UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 10-Q

 

 

[X] QUARTERLY REPORT PURSUANT SECTION 13 OR 15(D) OF THE SECURITIES

EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2013

 

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES

EXCHANGE ACT OF 1934

 

For the transition period from _______________ to _______________

 

Commission File # 333-165373

 

NORTHUMBERLAND RESOURCES, INC.

(Exact name of small business issuer as specified in its charter)

 

Nevada

(State or other jurisdiction of incorporation or organization)

 

98-0628594

(IRS Employer Identification Number)

701 N. Green Valley Pkwy.

Ste 200-258,

Henderson, NV

89074

(Address of principal executive offices)

 

    (702) 839-4029

(Issuer’s telephone number)

 

Indicate by check mark whether the registrant(1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 day. [X]  Yes  [  ] No

 

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

 

Large accelerated filer [ ]

Accelerated filer [  ]

Non-accelerated filer [ ]

Small reporting company [ X ]

 

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

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. The issuer had 62,615,770 shares of common stock and 809,400 shares of preferred stock (with 100:1 conversion and voting rights) issued and outstanding as of April 30, 2013.

 

 
 

 

 

ITEM 1. FINANCIAL STATEMENT

 

NORTHUMBERLAND RESOURCES, INC.
Balance Sheets
         
         
    March 31,   December 31,
    2013   2012
ASSETS                
                 
CURRENT ASSETS                
Cash and cash equivalents   $ 5,423     $ 1,026  
Other receivables     100,000       —    
Deposits     1,400       1,400  
                 
Total Current Assets     106,823       2,426  
                 
PROPERTY AND EQUIPMENT                
Oil and gas properties (full cost method)     1,235,426       1,327,645  
Support equipment     217,626       256,254  
Total property, plant and equipment     1,453,052       1,583,899  
Accumulated depletion and depreciation     (584,578 )     (574,618 )
Total Property, Plant and Equipment, net     868,474       1,009,281  
                 
TOTAL ASSETS   $ 975,297     $ 1,011,707  
                 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY                
                 
CURRENT LIABILITIES                
Accounts payable and accrued expenses   $ 216,196     $ 160,470  
Notes payable     123       18,123  
Convertible notes payable     —         100,000  
Derivative liability     —         11,136  
                 
Total Current Liabilities     216,319       289,729  
                 
LONG TERM LIABILITIES                
                 
Asset retirement obligations     139,023       158,976  
                 
TOTAL LIABILITIES     355,342       448,705  
                 
STOCKHOLDERS' EQUITY                
Preferred stock, 2,000,000 shares authorized at par                
   value of $0.10; 809,400 shares issued and outstanding     80,940       80,940  
Common stock, 198,000,000 shares authorized at                
   par value of $0.001; 62,615,670 and 62,229,100                
   shares issued and outstanding, respectively     62,616       62,229  
Additional paid-in capital     2,073,338       1,864,081  
Accumulated deficit     (1,596,939 )     (1,444,248 )
                 
Total Stockholders' Equity     619,955       563,002  
                 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY   $ 975,297     $ 1,011,707  

 

The accompanying notes are an integral part of these financial statements

 

 

F- 1
 

 

NORTHUMBERLAND RESOURCES, INC.
Condensed Statements of Operations
(Unaudited)
         
    For the Three Months Ended
    March 31,
    2013   2012
         
REVENUES   $ 39,318     $ 182,292  
                 
OPERATING EXPENSES                
                 
Depletion, depreciation, amortization                
  and accretion expense     63,839       204,811  
Lease operating expenses     53,911       73,537  
Professional fees     68,732       80,004  
General and administrative expenses     14,431       21,889  
                 
Total Operating Expenses     200,913       380,241  
                 
NET LOSS FROM OPERATIONS     (161,595 )     (197,949 )
                 
OTHER INCOME (EXPENSES )                
                 
Gain (loss) on derivative liability     11,136       11,962  
Interest expense     (2,232 )     (24,613 )
                 
Total Other Income (Expenses )     8,904       (12,651 )
                 
LOSS BEFORE INCOME TAXES     (152,691 )     (210,600 )
                 
PROVISION FOR INCOME TAXES     —         —    
                 
NET LOSS   $ (152,691 )   $ (210,600 )
                 
BASIC AND DILUTED LOSS                
   PER COMMON SHARE   $ (0.00 )   $ (0.00 )
                 
BASIC AND DILUTED WEIGHTED                
  AVERAGE NUMBER OF COMMON                
  SHARES OUTSTANDING     62,488,947       161,426,499  

 

The accompanying notes are an integral part of these financial statements

 

F- 2
 

NORTHUMBERLAND RESOURCES, INC.
Condensed Statements of Cash Flows
(Unaudited)
         
