|• 10-Q • EX-31 • EX-31 • EX-32|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2012
☐ TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 333-148546
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting Company. See the definitions of “large accelerated filed,” “accelerated filer” and “smaller reporting Company” in Rule 12b-2 of the Exchange Act.
Indicate by check mark whether the registrant is a shell Company (as defined in Rule 12b-2 of the Exchange Act. Yes ☐ No ☑
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
As of August 5, 2012, the issuer had 156,311,111 shares of common stock outstanding.
This Form 10-Q for the quarterly period ended June 30, 2012 contains forward-looking statements that involve risks and uncertainties. Forward-looking statements in this document include, among others, statements regarding our capital needs, business plans and expectations. Such forward-looking statements involve assumptions, risks and uncertainties regarding, among others, the success of our business plan, availability of funds, government regulations, operating costs, our ability to achieve significant revenues, our business model and products and other factors. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expect”, “plan”, “intend”, “anticipate”, “believe”, “estimate”, “predict”, “potential” or “continue”, the negative of such terms or other comparable terminology. In evaluating these statements, you should consider various factors, including the assumptions, risks and uncertainties set forth in reports and other documents we have filed with or furnished to the SEC. These factors or any of them may cause our actual results to differ materially from any forward-looking statement made in this document. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding future events, our actual results will likely vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. The forward-looking statements in this document are made as of the date of this document and we do not intend or undertake to update any of the forward-looking statements to conform these statements to actual results, except as required by applicable law, including the securities laws of the United States.
TABLE OF CONTENTS
QUARTER ENDED JUNE 31, 2012
Item 1: Financial Statements
NSU RESOURCES INC
(formerly BIO-CARBON SOLUTIONS INTERNATIONAL, INC.)
June 30, 2012 and 2011
1. Basis of Presentation
The accompanying unaudited interim financial statements of NSU Resources Inc f/k/a/ Bio-Carbon Solutions International Inc, (collectively referred to herein as “NSU Resources Inc” “NSU”, or the “Company”), have has been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited financial statements for the period ended December 31, 2011 and notes thereto contained in the Company’s Form 10-K filed with the SEC on April 16, 2012. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for fiscal 2011 as reported in the form 10-K have been omitted.
2. Going Concern
Although planned principal activities have begun, NSU Resources has generated minimal revenues of $5,792 to June 30, 2012. The Company had an accumulated deficit of $2,435,158. These matters raise substantial doubt about the Company’s ability to continue as a going concern. Continuation of NSU Resource’s existence depends upon its ability to obtain additional capital. Management’s plans in regards to this matter including raising additional equity financing and borrowing funds under a private credit facility and/or other credit sources. These financial statements do not include any adjustments that might result from the outcome of this uncertainty. During the reporting period, the Company has made contacts with various clients for the purpose of generating carbon assets. Also the company has been servicing its current engagement contracts with Sierra Gold Corporation and with companies in Ontario. As financial rewards from these contracts are based on success fees, no receivable has been generated from the execution of these contracts. Management has engaged in discussed for private placements and loans to support the operations of the company. The global recession and uncertainty on the stock markets has hampered the development of carbon projects forcing the company to seek the co-development of carbon opportunities with other activities that may generate revenues. Emphasis has been toward marrying carbon and mining, construction and energy efficient housing development opportunities.
3. Significant Accounting Policies
Use of Estimates
The preparation of financial statements, in conformity with generally accepted accounting principles in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.Cash Equivalents
The Company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents.
Prior Period Conformity
The Company has reclassified balances in the prior period financial statements for conformity with the current period for comparison purposes.
NSU RESOURCES INC
(formerly BIO-CARBON SOLUTIONS INTERNATIONAL, INC.)
Notes to Financial Statements
June 30, 2012 and 2011
3. Significant Accounting Policies (continued)
The Company accounts for income taxes under the asset and liability method, where deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
At June 30, 2012, there were no uncertain tax positions that require accrual.
Net Income (Loss) Per Share
Basic loss per share is computed by dividing net income, or loss, by the weighted average number of shares of common stock outstanding for the period. Diluted earnings (loss) per share is computed by dividing net income, or loss, by the weighted average number of shares of common stock outstanding for the period.
