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EX-31.1 - DIVERSIFIED RESOURCES 10Q, CERTIFICATION 302 - Diversified Resources Inc.diversifiedexh31_1.htm
EX-32.1 - DIVERSIFIED RESOURCES 10Q, CERTIFICATION 906 - Diversified Resources Inc.diversifiedexh32_1.htm


 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

x Quarterly Report Pursuant To Section 13 Or 15(D) Of The Securities Exchange Act Of 1934

For the quarterly period ended July 31, 2012

o Transition Report Under Section 13 Or 15(D) Of The Securities Exchange Act Of 1934

For the transition period from _______________ to _______________

COMMISSION FILE NUMBER    333-175183

DIVERSIFIED RESOURCES INC.
(Exact name of registrant as specified in its charter)
 
NEVADA
98-0687026
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
 
10071 Park Meadows Dr.  Suite 302,  Lone Tree CO  80124
(Address of principal executive offices, including zip code)

 951-255-9100
(Issuer’s telephone number, including area code)
 
 
Check whether the issuer (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 x  No o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 
Large accelerated filer
o
Accelerated filer
o
 
Non-accelerated filer
o
Smaller reporting company
x
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes x  No o
 
State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date. 5,250,000 shares of common stock as of September 13, 2012.
 
 

 
1

 

 
 
PART I. FINANCIAL INFORMATION

Item 1.       Financial Statements

The following consolidated interim unaudited financial statements of Diversified Resources Inc. (the “Company”) for the three month period ended July 31, 2012 are included with this Quarterly Report on Form 10-Q:















 
 
2

 
 
 
DIVERSIFIED RESOURCES, INC.
 
(An Exploration Stage Company)
 
Balance Sheet
 
as at  July 31, 2012 (unaudited) and  October 31, 2011
 
             
   
July 31,
   
October 31,
 
   
2012
   
2011
 
   
(Unaudited)
       
             
ASSETS            
             
CURRENT ASSETS
           
Cash and Cash Equivalents
  $ 161     $ 6,843  
 
               
TOTAL ASSETS
  $ 161     $ 6,843  
                 
                 
LIABILITIES & STOCKHOLDERS' EQUITY
               
                 
LIABILITIES
               
Officer Loan
  $ 5,000     $ -  
                 
STOCKHOLDERS' EQUITY
               
Common Stock, par value $0.001; authorized 75,000,000 shares;
               
issued and outstanding:  5,250,000 shares as of July 31, 2012
               
issued and outstanding:  5,250,000 shares as of October 31, 2011
    5,250       5,250  
Additional paid-in capital
    54,750       54,750  
Deficit accumulated in the development stage
    (64,839 )     (53,157 )
                 
Total Stockholders' Equity
    (4,839 )     6,843  
                 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
  $ 161     $ 6,843  

 
 
 
 
 
 

 

See accompanying notes to interim financial statements.
 
 
3

 
 
 
 DIVERSIFIED RESOURCES, INC.
 
 (An Exploration Stage Company)
 
 Statement of Operations
 
 (Unaudited)
 
                                 
                             
For the period
 
                             
from Inception,
 
                             
March 19, 2009
 
     
For the three months ended
   
For the nine months ended
   
through
 
     
July 31,
   
July 31,
   
July 31,
 
     
2012
   
2011
   
2012
   
2011
   
2012
 
                                 
 REVENUES
  $ -     $ -     $ -     $ -     $ -  
                                           
 COSTS AND EXPENSES
                                       
                                           
 
Professional Fees
    -       7,005       1,225       10,855       17,945  
 
Filing Fee
    -       -       10,360       -       20,080  
 
Mineral Lease
    -       5,000       -       11,700       21,700  
 
General and Administrative
    215       2,112       97       3,693       5,114  
                                           
TOTAL EXPENSES
    215       14,117       11,682       26,248       64,839  
                                           
 NET INCOME (LOSS)
  $ (215 )   $ (14,117 )   $ (11,682 )   $ (26,248 )   $ (64,839 )
                                           
                                           
 Net Income (Loss) per share,
                                       
basic and diluted
  $ (0.00 )   $ (0.00 )   $ (0.00 )   $ (0.00 )        
                                           
Weighted Average number of common
                                       
    shares outstanding, basic and diluted     5,250,000       5,250,000       5,250,000       5,250,000          

 
 
 
 
 
 
 
 
See accompanying notes to interim financial statements.
 