    For the Three Months Ended
    March 31,
    2013   2012
OPERATING ACTIVITIES                
Net loss   $ (152,691 )   $ (210,600 )
Adjustments to reconcile net loss to                
  net cash used by operating activities:                
Depreciation, depletion, amortization                
  and accretion     63,839       204,811  
Amortization of debt discount     —         23,366  
Change in derivative liability     (11,136 )     (11,962 )
Changes in operating assets and liabilities:                
Accounts receivable     —         (31,514 )
Deposits     —         (200 )
Prepaid expenses     —         (20,500 )
Accounts payable - related parties     —         —    
Accounts payable and accrued expenses     65,369       (58,809 )
                 
Net Cash Used in Operating Activities     (34,619 )     (105,408 )
                 
INVESTING ACTIVITIES                
Purchase of oil and gas properties     —         (140,400 )
Capitalized exploration and development costs     (31,341 )     —    
Purchase of well operating equipment     (11,643 )     —    
                 
Net Cash Used in Investing Activities     (42,984 )     (140,400 )
                 
FINANCING ACTIVITIES                
Common stock issued for cash     100,000       500,000  
Repayment of notes payable     (18,000 )     —    
                 
Net Cash Provided by Financing Activities     82,000       500,000  
                 
NET INCREASE IN CASH     4,397       254,192  
CASH AT BEGINNING OF PERIOD     1,026       91,551  
                 
CASH AT END OF PERIOD   $ 5,423     $ 345,743  
                 
SUPPLEMENTAL DISCLOSURES OF                
CASH FLOW INFORMATION                
                 
CASH PAID FOR:                
                 
Interest   $ —       $ —    
Income Taxes   $ —       $ —    
                 
NON-CASH FINANCING AND INVESTING ACTIVITIES   $ —       $ —    
                 
Common stock issued for debt   $ 170,996     $ —    
Sale of oil & gas properties for other receivables   $ 173,831     $ —    

 

 

The accompanying notes are an integral part of these financial statements

   

F- 3
 

 

NOTE 1 – CONDENSED FINANCIAL STATEMENTS

 

The accompanying financial statements have been prepared by the Company without audit.  In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows at March 31, 2013, and for all periods presented herein, have been made.

 

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted.  It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s December 31, 2012 audited financial statements.  The results of operations for the period ended March 31, 2013 and 2012 are not necessarily indicative of the operating results for the full year.

 

NOTE 2 - GOING CONCERN

 

The Company's financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.

 

In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management's plan is to obtain such resources for the Company by obtaining capital from management and significant shareholders sufficient to meet its minimal operating expenses and seeking equity and/or debt financing. However management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.

 

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES

 

Use of Estimates

 

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

  

Recent Accounting Pronouncements

 

The Company has evaluated recent accounting pronouncements and their adoption has not had or is not expected to have a material impact on the Company’s financial position or statements.

 

F- 4
 

Oil and Gas Properties

 

The Company uses the full cost method of accounting for oil and natural gas properties. Under this method, all acquisition, exploration and development costs, including certain payroll, asset retirement costs, other internal costs, and interest incurred for the purpose of finding oil and natural gas reserves, are capitalized. Internal costs that are capitalized are directly attributable to acquisition, exploration and development activities and do not include costs related to production, general corporate overhead or similar activities. Costs associated with production and general corporate activities are expensed in the period incurred. Proceeds from the sale of oil and natural gas properties are applied to reduce the capitalized costs of oil and natural gas properties unless the sale would significantly alter the relationship between capitalized costs and proved reserves, in which case a gain or loss is recognized.

  

NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Oil and Gas Properties (Continued)

 

Capitalized costs associated with impaired properties and capitalized costs related to properties having proved reserves, plus the estimated future development costs, and asset retirement costs under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 410 “Asset Retirement and Environmental Obligations” (FASB ASC 410), are amortized using the unit-of-production method based on proved reserves. Capitalized costs of oil and natural gas properties, net of accumulated amortization and deferred income taxes, are limited to the total of estimated future net cash flows from proved oil and natural gas reserves, discounted at ten percent, plus the cost of unevaluated properties.  Under certain specific conditions, companies could elect to use subsequent prices for determining the estimated future net cash flows. The use of subsequent pricing is no longer allowed. There are many factors, including global events that may influence the production, processing, marketing and price of oil and natural gas. A reduction in the valuation of oil and natural gas properties resulting from declining prices or production could adversely impact depletion rates and capitalized cost limitations. Capitalized costs associated with properties that have not been evaluated through drilling or seismic analysis, including exploration wells in progress, are excluded from the unit-of-production amortization. Exclusions are adjusted annually based on drilling results and interpretative analysis.

