PINX:HMLA Homeland Resources Ltd Quarterly Report 10-Q Filing - 4/30/2012

Effective Date 4/30/2012

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

FORM 10-Q
(Mark One)
[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 30, 2012

[  ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________ to _______________

333-147501
 (Commission file number)

HOMELAND RESOURCES LTD.
 (Exact name of registrant as specified in its charter)

Nevada
(State or other jurisdiction
Of incorporation or organization)
 
26-0841675
(IRS Employer
Identification No.)

6801 Los Trechos NE, Albuquerque New Mexico            87109
(Address of principal executive offices)                               (Zip Code)

(505) 264-0600
 (Registrant’s telephone number, including area code)

Not applicable
 (Former name, former address and former fiscal year, if changed since last report)

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 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 days.
[x] Yes                      [  ] No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
[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 [  ]
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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 60,300,000 shares of Common Stock, $0.0001 par value, June 14, 2012

 
 

 


HOMELAND RESOURCES LTD.

   
Page
PART I.
UNAUDITED FINANCIAL INFORMATION
 
     
Item 1.
Interim Financial Statements
 
     
 
Balance Sheets April 30, 2012 (unaudited) and July 31, 2011
3
     
 
Statements of Operations (unaudited)
Three and Nine months Ended April 30, 2012 and 2011
 
4
     
 
Statements of Cash Flows (unaudited)
Nine months Ended April 30, 2012 and 2011
 
5
     
 
Notes to Financial Statements (unaudited)
6
     
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
11
     
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
13
     
Item 4.
Controls and Procedures
13
     
PART II.
OTHER INFORMATION
 
     
Item 1.
Legal Proceedings
14
     
Item 1A.
Risk Factors
14
     
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
14
     
Item 3.
Defaults Upon Senior Securities
15
     
Item 4.
Mine Safety Disclosures
15
     
Item 5.
Other Information
15
     
Item 6.
Exhibit Index
15
     
Signatures
 
16

 
2

 

HOMELAND RESOURCES LTD.
BALANCE SHEETS

 

   
April 30,
2012
   
July 31,
2011
 
   
(Unaudited)
       
ASSETS
           
             
Current Assets
           
Cash
 
$
138,865
   
$
65,811
 
Accounts receivable
   
43,000
     
54,000
 
Prepaid expenses
   
1,605
     
2,515
 
Total Current Assets
   
183,470
     
122,326
 
                 
Deferred financing costs, net
   
18,711
     
32,949
 
Mineral property
   
1
     
1
 
                 
Oil and gas properties, at cost (full cost method)
               
Proved properties
   
211,238
     
211,238
 
Unproved properties
   
538,338
     
517,790
 
Less: accumulated depletion and depreciation
   
(64,309)
     
(41,611)
 
Net oil and gas properties
   
685,267
     
687,417
 
                 
Total Assets
 
$
887,449
   
$
842,693
 
                 
LIABILITIES AND STOCKHOLDERS’ (DEFICIT)
               
                 
Current Liabilities
               
Accounts payable and accrued liabilities
 
$
106,771
   
$
68,008
 
Accounts payable – related party
   
158,354
     
135,854
 
Notes payable – current portion
   
105,000
     
105,000
 
Total Current Liabilities
   
370,125
     
308,862
 
 
Long Term Liabilities
               
Notes payable
   
604,709
     
604,709
 
Asset retirement obligation
   
3,540
     
3,353
 
Total Liabilities
   
978,374
     
916,924
 
                 
Stockholders’(Deficit)
               
Preferred stock - $0.0001 par value; authorized – 250,000,000 shares
    Issued and outstanding – none
   
-
     
-
 
Common stock - $0.0001 par value; authorized – 500,000,000 shares
    Issued and outstanding – 60,300,000 shares
   
6,030
     
6,030
 
Additional paid in capital
   
109,140
     
66,520
 
(Deficit) accumulated during the development stage
   
(175,610)
     
(175,610)
 
 Retained earnings (deficit)
   
(30,485)
     
28,829
 
Total Stockholders’ (Deficit)
   
(90,925)
     
(74,231)
 
                 
Total Liabilities and Stockholders’ (Deficit)
 
$
887,449
   
$
842,693
 

The accompanying notes are an integral part of these unaudited interim financial statements.
 