 
4

 
 
 
 DIVERSIFIED RESOURCES, INC.
 
 (An Exploration Stage Company)
 
 Statements of Cash Flows
 
 (Unaudited)
 
                   
               
For the period
 
               
from Inception,
 
               
March 19, 2009
 
   
For the nine months ended
   
through
 
   
July 31
   
July 31,
 
   
2012
   
2011
   
2012
 
                   
CASH FLOWS FROM OPERATING ACTIVITIES:
                 
Net Income (Loss)
  $ (11,682 )   $ (26,248 )   $ (64,839 )
Adjustments to reconcile net loss to net cash
                       
used by operating activities:
    -       -       -  
Change in operating assets and liabilities:
    -       -       -  
Net Cash provided by (used by)
                       
Operating Activities
    (11,682 )     (26,248 )     (64,839 )
                         
CASH FLOWS FROM INVESTING ACTIVITIES
                       
                         
Net Cash provided by Investing Activities
    -       -       -  
                         
CASH FLOWS FROM FINANCING ACTIVITIES
                       
Stockholder loan-Gordon
    5,000               5,000  
Sale of stock for cash
    -       -       30,000  
Subscriptions received
                    30,000  
Net Cash provided by Financing Activities
    5,000       -       65,000  
                         
NET INCREASE IN CASH
    (6,682 )     (26,248 )     161  
                         
CASH AT BEGINNING OF PERIOD
    6,843       44,180       -  
                         
CASH AT END OF PERIOD
  $ 161     $ 17,932     $ 161  
                         
CASH PAID FOR:
                       
Interest
  $ -     $ -          
Income Taxes
  $ -     $ -          

 
 

 
See accompanying notes to interim financial statements.

 
5

 
 
 
DIVERSIFIED RESOURCES INC.
(An Exploration Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
July 31, 2012
(Unaudited)
 
NOTE 1       ORGANIZATION
 
These interim financial statements as of and for the nine months ended July 31, 2012 reflect all adjustments which, in the opinion of management, are necessary to fairly state the Company’s financial position and the results of its operations for the periods presented in accordance with the accounting principles generally accepted in the United States of America. All adjustments are of a normal recurring nature.
 
These interim financial statements should be read in conjunction with the Company’s financial statements and notes thereto included in the Company’s fiscal year end October 31, 2011 report on Form 10-K. The Company assumes that the users of the interim financial information herein have read, or have access to, the audited financial statements for the preceding period, and that the adequacy of additional disclosure needed for a fair presentation may be determined in that context. The results of operations for the nine month period ended July 31, 2012 are not necessarily indicative of results for the entire year ending October 31, 2012.
 
Diversified Resources Inc. (“the Company”) was incorporated in the State of Nevada on March 19, 2009 to pursue mineral extraction in the United States.
 
Current Operations
 
On May 22, 2009 the Company leased two mining claims in Esmerelda County, Nevada, in the Dunfee Mine Area. The lease includes all additional claims within one mile of these claims. The area was the subject of a geological report on September 11, 2009. The lease required an initial payment of $5,000, plus $275 Federal and State maintenance fees. Minimum annual payments are required, beginning with $5,000 at the 2nd anniversary year, and escalating to $75,000 at the 5th and subsequent years. The Company is responsible for taxes and maintenance fees imposed on the claims. The lease grants the Company the right to purchase 2 ½ percent of the royalty on the claims for $5,000,000, reduced by minimum payments made. Lessor is entitled to a royalty of one percent of net smelter returns.
 
NOTE 2       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Cash and cash equivalents
 
The Company considers all liquid investments with a maturity of three months or less from the date of purchase that are readily convertible into cash to be cash equivalents.
 