Because the Company offered no option or other convertible debt instrument issued, as of June 30, 2012 and 2011, basic and diluted loss per share was the same as there were no outstanding instruments having a dilutive effect.
Recently Issued Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board ("FASB") or other standard setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise discussed, we believe that the impact of recently issued standards that are not yet effective will not have a material impact on our financial position or results of operations upon adoption.
4. Related Party Transactions
No salaries were paid to directors or executives during the six months ended June 30, 2012.
From inception to June 30 2012, the Company received loans from a related party totaling $25,976 to fund operations. These loans are non-interest bearing, due on demand and as such is included in current liabilities. Imputed interest as been considered but was determined to be immaterial to the financial statements as a whole.
In January 2012 the Company has generated a receivable of $5,792 from one of its clients. This receivable has been assigned to GSN Dreamworks, a company owed by the CEO of the Company to cover past expenses made on behalf of the company.
On April 20, 2012 NSU Resources Inc (the “Company”) entered into a sales agreement with Great Rock Development Corporation for the sale of Gold mineral rights of the Shatter Lake and Byers Brook claims of the Cobequid County of Nova Scotia, Canada in exchange for 75,000,000 common shares of Great Rock Development Corporation of which Luc C Duchesne is a member of the Board of Directors. Great Rock Development Corporation has yet to issue the 75,000,000 common shares and the value thereof is carried as a receivable on the balance sheet as a result.
There were no other related party transactions in the quarter.
5. Stockholders’ Equity: Common and Preferred Stock
The authorized capital stock of our Company consists of 275,000,000 shares of common stock, par value $0.001 per share, of which there are currently 156,311,111 issued and outstanding, and 5,000,000 shares of preferred stock, par value $0.001 per share, of which 5,000,000 shares have been designated and issued as Class A Preferred Shares.
NSU RESOURCES INC
(formerly BIO-CARBON SOLUTIONS INTERNATIONAL, INC.)
Notes to Financial Statements
June 30, 2012 and 2011
6. Technology Licenses
On January 14, 2011, the Company entered into a License Agreement with 1776729 Ontario Corporation (the “1776729 License”), a privately owned corporation registered under the Laws of Ontario. Pursuant to the 1776729 License, the Company was granted an exclusive, non-transferable, and irrevocable right to develop and commercialize certain intellectual property that will be used in developing carbon credits from forested lands. The intellectual property consists of knowledge pertaining to the registration of carbon offsets or carbon credits from the biological carbon pools contained in ecosystems (mainly forest ecosystems). Carbon pools can then be conveyed into a new form of security, termed carbon credits, which are bought by carbon emitters who are compelled to reduce their carbon emissions through legislation, or carbon emitters who may voluntarily engage in carbon trading for the purpose of increasing their environmental stewardship or for publicity purposes. Under the 1776729 License the Company must pay a royalty of 6 % of its gross annual sales to 1776729. In addition, the Company has agreed to pre-pay the royalty on the first $15,000 of revenue to be earned under the 1776729 License, which will be paid by the issuance of 4,000,000 of the Company’s Common Stock to 1776729 Ontario Corporation This permitted the Company to further advance business activities by providing carbon development services as well as carbon development of its own projects under plans in addition to carbon accounting services (see Section 2.02). 1776729 Ontario Corporation is owned fully by Dr Luc C Duchesne, who was then appointed CEO and Director of the Company on January 14, 2011. This transaction was spearheaded by Mr. John Wilkes who occupied the role of CEO of the Company. There was no additional compensation to Mr. Wilkes nor were there third parties involved. Moreover, this transaction also builds on a previous acquisition from Lacey Holdings, which took place on November 4, 2011.
7. Subsequent Events
On July 10, 2012, the company retained ProEdge Media Corp for 2 years for a commercial value of $30,000 in exchange for 225,000 common shares of NSU Resources together with 10,000 warrants exercisable at $0.25 and 10,000 warrants exercisable at $0.50 before July 10, 2014.