 

Sales of oil and natural gas properties are accounted for as adjustments to the net full cost pool with no gain or loss recognized, unless the adjustment would significantly alter the relationship between capitalized costs and proved reserves. If it is determined that the relationship is significantly altered, the corresponding gain or loss will be recognized in the statements of operations.

  

Costs of oil and gas properties are depleted using the unit-of-production method. For the three months ended March 31, 2013, the Company recognized $48,143 of depletion expense related to oil and gas production.

 

Ceiling Test

 

Ceiling Test  - In applying the full cost method and in accordance with ASC 932, the Company performs an impairment test (ceiling test) at each reporting date, whereby the carrying value of property and equipment is compared to the value of its proved reserves discounted at a ten percent interest rate of future net revenues, based on current economic and operating conditions, plus the cost of properties not being amortized, plus the lower of cost or fair market value of unproved properties included in costs being amortized, less the income tax effects related to book and tax basis differences of the properties. Through March 31, 2013, $13,948 of impairment expense has been recorded in connection with the full cost ceiling test calculation.

 

F- 5
 

Revenue Recognition

 

Revenues from the sale of oil and natural gas are recognized when the product is delivered at a fixed or determinable price, title has transferred, and collectability is reasonably assured.  For oil sales, this occurs when the customer takes delivery of oil from the operators’ storage tanks.

 

Asset Retirement Obligations

 

The Company records the fair value of a liability for an asset retirement obligation in the period in which it is incurred and a corresponding increase in the carrying amount of the related long-lived asset. The liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. If the liability is settled for an amount other than the recorded amount, a gain or loss is recognized.

   

NOTE 4 – OIL AND GAS PROPERTIES

 

On February 9, 2012, the Company purchased a 30 percent gross working interest and a 26.25 percent net revenue interest in six unproved oil and gas leases in Cowley County, Kansas for $140,400. The six leases combined contain approximately 1,025 acres. Subsequent to purchase the company capitalized $11,934 in support equipment and $38,519 in development costs.

 

On May 14, 2012 the Company purchased a 35 percent gross working interest and a 28 percent net revenue interest in 98 acres of unproved oil and gas leases in Stafford County, Kansas for $12,569. Concurrent with this purchase, the Company paid $22,637 in additional development costs, and $66,181 for support equipment, for an aggregate purchase price of $101,387. As of December 31, 2012, pursuant to a ceiling test analysis, the Company recognized an impairment expense on these leases in the amount of $6,484.

 

On May 14, 2012 the Company purchased a 13 percent gross working interest and a 10 percent net revenue interest in 70 acres of unproved oil and gas leases in Butler County, Kansas for $17,208. Concurrent with this purchase, the Company paid $27,401 in additional development costs, and $17,542 for support equipment, for an aggregate purchase price of $62,151. Subsequent to purchase the Company capitalized $479 in support equipment. As of December 31, 2012, pursuant to a ceiling test analysis, the Company recognized an impairment expense on these leases in the amount of $7,464.

 

On February 5, 2013 the Company sold a 30 percent gross working interest and a 30 percent net revenue interest in six oil and gas leases located in Pratt County, Kansas for $100,000. This amount is classified as other receivables on the Company’s balance sheet at March 31, 2013. Pursuant to this transaction the Company transferred a 30 percent interest in all related support equipment and asset retirement obligations.

 

During the three months ended March 31, 2013 the Company incurred certain workover and other improvements to certain of its wells. The Company paid $58,190 for these improvements, which have been added to the book value of the wells.

 

Through March 31, 2013, the Company established an asset retirement obligation of $112,652 for the wells acquired by the Company, which was capitalized to the value of the oil and gas properties. The wells have an estimated useful life of 25 years. Total accretion expense on the asset retirement obligation was $26,371, leaving an ending balance of $139,023 at March 31, 2013.

 

F- 6
 

NOTE 5 – CONVERTIBLE NOTE PAYABLE

 

On September 28, 2011 the Company borrowed $100,000 from an unrelated third party entity in the form of a convertible note. The note bears interest at a rate of five percent per annum, with principal and interest due in full on September 24, 2012. The note is convertible at any time, at the option of the note holder, into shares of the Company’s common stock, at ten percent below the current market price on the date of conversion. For purposes of the note, “current market price” is defined as the average of the lowest three daily closing prices per share for the five business days prior to the date of conversion.

 

Pursuant to this conversion feature, the Company recognized a derivative liability in the amount of $93,976 on the note date. At December 31, 2011, the derivative liability was revalued at $103,581, and at December 31, 2012 the derivative liability was revalued at $11,136. This led to the Company recording a gain on derivative liability of $92,445 for the period ended December 31, 2012. On March 17, 2013 the derivative liability was revalued at $-0-, resulting in a gain on derivative liability of $11,136 for the three months ended March 31, 2013.

