2011
|
Christopher Robin Relph
|
|
Director, President, Chief Executive Officer, Chief Financial Officer and Principal Accounting Officer
|
|
10