Property & Equipment
 
Capital assets are stated at cost. Depreciation of equipment is provided using the straight-line method over the estimated useful lives of the assets. Expenditures for maintenance and repairs are charged to expense as incurred. The Company did not have any property & equipment at July 31, 2012 and 2011.
 
 

 
6

 
 
 
Long-lived assets
 
The Company accounts for long-lived assets under the FASB (Financial Accounting Standards Board) ASC (Accounting Standard Codification) 340-10 Other Assets and Deferred Costs, (SFAS 142 and 144: “Accounting for Goodwill and Other Intangible Assets” and “Accounting for Impairment or Disposal of Long-Lived Assets”). In accordance with ASC 340-10, long-lived assets, goodwill and certain identifiable intangible assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset will not be recoverable. For purposes of evaluating the recoverability of long-lived assets, goodwill and intangible assets, the recoverability test is performed using undiscounted net cash flows related to the long-lived assets. The Company did not have any long lived assets at July 31, 2012.
 
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 could differ from those estimates.
 
Income Taxes
 
The Company utilizes FASB ACS 740, “Income Taxes,” which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the tax basis of assets and liabilities and their financial reporting amounts based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The Company has available a net operating loss carry-forward of approximately $64,839, which begins to expire in 2029 unless utilized beforehand. The Company generated a deferred tax credit through the net operating loss carry-forward. However, a valuation allowance of 100% has been established.
 
Interest and penalties on tax deficiencies recognized in accordance with ACS accounting standards are classified as income taxes in accordance with ASC Topic 740-10-50-19.
 
Fair Value of Financial Instruments
 
The Financial Accounting Standards Board issued ASC (Accounting Standards Codification) 820-10 (SFAS No. 157), “Fair Value Measurements and Disclosures" for financial assets and liabilities. ASC 820-10 provides a framework for measuring fair value and requires expanded disclosures regarding fair value measurements. FASB ASC 820-10 defines fair value as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. FASB ASC 820-10 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs, where available. The following summarizes the three levels of inputs required by the standard that the Company uses to measure fair value:
 
 
-
Level 1: Quoted prices in active markets for identical assets or liabilities
 
 
 
 
7

 
 
 
 
-
Level 2: Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities.
 
 
-
Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
 
The carrying amounts of the Company’s financial instruments as of July 31, 2012 and 2011 were valued according to the following inputs:
 
   
----------January 31---------
 
   
2012
   
2011
 
             
Level 3:   Officer Loans   
  $ 5,000     $ 0  

Basic and Diluted Earnings Per Share
 
Net loss per share is calculated in accordance with FASB ASC 260, Earnings Per Share, for the period presented. ASC 260 requires presentation of basic earnings per share and diluted earnings per share. Basic income (loss) per share (“Basic EPS”) is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period. A Diluted earnings per share (“Diluted EPS”) is similarly calculated. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. As at July 31, 2012 and 2011, there were no potentially dilutive securities.
 
The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations for the nine months ended July 31, 2012 and 2011:
 
 
 
2012
   
2011
 
Numerator:
           
Basic and diluted net loss per share:
           
Net Loss
  $ (11,682 )   $ (26,248 )
                 
Denominator:
               
Basic and diluted weighted average number of shares outstanding
    5,250,000       5,250,000  
Basic and Diluted Net Loss Per Share:
  $ (0.00 )   $ (0.00 )
 

 
 
8

 
 
 
Revenue Recognition
 
The Company's revenue recognition policies are in compliance with ASC 605-13 (Staff accounting bulletin (SAB) 104). Sales revenue is recognized at the date of shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collectability is reasonably assured. There were no sales in the nine months ended July 30, 2012 and 2011.
 