 

On March 17, 2013 the holder of the note elected to convert the entire face value of the note of $100,000, along with $9,644 in accrued interest, into 219,903 shares of common stock at $0.50 per share.

 

NOTE 6 – STOCKHOLDERS’ EQUITY

 

On March 21, 2012, the Company issued 833,333 shares of common stock at $0.60 per share for cash proceeds of $500,000 and 10,000 shares of common stock at $0.52 per share for services valued at $5,200.

 

On April 1, 2012, the Company appointed a new member of its Board of Directors. The Company has agreed to pay the director $1,000 per month. In addition, the Company has also agreed to issue the new director 10,000 shares of $0.001 par value common stock at $0.52 per share, for services valued at $5,200. The price per share of common stock issued for services was based on the trading price of the Company’s common stock on the dates such services were performed.

 

During the year ended December 31, 2012, the Company increased its authorized $0.001 par value common stock to 198,000,000 shares, and authorized 2,000,000 preferred shares with 1-to-100 voting rights and conversion ratio from preferred to common shares.

 

During the year ended December 31, 2012, the Company converted 80,940,000 shares of outstanding common stock into 809,400 shares of preferred stock. During the same fiscal period, the Company cancelled 18,999,000 shares of common stock.

 

During the three months ended March 31, 2013 the Company issued 219,903 shares of common stock upon the conversion of a $100,000 convertible note payable (see Note 5) at $0.50 per share. The Company also issued 166,667 shares of common stock for cash at $0.60 per share, resulting in total cash proceeds of $100,000.

 

NOTE 7 – SUBSEQUENT EVENTS

 

In accordance with ASC 855-10, the Company’s management has reviewed all material events and there are no additional material subsequent events to report.

 

F- 7
 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

 

Forward-looking statements

 

This quarterly report on Form 10-Q contains “forward-looking statements” relating to the registrant which represent the registrant’s current expectations or beliefs, including statements concerning registrant’s operations, performance, financial condition and growth.  For this purpose, any statement contained in this quarterly report on Form 10-Q that are not statements of historical fact are forward-looking statements. Without limiting the generality of the foregoing, words such as “may”, “anticipation”, “intend”, “could”, “estimate”, or “continue” or the negative or other comparable terminology are intended to identify forward-looking statements. These statements by their nature involve substantial risks and uncertainties, such as credit losses, dependence on management and key personnel and variability of quarterly results, ability of registrant to continue its growth strategy and competition, certain of which are beyond the registrant’s control. Should one or more of these risks or uncertainties materialize or should the underlying assumptions prove incorrect, actual outcomes and results could differ materially from those indicated in the forward-looking statements.

 

The following discussion and analysis should be read in conjunction with the information set forth in the Company’s audited financial statements for the period ended December 31, 2012.

 

Overview

 

We are in the business of precious minerals exploration and oil and gas exploration and production.  The Company was incorporated in the State of Nevada on June 22, 2009.

 

On March 31st, 2011 Northumberland (NHUR) was a successful bidder at the Evenson Oil Production Auction in Wichita, Kansas. NHUR acquired the Mason, Thompson, Keyes and Harrell leases inclusive of all production and improvements. The leases were purchased at auction from Reh Oil & Gas LLC. The leases of 280 acres located in the Sawyer field in Pratt County Kansas and 120 acres located in the Wildcat field, filed in Pratt County Kansas, were purchased for Two Hundred Sixty Thousand Dollars. 

 

The Company’s Articles of Incorporation are being amended to reflect a decrease in the number of common shares authorized from Two Billion (2,000,000,000) to One Hundred Ninety Eight Million (198,000,000) and the creation of a preferred stock in the amount of Two Million (2,000,000) shares authorized with voting and conversion rights of 1 for 100. The Amendment was adopted pursuant to written consent of stockholders holding a majority of the voting power of the outstanding capital stock of the Company.

 

On March 1, 2011, the Company purchased a 100 percent working interest on a 70 percent net revenue interest in certain oil and gas leases and related well operating equipment in Pratt County, Kansas for $260,000. Of this total, $149,000 was allocated to oil and gas leases, and the remaining $111,000 was allocated to the purchased well operating equipment. Subsequent to acquiring the interests in these leases the Company has incurred $23,310 of exploration costs and $60,702 of development costs which have been capitalized to the value of oil and gas properties.

 

On June 11, 2011, the Company purchased a 30 percent working interest on an 24.45 percent net revenue interest in an unproved oil and gas well located in Cowley County, KS. The Company paid $17,220 for the lease on 640 acres at $85 per acre. Subsequent to acquiring the interest in these wells the Company incurred an additional $119,350 of exploration costs and $110,531 of development costs on the property which have been capitalized to the value of oil and gas properties.