The Company has restated its statement of operations and statement of cash flows for the six months ended June 30, 2011 after reversing previously recorded compensation for our CEO. This had the following impact on the financial statements:
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation. Shareholders’ Equity
Plan of Operations
NSU Resources, Inc. is a mineral exploration and carbon development company. Our mission is to become a vertically integrated provider of Rare Earth Elements using carbon solutions. We are targeting growth from the acquisition of mineral and carbon rights worldwide.
Our strategic growth plan:
From Q1-2012 to Q4-2013 NSU Resources, Inc will pursue expansion in the form of various acquisitions that are pertinent to its strategic vision for aggressive growth. Specific deliverables include and are not limited to:
1. The creation of a business plan for the exploitation of Rare Earth Elements from its 4,200 acres of rare earth claims in the Cobequid Fault Area of Nova Scotia, Canada. Said claims are adjacent to or in the vicinity of claims or exploration projects by other mineral exploration companies in the Cobequid Highlands. Reports of the occurrence of Rare Earth Elements have been made with the Nova Scotia Ministry of Natural Resources by exploration companies in the vicinity. Rare Earth Elements are experiencing rapidly increasing demand for use in green technologies from consumer electronics, electric and hybrid vehicles and power storage for alternative energy sources such as wind and solar. For example the emergence of third generation solar cells with multispectral capabilities and with >40% efficiencies will create significant growth possibilities for the industry. Companies with Rare Earth Elements are re-emerging as a strategic investment opportunity. The first wave started in early 2010 when China began rationing its export of Rare Earth Elements, which led to the emergence of junior miners in the Rare Earths Elements industry.
2. The completion and proving of its technology for the extraction of rare earth minerals using a combination of methodologies that were first developed for the purification of rare chemicals from living tissues. The most exciting aspect on the discovery of Rare Earth Ore minerals in the Cobiquid fault area is the ratio between Heavy Rare Earth Ores (HREO) to the Light Rare Earth Ores (LREO). This is especially significant considering the much greater market value of HREO as compared to LREO. In almost all analyses of the closely related site of Debert Lake the ratio was near or greater than 50% (From Sears 2011). The high levels of HREO over LREO suggests that that a mining venture might be economically feasible, provided the costs of ore extraction are in line with the costs of competing mines. The company plans to adapt, prove and patent its unique rare earth extraction process for the ores specifically found in the Cobequid Highlands of Nova Scotia.
3. The demonstration of carbon neutral approaches for the mining sector despite the current lackluster interest in carbon trading schemes, there is still regional interest in Cap and Trade, for example through the Western Climate Initiative. This will permit to augment the yield from Rare Earth Element extraction projects and other mining projects.
The company was initiated as a provider of carbon offset development solutions (accounting, measuring, reporting, verification and registration) to:
Limited Operating History; Need for Additional Capital
There is no historical financial information about us upon which to base an evaluation of our performance. Our assets and business have not yet generated substantial or recurring revenues. We cannot guarantee we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources and possible cost overruns due to price and cost increases in services.
We will require additional financing to cover costs that we expect to incur over the next twelve months. We believe that debt financing will not be an alternative for funding our operations as we do not have tangible assets to secure any debt financing. We anticipate that additional funding will be in the form of equity financing from the sale of our common stock or other securities. However, we cannot provide any assurance that we will be able to raise sufficient funding from the sale of our common stock to fund our plan of operations. In the absence of such financing, we will not be able to continue and our business plan will fail.
Results of Operations
We have generated $5,792 from our operations during the six month period ended June 30, 2012 or during the period since January 17, 2007 (inception).
We incurred general and administrative expenses of $1,366 and professional fees of $2,445 during the six months ended June 30, 2012.
Liquidity and Capital Resources
As at June 30, 2012, we had no cash.
Cash Used in Operating Activities
Net cash used in operating activities was $769 for the six months ended June 30, 2012 compared to $3,658 used for the same period in 2011.
Cash from Financing Activities
We have funded our business to date primarily from loans from directors. There are no assurances that we will be able to achieve further sales of our common stock or any other form of additional financing. If we are unable to achieve the financing necessary to continue our plan of operations, then we will not be able to continue our operations and our business will fail.