Recent Accounting Pronouncements
 
In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-04, "Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs." The amendments in this update generally represent clarifications of Topic 820, but also include some instances where a particular principle or requirement for measuring fair value or disclosing information about fair value measurements has changed. This update results in common principles and requirements for measuring fair value and for disclosing information about fair value measurements in accordance with U.S. GAAP and IFRS. The amendments in this update are to be applied prospectively. The amendments are effective for interim and annual periods beginning after December 15, 2011. Early application is not permitted. The Company does not expect this guidance to have a significant impact on its consolidated financial position, results of operations or cash flows.
 
In June 2011, the FASB issued ASU No. 2011-05, "Presentation of Comprehensive Income." This update was amended in December 2011 by ASU No. 2011-12, "Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05." This update defers only those changes in update 2011-05 that relate to the presentation of reclassification adjustments. All other requirements in update 2011-05 are not affected by this update, including the requirement to report comprehensive income either in a single continuous financial statement or in two separate but consecutive financial statements. ASU No. 2011-05 and 2011-12 are effective for fiscal years (including interim periods) beginning after December 15, 2011. The Company does not expect this guidance to have a significant impact on its consolidated financial position, results of operations or cash flows.
 
In December 2011, the FASB issued ASU No. 2011-11, "Disclosures about Offsetting Assets and Liabilities." The amendments in this update require enhanced disclosures around financial instruments and derivative instruments that are either (1) offset in accordance with either ASC 210-20-45 or ASC 815-10-45 or (2) subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset in accordance with either ASC 210-20-45 or ASC 815-10-45. An entity should provide the disclosures required by those amendments retrospectively for all comparative periods presented. The amendments are effective during interim and annual periods beginning on or after January 1, 2013. The Company does not expect this guidance to have any impact on its consolidated financial position, results of operations or cash flows.
 
A variety of proposed or otherwise potential accounting standards are currently under study by standard setting organizations and various regulatory agencies. Due to the tentative and preliminary nature of those proposed standards, the Company’s management has not determined whether implementation of such standards would be material to its financial statements.
 
 
 
9

 
 
 
NOTE 3       UNCERTAINTY OF ABILITY TO CONTINUE AS A GOING CONCERN
 
The Company's financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, the Company has not generated any revenue and has incurred cumulative losses of $64,839 through April 30, 2012.
 
Management has taken the following step to revise its operating and financial requirements, which it believes are sufficient to provide the Company with the ability to continue as a going concern. The Company pursued funding through sale of stock. Management believes that the above action will allow the Company to continue operations through the next fiscal year. However management cannot provide any assurances that the Company will be successful in its retail operation.
 
Recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheets is dependent upon continued operations of the Company, which in turn is dependent upon the Company’s ability to raise additional capital, obtain financing and to succeed in its future operations. If the Company is unable to make it profitable, the Company could be forced to discontinue operations.
 
The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
 
NOTE 4       EXPLORATION STAGE COMPANY
 
The Company is considered an exploration stage company, with limited operating revenues during the periods presented. The Company is required to report its operations, shareholders deficit and cash flows since inception through the date that revenues are generated from management’s intended operations, among other things. Management has defined inception as March 19, 2009. Since inception, the Company has incurred an operating loss of $64,839. The Company’s working capital has been generated through the sales of common stock. Management has provided financial data since March 19, 2009, “Inception” in the financial statements, as a means to provide readers of the Company’s financial information to make informed investment decisions. The date of Inception is assigned as the date of incorporation, used for convenience as it is near the date of entering into a mineral lease.
 
 
 

 
10

 
 
 
NOTE 5       INCOME TAXES
 
No provision was made for federal income tax for the nine months ended July 31, 2012 and 2011, since the Company had net operating loss.
 
The Company has available a net operating loss carry-forward of approximately $64,839, which begins to expire in 2029 unless utilized beforehand. Net operating loss carry forwards may be used to reduce taxable income through the year 2032. The availability of the Company’s net operating loss carry forwards are subject to limitation if there is a 50% or more positive change in the ownership of the Company’s stock. The Company generated a deferred tax credit of approximately $25,935 through the net operating loss carry-forward. However, a 100% valuation allowance of 25,935 has been established.
 