 

On July 7, 2011, the Company purchased a 20 percent working interest on an 16.41 percent net revenue interest in a proved and producing oil and gas well located in Cowley County, KS. The Company paid $45,000 to acquire the leases and incurred an additional $26,881 of development costs which were capitalized to the value of oil and gas properties under.

 

1
 

On September 27, 2011, the Company purchased two leases and related well operating equipment located in Pratt County for $72,500. Of this total, $22,500 was allocated to oil and gas leases, and the remaining $50,000 was allocated to the purchased well operating equipment. The leases carry a 100 percent working interest of 70 percent net revenue interest. Subsequent to purchase the Company capitalized $990 in exploration costs and $18,363 in development costs relating to these leases.

 

On September 27, 2011, the Company also purchased a 23 percent interest in a net revenue interest ranging from 18.66 to 19.65 percent in three leases in Barton and Stafford Counties, Kansas for $220,800. The three leases combined contain slightly more than 564 net acres. In total there are seven active wells located in these leases. There are four oil producing wells, two disposal wells and one injection well. Subsequent to purchase the Company capitalized $2,326 in development costs relating to these leases.

 

On December 19, 2011, the company purchased a 15 percent interest in net revenue interests ranging from 12.675 percent to 13.125 percent in four leases in Cowley County, Kansas for $75,600. The four leases combined contain approximately 720 acres. Subsequent to purchase the Company capitalized $65,741 in development costs relating to these leases.

 

On February 9, 2012, the Company purchased a 30 percent gross working interest and a 26.25 percent net revenue interest in six unproved oil and gas leases in Cowley County, Kansas for $140,400. The six leases combined contain approximately 1,025 acres. Subsequent to purchase the company capitalized $1,488 in support equipment and $26,351 in development costs.

 

On May 14, 2012 the Company purchased a 35 percent gross working interest and a 28 percent net revenue interest in 98 acres of unproved oil and gas leases in Stafford County, Kansas for $12,569. Concurrent with this purchase, the Company paid $22,673 in additional development costs, and $66,181 for support equipment, for an aggregate purchase price of $101,387. As of December 31, 2012, pursuant to a ceiling test analysis, the Company recognized an impairment expense on these leases in the amount of $6,484.

 

On May 14, 2012 the Company purchased a 13 percent gross working interest and a 10 percent net revenue interest in 70 acres of unproved oil and gas leases in Butler County, Kansas for $17,208. Concurrent with this purchase, the Company paid $27,401 in additional development costs, and $18,021 for support equipment, for an aggregate purchase price of $62,630. Subsequent to purchase the Company capitalized $479 in support equipment. As of December 31, 2012, pursuant to a ceiling test analysis, the Company recognized an impairment expense on these leases in the amount of $7,464.

 

On February 5, 2013 the Company sold a 30 percent gross working interest and a 30 percent net revenue interest in six oil and gas leases located in Pratt County, Kansas for $100,000. This amount is classified as a note receivable at March 31, 2013. Pursuant to this transaction the Company transferred a 30 percent interest in all related support equipment and asset retirement obligations.

 

At March 31, 2013, the Company has established an asset retirement obligation of $112,652 for all oil and gas properties purchased since inception, which has been capitalized to the value of the oil and gas properties. The wells have an estimated useful life of 25 years. Accretion expense recorded on these obligations since inception totals $26,371, leaving a balance of 139,023 at March 31, 2013.

 

Management did not renew four mineral claims, collectively named the “BARD 1-4 Property,” situated in the Paymaster Canyon area of Esmeralda County in west-central Nevada. We do not have any current plans to acquire interests in additional mineral properties, though we may consider such acquisitions in the future.  

 

There was no assurance that a commercially viable precious minerals deposit existed on the BARD 1-4 Property and further development was abandoned.

 

Effective April 1, 2012, Chris Knowles was elected as an additional director of the Company, bringing the total number of directors to three. On January 1, 20013 Mr. Knowles resigned as Director of the Company.

 

On January 7, 2013, Ryan Kerr was appointed to serve as a replacement director in the stead of Chris Knowles, to serve until the next regularly scheduled Board of Directors election by shareholders.

2
 

Ryan Kerr, Director

Mr. Kerr currently manages Inland Oil Corp., his family-owned business. Mr. Kerr has over 15 years experience in locating, producing, completing and general operations in the oil and gas industry. Mr. Kerr has successfully drilled and completed hundreds of wells throughout the Mid-continent region and is actively involved with development and operations of fields in this region. Mr. Kerr’s extensive experience in oil and gas exploration and production is furthered as an exploration geologist where he has consulted on several water-flood and infill drilling projects throughout Oklahoma, Kansas, North Dakota, Wyoming, New Mexico, Texas, and California. Currently, Mr. Kerr has been heading drilling programs for several operators in Oklahoma, as well as design and implementation of a Nitrogen gas flood in Wagoner County Oklahoma in the Stone Bluff Field. This project consisted of flooding 1,200+ - acres with the producing interval from the Dutcher Sand zone at a depth of 1250’feet. Production since the start of the nitrogen injection flood has been increased from the formation at a rate of 1 MMCF per day. Mr. Kerr also serves on the Board of Directors of Tiger Oil and Energy, Inc (OTC BB TGRO).