We are a development stage Company. In a development stage Company, management devotes most of its activities to developing a market for its products and services. Planned principal activities have begun, clients have entered into material consulting agreements based on contingency fees which we believe will be generated 2012 from our current contracts and we have generated minimal revenue to June 30, 2012. During the reporting period, the Company has made contacts with various clients for the purpose of generating carbon assets.
On June 10, 2012 the company selected GeoFind Inc as the contractor of choice for the management of the exploration work at NSU Resources Inc’s mineral claims at Shatter Lake and Byers Brook in the Cobequid Highlands of Colchester County, Nova Scotia. No contract or monetary commitment has been signed or made yet as the company is waiting for funding to commissioned the contractors.
We anticipate continuing to rely on equity sales of our common stock in order to continue to fund our business operations. Issuances of additional shares will result in dilution to our existing shareholders. There is no assurance that we will achieve any additional sales of our equity securities or arrange for debt or other financing to fund our planned operations.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.
To management’s knowledge there is no pending, or threatened lawsuit against the Company
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
As a smaller reporting company, we are not required to provide the information required by this item.
Item 4. Controls and Procedures.
Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) that are designed to ensure that information required to be disclosed by us in reports we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to management, including our Chief Executive Officer (as our chief executive officer and chief financial officer), to allow timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. As of the end of the period covered by this report, and under the supervision and with the participation of management, including our Chief Executive Officer, who is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act, conducted an evaluation of the effectiveness of the design and operation of these disclosure controls and procedures. Based on this evaluation and subject to the foregoing, our Chief Executive Officer concluded that these controls are effective considering the level and nature of the Company’s operations and the number and types of transactions concluded by the Company.
Changes in Internal Control Over Financial Reporting
During the period covered by this report control and management of the Company was transformed and the company began operating as an active business (rather than a shell company). As such, there were significant changes in our internal controls during the period. For example, for the time being and until the operations of the company make this impractical all financial transactions involving the Company, including all payments and all agreed upon incurrences of liabilities, require a signature from, or other approval from, the CEO or CFO of Bio-Carbon. Notwithstanding these changes, as the company was previously a shell company owned and managed by one person, management has no reason to believe that the internal controls in place at that time were insufficient. Furthermore, management believes that until the operations of the Company progress to the point where tight control impedes smooth operations, it will be appropriate and sufficient (from the perspective of internal controls over financial reporting) if approval of the CEO and CFO is required for transactions that are or are reasonably likely to require disclosure in the financial statements.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
We are not presently a party to any legal proceedings and, to our knowledge, no such proceedings are threatened or pending.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On February 22, 2012 the company issued 1,500,000 Rule 144 common shares to Mr John Wilkes in compensation for a past debt of $913 made on behalf of the company and in compensation for outstanding contract wages while acting as a CEO and director of the corporation from October 28, 2010 to January 25, 2011 for total consideration of $20,000.
None of these share issuances involved underwriters, and all were made in reliance on Rule 506 under the Securities Act of 1933, as amended.
Description of Registrant’s Securities to be Registered
The authorized capital stock of our Company consists of 275,000,000 shares of common stock, par value $0.001 per share, of which there are currently issued and outstanding, and 156,311,111 shares of preferred stock, excluding the transactions listed under Item 2.
All outstanding shares of common stock are of the same class and have equal rights and attributes. The holders of common stock are entitled to one vote per share on all matters submitted to a vote of stockholders of the Company. All stockholders are entitled to share equally in dividends, if any, as may be declared from time to time by the sole director out of funds legally available. In the event of liquidation, the holders of common stock are entitled to share ratably in all assets remaining after payment of all liabilities. The stockholders do not have cumulative or preemptive rights.
Item 3. Defaults Upon Senior Securities.
Item 4. Submission of Matters to a Vote of Security Holders.
Item 5. Other Information.
The following exhibits are attached hereto:
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
NSU Resources Inc.
By: /s/ Luc C. Duchesne
August 29, 2012