NOTE 6       CAPITAL
 
The company issued the following common shares:
 
May 12, 2009: 3,000,000 shares issued for cash at 1/2 cent per share, realizing $15,000.
 
September 30, 2010: 2,250,000 shares issued for cash at $0.02 (2 cents) per share, realizing $45,000.
 
As of July 31, 2012 the Company had authorized 75,000,000 common shares of par value $0.001, of which 5,250,000 were issued and outstanding.
 
NOTE 7       COMMITMENTS AND CONTINGENCIES
 
The company fulfilled the following financial commitments pursuant to the mineral lease entered into on May 22, 2009:

Fiscal Year Ended        
      October 31,        
         
2009
  $ 5,000  
Paid
2010
  $ 5,000   Paid
2011
  $ 10,000   Paid

The following is the financial commitment related to the lease over the following five fiscal years:

2012
    10,000    
2013
    25,000    
2014
    75,000    
2015
    75,000   Subject to Rate of Inflation
 
  $ 185,000    
 
 
 
 
 
11

 
 
 
NOTE 8       RELATED PARTY TRANSACTIONS
 
On February 2nd, 2012 the Company President and Chief Operating Officer, Gordon R. Smith, loaned the Company $5,000. The loan is payable on demand, carries no interest and has no maturity date.
 
NOTE 9       LEGAL PROCEEDINGS
 
There were no legal proceedings against the Company with respect to matters arising in the ordinary course of business. Neither the Company nor any of its officers or directors is involved in any other litigation either as plaintiffs or defendants, and have no knowledge of any threatened or pending litigation against them or any of the officers or directors.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
12

 
 
 
Item 2.       Management’s Discussion and Analysis of Financial condition and Results of Operations

THE FOLLOWING DISCUSSION OF THE RESULTS OF OUR OPERATIONS AND FINANCIAL CONDITION SHOULD BE READ IN CONJUNCTION WITH OUR FINANCIAL STATEMENTS AND THE NOTES THERETO INCLUDED ELSEWHERE IN THIS REPORT.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This section of this report includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance.  Forward-looking statements are often identified by words like: believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of our report.  These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results and predictions.  We are a development stage company and have not yet generated or realized any revenues.

Overview

We are in the business of mineral exploration.  On June 15, 2009 we entered in a Mineral Lease Agreement whereby we leased from Timberwolf Minerals, LTD a total of two (2) unpatented lode mining claims in the State of Nevada which we refer to as the Dunfee Property. These mineral claims are located in Section 14 & 23, Township 7 South, Range 41 1/2 East, Mt. Diablo Baseline & Meridian, Esmeralda County, Nevada, USA, owned by Timberwolf Minerals LTD. In January of 2011, we staked an additional twenty (20) unpatented lode mining claims under the mineral lease agreement to expand the Dunfee Property.

According to the lease Diversified has agreed to pay Timberwolf Minerals, LTD minimum royalty payments which shall be paid in advance.  Diversified paid the sum of $5,275 upon execution of this lease. Diversified also paid $5,000 on the first anniversary of the lease, and paid $5,000 on the second anniversary of the lease and agreed to pay $10,000 on or before the third anniversary of the lease, $25,000 on or before the fourth anniversary of the lease and each annual payment after that shall be $75,000 plus an annual increase or decrease equivalent to the rate of inflation designated by the Consumer’s Price Index for that year with execution year as base year. Diversified will pay Timberwolf Minerals, LTD a royalty of 3.5% of the Net Returns from all ores, minerals, concentrates, or other products mined and removed from the property and sold or processed by Diversified, quarterly. The term of this lease is for twenty (20) years, renewable for an additional twenty (20) years so long as conditions of the lease are met.
 
 

 
13

 
 
 
Our plan of operations is to conduct mineral exploration activities on the Dunfee Property in order to assess whether these claims possess commercially exploitable mineral deposits.  (Commercially exploitable mineral deposits are deposits which are suitably adequate or prepared for productive use of a natural accumulation of minerals or ores).