 

On April 27, 2012, the Company entered into a Common Stock Purchase Agreement with ThorFinn Partners, a private investment group, with such agreement being effective March 21, 2012. As previously disclosed by the Company in its Annual Report filed on Form 10-K for the year ended December 31, 2011, the Company received a $500,000 subscription for common shares at a price of $0.60 per share on March 21, 2012. This amount was received from ThorFinn Partners in anticipation of a broader financing arrangement as detailed in the Common Stock Purchase Agreement filed herewith. Under the terms of the Common Stock Purchase Agreement, until March 21, 2013, ThorFinn Partners may purchase common stock of the Company at a price of $0.60 per share in tranches of up to $500,000. The total financing amount is up to $3,000,000, including and incorporating the initial $500,000 tranche that closed on March 21, 2012. Closings of additional tranches are conditional upon the mutual agreement of the parties. This agreement was extended to March 21, 2014 by means of an addendum to the agreement.

  

Plan of Operation

 

Our plan of operations is to further develop our recent oil and gas acquisitions in Kansas and carry out further exploration and acquisition in the oil and gas sectors. NHUR has upgraded the facilities on its acquired Mason, Thompson, Keyes and Harrell Sanders, Asmussen and Carver leases with the objective to improve current oil and gas production.

 

Results of Operations for the Three Months Ended March 31, 2013 and 2012

 

Revenues

 

We had revenues of $39,318 during the three months ended March 31, 2013, compared to $182,292 in revenues during the corresponding period in 2012. Revenues were from oil and gas production occurring at previously purchased property sites. The decrease in revenues when compared the the corresponding period in 2012 is due primarily to a decrease in oil and gas production.

 

Expenses

 

We incurred operating expenses in the amount of $200,913 during the three months ended March 31, 2013, compared to $380,241 for the corresponding period in 2012. The 2013 operating expenses consisted primarily of $14,431 in general and administrative expenses such as office expenses, $68,732 in professional fees, $53,911 in lease operating expenses, $63,839 in depletion, depreciation, amortization, and accretion expenses. This compares to lease operating costs of $73,537, professional fees of $80,004, and general and administrative expenses of $21,889, and $204,811 in depletion, depreciation, amortization and accretion expense during the corresponding period in 2012. We expect our operating costs to continue to increase in the next 12 months.

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Net Loss

 

We incurred a net loss of $152,691 during the three months ended March 31, 2013, compared to a net loss of $210,600 during the corresponding period in 2012. This translates to a loss per share of $0.00 and $0.00 for the three months ended March 31, 2013 and 2012, respectively.

 

LIQUIDITY AND CAPITAL RESOURCES

 

Since its inception, the Company has financed its cash requirements from the sale of common stock. Uses of funds have included activities to establish our business, professional fees and other general and administrative expenses.

 

The Company’s principal sources of liquidity as of March 31, 2013 consisted of $5,423 in cash.

 

We believe the Company will have adequate resources to implement its strategic objectives in upcoming quarters. Due to our lack of operating history and present inability to generate revenues, however, our auditors have stated their opinion that there currently exists substantial doubt about our ability to continue as a going concern.

 

Material Events and Uncertainties

 

Our operating results are difficult to forecast. Our prospects should be evaluated in light of the risks, expenses and difficulties commonly encountered by comparable exploration stage companies.

 

There can be no assurance that we will successfully address such risks, expenses and difficulties.

 

On March 1, 2011, the Company purchased a 100 percent working interest on a 70 percent net revenue interest in certain oil and gas leases and related well operating equipment in Pratt County, Kansas for $260,000. Of this total, $149,000 was allocated to oil and gas leases, and the remaining $111,000 was allocated to the purchased well operating equipment. Subsequent to acquiring the interests in these leases the Company has incurred $23,310 of exploration costs and $60,702 of development costs which have been capitalized to the value of oil and gas properties.

 

On June 11, 2011, the Company purchased a 30 percent working interest on an 24.45 percent net revenue interest in an unproved oil and gas well located in Cowley County, KS. The Company paid $17,220 for the lease on 640 acres at $85 per acre. Subsequent to acquiring the interest in these wells the Company incurred an additional $119,350 of exploration costs and $110,531 of development costs on the property which have been capitalized to the value of oil and gas properties.