Our exploration program is designed to explore for commercially viable deposits of gold, silver, copper or any other valuable minerals.  (Commercially viable deposits are deposits which are suitably adequate or prepared for productive use of an economically workable natural accumulation of minerals or ores). We have not, nor has any predecessor, identified any commercially exploitable reserves of these minerals on our mineral claims.  (A reserve is an estimate within specified accuracy limits of the valuable metal or mineral content of known deposits that may be produced under current economic conditions and with present technology). We are an exploration stage company and there is no assurance that a commercially viable mineral deposit exists on our mineral claims.

After acquiring a lease on the Dunfee Property, we retained the services of Robert Thomas, a Professional Geologist.  Mr. Thomas prepared geologic reports for us on the mineral exploration potential of the claims.  Mr. Thomas has no direct or indirect interest and does not expect to receive an interest in any of the Dunfee Property claims. Included in the reports are recommended exploration programs which consists of mapping, sampling, staking additional claims and drilling.

At this time we are uncertain of the extent of mineral exploration we will conduct before concluding that there are, or are not, commercially viable minerals on our claims.  Further phases beyond the current exploration program will be dependent upon numerous factors such as Mr. Thomas’ recommendations based upon ongoing exploration program results and our available funds.

Plan of Operation

Our business plan is to proceed with the exploration of the Dunfee Property to determine whether there are commercially exploitable reserves of gold, silver or other metals. As of the date of this Report, the Company has not paid the minimum agreed royalty advance of $10,000 which was due on June 15, 2012.  Due to our lack of capital, we are unable to make this payment.  It is our intention to renegotiate the terms of the mineral lease agreements with Timberwolf Minerals, LTD.  However, there is no guarantee that we will be successful at renegotiation and may be required to relinquish our rights in the mineral leases currently leased by us.
We completed Phase I in August 2009. Six days were spent mapping and sampling the Dunfee Property. The purpose of this work was to evaluate the mineral potential of the leased claims, and the surrounding area precious metal mineralization. Detailed geologic mapping and geochemical sampling indicate the presence of high-grade gold-silver silica veins and vein intersections. Phase one was carried out by David A. Wolfe and the end cost of the work was $5,000.

We completed Phase II of our exploration program in January 2011 Which consisted of staking 20  additional claims in the area. The cost of staking these additional 20 claims was $6,700, and the staking of the additional claims was carried out by David A. Wolfe.
 
 

 
14

 
 
 
We initiated Phase III of our exploration program in November 2011, which is follow-up detailed mapping and sampling of the additional claims and indicated drill targets. Mr. Ken Brook was retained by the company to carry out this phase of our exploration program. A total of 49 rock chip samples were taken from outcrops on the project. Gold values were up to 4.5 gm/ton and the most significant values were found in the known structures.

Based on the results of Phase III of our exploration program, Mr. Ken Brook, consulting geologist recommended we carry out the following four Phase program:

Phase IV of our proposed exploration is for detailed alteration mapping. This Phase is expected to cost approximately $12,500. The timing is still being considered by management as the company currently does not have sufficient capital to proceed with this phase of its exploration program.

Phase V of our proposed exploration is for additional outcrop sampling. This Phase is expected to cost approximately $10,000. The timing is still being considered by management as the company currently does not have sufficient capital to proceed with this phase of its exploration program.

Phase VI of our proposed exploration is for Geophysics, IP survey. This Phase is expected to cost approximately $40,000. The timing is still being considered by management as the company currently does not have sufficient capital to proceed with this phase of its exploration program.

Phase VII of our proposed exploration is the drilling of 4,000 feet of Reverse Circulation holes, and includes the cost of assays as well as the cost of the supervising geologist, bonding, permitting and other associated expenses. The timing of this phase has not been determined. The timing will be based on availability of a geologist and work crew, as well as the company’s ability to fund this phase. This phase is expected to cost approximately $340,000. We do not have sufficient cash reserves to proceed with this phase of the exploration program.

If results are favorable leading up to the drilling of the property, the company will need to raise additional funds required to meet this and other capital needs.  Should the results leading up to the drilling of the property prove not to be sufficiently positive to proceed with a further exploration on the property, we intend to seek out and acquire other North American mineral exploration properties which, in the opinion of a Geologist, offer attractive mineral exploration opportunities.  However, we may not have sufficient financing to seek out and acquire other properties, and if we did have sufficient financing, it is possible that we would be unsuccessful in seeking out an acquiring alternative exploration properties.
 
 

 
15

 
 
 
During the exploration stage of the Dunfee Property, our President will be devoting approximately 10 hours per week of his time to our business.  We do not foresee this limited involvement as negatively impacting our company over the next twelve months as all exploratory work is being performed by outside consultants. If, however, the demands of our business require more time of our president such as raising additional capital or addressing unforeseen issues with regard to our exploration efforts, he is prepared to adjust his timetable to devote more time to our business.  However, he may not be able to devote sufficient time to the management of our business, as and when needed.

Upon the event that we require additional funding, we anticipate that such funding will be in the form of equity financing from the sale of our Class A common stock.  However we cannot provide investors with any assurance that we will be able to obtain sufficient funding from the sale of our Class A common stock to fund additional phases of the exploration program, should we decide to proceed.  We believe that debt financing will not be an alternative for funding any phases in our exploration program.  The risky nature of this enterprise and lack of tangible assets places debt financing beyond the credit-worthiness by most banks or typical investors or corporate debt until such time as an economically viable mine can be demonstrated.  We do not have any arrangements in place for any future equity financing.

In the event that Diversified completes this exploration program and is successful in identifying a potential mineral deposit, we would have to spend substantial funds on additional drilling of the property and engineering studies before we would be able to determine if it’s a commercially viable mineral deposit.

Results of Operations

The following summary of our results of operations should be read in conjunction with our financial statements included herein.

Our operating results for the three months ended July 31, 2012 and 2011 are summarized as follows:

   
Three Months Ended
   
Three Months Ended
 
   
July 31, 2012
   
July 31, 2011
 
             
Revenue
 
$
-
   
$
-
 
Total Expenses
 
$
215
   
$
14,117
 
Net Loss
 
$
215
   
$
14,117
 
 
Revenues

We have not earned any revenues to date, and do not anticipate earning revenues unless we find a commercially viable mineral deposit on our property.
 
 

 
16

 
 
 
Expenses

Our expenses for the three months ended July 31, 2012 and 2011 are outlined in the table below:
 
   
Three Months Ended
   
Three Months Ended
 
   
July 31, 2012
   
July 31, 2011
 
             
Professional Fees
 
$
-
   
$
7,005
 
Filing Fees
 
$
-
   
$
-
 
Mineral Lease
 
$
-
   
$
5,000
 
General & Administrative
 
$
215
   
$
2,112
 
 
Professional Fees

Professional fees include our accounting and auditing expenses incurred in connection with the preparation of our financial statements and professional fees that we pay to our legal counsel

Mineral Lease

Mineral Lease expenses are the expenses associated with maintaining our Mineral Lease Agreement in good standing.

We incurred operating losses in the amount of $64,839 from inception on March 19, 2009 through the period ended July 31, 2012.  These operating expenses were composed of professional fees, filling fees, mineral lease fees, exploration work and other general and administrative expenses.

Going Concern

We have not attained profitable operations and are dependent upon obtaining financing to pursue any extensive exploration activities. For these reasons our auditors stated in their report on our audited financial statements that they have substantial doubt we will be able to continue as a going concern.

Financings
 
Our operations to date have been funded by equity investment. All of our equity funding has come from a private placement of our securities.
 
 

 
17

 
 
 
We closed an issue of 3,000,000 shares of Class A common stock on May 12, 2009 to our president, CEO, CFO and director, Gordon Smith, at a price of $0.005 per share.  The total proceeds received from this offering were $15,000.  These shares were issued pursuant to Section 4(2) of the Securities Act of 1933 and are restricted shares as defined in the Securities Act.  We did not engage in any general solicitation or advertising.