 

On July 7, 2011, the Company purchased a 20 percent working interest on an 16.41 percent net revenue interest in a proved and producing oil and gas well located in Cowley County, KS. The Company paid $45,000 to acquire the leases and incurred an additional $26,881 of development costs which were capitalized to the value of oil and gas properties under.

 

On September 27, 2011, the Company purchased two leases and related well operating equipment located in Pratt County for $72,500. Of this total, $22,500 was allocated to oil and gas leases, and the remaining $50,000 was allocated to the purchased well operating equipment. The leases carry a 100 percent working interest of 70 percent net revenue interest. Subsequent to purchase the Company capitalized $990 in exploration costs and $18,363 in development costs relating to these leases.

 

On September 27, 2011, the Company also purchased a 23 percent interest in a net revenue interest ranging from 18.66 to 19.65 percent in three leases in Barton and Stafford Counties, Kansas for $220,800. The three leases combined contain slightly more than 564 net acres. In total there are seven active wells located in these leases. There are four oil producing wells, two disposal wells and one injection well. Subsequent to purchase the Company capitalized $2,326 in development costs relating to these leases.

 

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On December 19, 2011, the company purchased a 15 percent interest in net revenue interests ranging from 12.675 percent to 13.125 percent in four leases in Cowley County, Kansas for $75,600. The four leases combined contain approximately 720 acres. Subsequent to purchase the Company capitalized $65,741 in development costs relating to these leases.

 

On February 9, 2012, the Company purchased a 30 percent gross working interest and a 26.25 percent net revenue interest in six unproved oil and gas leases in Cowley County, Kansas for $140,400. The six leases combined contain approximately 1,025 acres. Subsequent to purchase the company capitalized $1,488 in support equipment and $26,351 in development costs.

 

On May 14, 2012 the Company purchased a 35 percent gross working interest and a 28 percent net revenue interest in 98 acres of unproved oil and gas leases in Stafford County, Kansas for $12,569. Concurrent with this purchase, the Company paid $22,673 in additional development costs, and $66,181 for support equipment, for an aggregate purchase price of $101,387. As of December 31, 2012, pursuant to a ceiling test analysis, the Company recognized an impairment expense on these leases in the amount of $6,484.

 

On May 14, 2012 the Company purchased a 13 percent gross working interest and a 10 percent net revenue interest in 70 acres of unproved oil and gas leases in Butler County, Kansas for $17,208. Concurrent with this purchase, the Company paid $27,401 in additional development costs, and $18,021 for support equipment, for an aggregate purchase price of $62,630. Subsequent to purchase the Company capitalized $479 in support equipment. As of December 31, 2012, pursuant to a ceiling test analysis, the Company recognized an impairment expense on these leases in the amount of $7,464.

 

On February 5, 2013 the Company sold a 30 percent gross working interest and a 30 percent net revenue interest in six oil and gas leases located in Pratt County, Kansas for $100,000. This amount is classified as a note receivable at March 31, 2013. Pursuant to this transaction the Company transferred a 30 percent interest in all related support equipment and asset retirement obligations.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

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

 

Item 4. Controls and Procedures

 

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

 

As of March 31, 2013, under the direction of the Chief Executive Officer and Chief Financial Officer, the Company evaluated the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13a — 15(e) under the Securities Exchange Act of 1934, as amended.  Based on the evaluation of these controls and procedures required by paragraph (b) of Sec. 240.13a-15 or 240.15d-15 the disclosure controls and procedures are not effective. The company intends, prior to the next fiscal year as the company's finances improve, to hire additional accounting staff and implement additional controls.

 

The Company maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed by us in our reports filed under the securities Exchange Act, is recorded, processed, summarized, and reported within the time periods specified by the SEC’s rules and forms.  Disclosure controls are also designed with the objective of ensuring that this 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.

 

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CHANGES IN INTERNAL CONTROLS.

 

There was no change in our internal controls or in other factors that could affect these controls during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect our internal control over financial reporting.

 

The Company has not taken any steps at this time to address these weaknesses but will formulate a plan before fiscal year ending December 31, 2013.

PART II – OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

There is no litigation pending or threatened by or against us.

 

ITEM 1A. RISK FACTORS

 

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

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

During the past five years, Northumberland Resources Inc. has sold the following securities which were not registered under the Securities Act: 

 

We issued 70,000,000 (post-split) shares of restricted common stock at a price of $0.0001 per share through a Section 4(2) exemption to Geoffrey Scales our founder, officer and director on September 8, 2009 for cash consideration of $3,500.

 

Mr. Scales is a sophisticated investor and was in possession of all material information relating to the Company. Further, no commissions were paid in connection with the sale of the shares and no general solicitation was made.

 

On November 30, 2009 the Company issued 42,550,000 (post-split) of its common stock for $42,550 cash.