We closed an issue of 25,000 shares of Class A common stock on September 30, 2010 to our secretary, R. Gordon Cormie, at a price of $0.02 per share.  The total proceeds received from this offering was $500.  These shares were issued pursuant to Section 4(2) of the Securities Act of 1933 and are restricted shares as defined in the Securities Act.  We did not engage in any general solicitation or advertising.

We closed an issue of 25,000 shares of Class A common stock on September 30, 2010 to our director, Richard O’Hara, at a price of $0.02 per share.  The total proceeds received from this offering was $500.  These shares were issued pursuant to Section 4(2) of the Securities Act of 1933 and are restricted shares as defined in the Securities Act.  We did not engage in any general solicitation or advertising.

We completed an offering of 2,200,000 shares of our Class A common stock at a price of $0.02 per share to a total of thirty (30) purchasers on September 30, 2010.  The total amount we received from this offering was $44,000. The identity of the purchasers from this offering is included in the selling shareholder table set forth above.  We completed this offering pursuant Rule 903(a) and conditions set forth in Category 3 (Rule 903(b)(3)) of Regulation S of the Securities Act of 1933.

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.
 
Item 3.       Quantitative and Qualitative Disclosures About Market Risk.
 
N/A
 
Item 4.       Controls and Procedures.

As of the end of the period covered by this Report, the Company’s President, and principal financial officer (the “Certifying Officer”), evaluated the effectiveness of the Company’s “disclosure controls and procedures,” as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934. Based on that evaluation, the officer concluded that, as of the date of the evaluation, the Company’s disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed in the Company’s periodic filings under the Securities Exchange Act of 1934 is accumulated and communicated to management to allow timely decisions regarding required disclosure.
 
 

 
18

 
 
 
The Certifying Officer has also indicated that there were no changes in internal controls over financial reporting during the Company’s last fiscal quarter, and no significant changes in our internal controls or other factors that could significantly affect such controls subsequent to the date of their evaluation and there were no corrective actions with regard to significant deficiencies and material weaknesses.

Our management, including the Certifying Officer, does not expect that our disclosure controls or our internal controls will prevent all errors and fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. In addition, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the control. The design of any systems of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of these inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
 
Item 4(t).   Controls and Procedures.

The information required pursuant to item 4(t) has been provided in Item 4.















 
19

 
 
 
PART II. OTHER INFORMATION

Item 1.       Legal Proceedings

None.

Item 1(a).   Risk Factors

There have been no changes to our risk factors from those disclosed in our Amendment No. 4 to Form S-1 filed on November 22, 2011.

Item 2.       Unregistered Sales of Equity Securities

We did not issue any securities without registration pursuant to the Securities Act of 1933 during the three months ended July 31, 2012.

Item 3.       Defaults Upon Senior Securities

None.

Item 4.       Submission of Matters to a Vote of Securities Holders

No matters were submitted to our security holders for a vote during the quarter of our fiscal year ending July 31, 2012.

Item 5.       Other Information

As reported in the 8-K filed with the SEC on July 27, 2012, Gordon Smith resigned as the President, Treasurer, Chief Executive Officer, Chief Financial Officer and director of the Company on July 24, 2012.  On the same date, Gordon Cormie resigned as the Company's Secretary and Richard O'Hara resigned as the Company's director.  The above-mentioned resignations were not due to any disagreement with the Company on any matter relating to the Company's operations, policies or practices.  The positions of President, Chief Executive Officer, Chief Financial Officer, Secretary and Director were filled by Philip F. Grey.

Item 6.       Exhibits

 
 
 
 
 
 
 

 
20

 
 
 
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

DIVERSIFIED RESOURCES INC.

By:           /s/ Philip F. Grey
Philip F. Grey
President, Treasurer, Chief Executive Officer
and Chief Financial Officer
(Principal Executive Officer, Principal
Accounting Officer
And Principal Financial Officer)

Date:  September 13, 2012
 
 
 
 
 
 
 
 
 
 
 
 
 
 





 
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