 

On January 17, 2011 the Company issued 7,200,000 (post-split) shares of its common stock to a consulting company for services provided valued at $7,200. The fair value of the shares was determined based on the most recent cash sale price of common stock of $0.001 per share

 

On February 8, 2011 the Company issued 800,000 (post-split) shares of its common stock each to two officers of the Company for services provided valued at $800. The fair value of the shares was determined based on the most recent cash sale price of common stock of $0.001 per share

 

On March 20, 2011 the Company issued 10,909,100 (post-split) shares of its common stock with proceeds to the Company of $300,000.

 

On April 1, 2011 the Company issued 7,200,000 (post-split) shares of its common stock to a consulting company for services provided valued at $198,000. The fair value of the shares was determined based on the most recent cash sale price of common stock of $0.0275 per share

 

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On May 28, 2011 the Company issued 1,818,180 (post-split) shares of its common stock with proceeds to the Company of $50,000.

 

On June 10, 2011 the Company issued 18,181,120 (post-split) shares of its common stock with proceeds to the Company of $500,000.

 

On October 3, 2011 the Company issued 2,666,667 shares of its common stock with proceeds to the Company of $400,000.

 

On April 27, 2012, the Company entered into a Common Stock Purchase Agreement with ThorFinn Partners, a private investment group, with such agreement being effective March 21, 2012. As previously disclosed by the Company in its Annual Report filed on Form 10-K for the year ended December 31, 2012, the Company received a $500,000 subscription for the issuance of 833,333 shares of common shares at a price of $0.60 per share on March 21, 2012. This amount was received from ThorFinn Partners in anticipation of a broader financing arrangement as detailed in the Common Stock Purchase Agreement filed herewith. Under the terms of the Common Stock Purchase Agreement, until March 21, 2013, ThorFinn Partners may purchase common stock of the Company at a price of $0.60 per share in tranches of up to $500,000. The total financing amount is up to $3,000,000, including and incorporating the initial $500,000 tranche that closed on March 21, 2012. Closings of additional tranches are conditional upon the mutual agreement of the parties. This agreement was extended to March 21, 2014 by means of an addendum to the agreement.

 

On April 1, 2012 the Company issued 10,000 shares of its common stock for services of $5,200. 

On September 28, 2011 the Company entered into a convertible debenture agreement with an unaffiliated corporation at five percent and was originally due September 24, 2012. The conversion is at the average of the lowest price the company’s share trade five days previous to the date of the conversion. The face value of the debenture is $100,000.   On January 17, 2013 the Company issued 219,903 shares of its common stock for conversion of debt.

On February 15, 2013 we received $100,000 from ThorFinn Partners for the issuance of 166,667 shares of the Company’s stock at $0.60 per share. These shares have not yet been issued.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

The Company has no senior securities outstanding.

 

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

 

During the quarter ended September 30, 2012, a majority of the shareholders approved the change to the number of common shares from 2,000,000,000 to 198,000,000 common shares and 2,000,000 preferred shares. The preferred shares have a 1 to 100 voting and conversion ratio preferred to common.

  

ITEM 5. OTHER INFORMATION

 

None 

 

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ITEM 6. EXHIBITS

 

EXHIBIT INDEX

 

Number Exhibit Description
3.1 Articles of Incorporation of Northumberland Resources, Inc.*
3.2 Bylaws of Northumberland Resources, Inc.*
3.3 Certificate of Change with Nevada Secretary of State. Incorporated by reference in 8K filed 9/16/11.
10.0 Materials Contracts-leases and ThorFinn documents . Incorporated by reference in 10Q filed 5/21/12.
10.1 Purchase Agreement and Investors Rights Agreement with Thorfinn Partners. Incorporated by reference in 8K filed 5/02/12.
10.2 Property acquisitions. Incorporated by reference in 8K filed 10/03/11 and August 14, 2012.
10.3 Convertible Debenture September 26, 2011 Incorporated by reference in 10Q/a filed 11/25/11.
10.4 Addendum to ThorFinn Partners Purchase Agreement dated 3/19/13.
14.1 Code of Ethics, Corporate Charters and Governances. Incorporated by reference in 8K filed 5/02/12.
31.1 Certificate of principal executive officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certificate of principal financial officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certificate of principal executive officer and principal financial officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

*    Filed as an exhibit to our registration statement on Form S-1 filed March 9, 2010 and incorporated herein by this reference

 

 

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SIGNATURES

 

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

 

NORTHUMBERLAND RESOURCES, INC.   
     
/s/   Fortunato Villamagna    

Fortunato Villamagna

President (Principal Executive Officer)

 

 

/s/  Peter Hewitt

Peter Hewitt

Secretary, CFO (Principal Accounting Officer)

 

May 17, 2013

 

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