 
3

 

HOMELAND RESOURCES LTD.
STATEMENTS OF OPERATIONS
(UNAUDITED)
 
   
Three Months
Ended April 30,
2012
   
Three Months
Ended April 30,
2011
   
Nine Months
Ended April 30,
2012
   
Nine Months
Ended April 30,
2011
 
REVENUES
                       
Oil and gas revenue
  $ 60,443     $ 101,628     $ 188,097     $ 170,488  
                                 
COSTS AND EXPENSES
                               
Lease operating expenses
    5,201       6,207       15,139       8,487  
Depreciation, depletion, and accretion
    7,628       21,284       22,885       21,328  
Consulting fees – related party
    7,500       7,500       22,500       37,500  
General and administrative
    67,169       25,210       133,480       72,689  
TOTAL OPERATING EXPENSES
    87,498       60,201       194,004       140,004  
                                 
INCOME (LOSS) FROM OPERATIONS
    (27,055 )     41,427       (5,907 )     30,484  
                                 
OTHER EXPENSES
                               
Interest expense
    12,866       11,626       39,169       30,393  
Amortization of deferred financing costs
    4,289       2,583       14,238       5,931  
TOTAL OTHER EXPENSES
    17,155       14,209       53,407       36,324  
                                 
Net Income (Loss)
  $ (44,210 )   $ 27,218     $ (59,314 )   $ (5,840 )
                                 
Net Income (Loss) Per Common Share
Basic and Diluted
  $ (0.000 )   $ 0.000     $ (0.000 )   $ (0.000 )
                                 
Weighted average number of common shares outstanding Basic and Diluted
    60,300,000       60,250,000       60,300,000      
 
60,200,916
 

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

 
 
 
4

 
HOMELAND RESOURCES LTD.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
 
   
Nine
Months
Ended
April 30, 2012
   
Nine
Months
Ended
April 30, 2011
 
OPERATING ACTIVITIES
           
Net (loss)
  $ (59,314 )   $ (5,840 )
Adjustments to reconcile net (loss) to net cash provided by (used in) operating activities:
               
Depreciation, depletion, and accretion
    22,885       21,328  
Share based compensation
    42,620       -  
Amortization of deferred financing costs
    14,238       5,931  
Change in non-cash working capital items:
               
(Increase) Decrease in accounts receivable
    11,000       (74,000 )
Increase (Decrease) in accounts payable and accrued liabilities
    38,637       (52,380 )
Increase in accounts payable related party
    22,500       37,500  
(Increase) Decrease in prepaid assets
    1,036       (2,515 )
Net cash provided by (used in) operating activities
    93,602       (69,976 )
 
INVESTING ACTIVITIES
               
Additions to interests in oil and gas properties
    (20,548 )     (314,782 )
Net cash (used in) investing activities
    (20,548 )     (314,782 )
 
FINANCING ACTIVITIES
               
Proceeds from notes payable
    -       429,709  
Net cash provided by financing activities
    -       429,709  
                 
Net increase in cash
    73,054       44,951  
Cash beginning of period
    65,811       2,491  
Cash end of period
  $ 138,865     $ 47,442  
 
SUPPLEMENTAL CASH FLOW DISCLOSURES
 
               
Cash paid for interest
  $ -     $ -  
Cash paid for income taxes
  $ -     $ -  
 
NON-CASH INVESTING AND FINANCING ACTIVITIES
               
Common shares issued in connection with debt as deferred financing costs   $ -     $ 26,500  
 
The accompanying notes are an integral part of these unaudited interim financial statements.
 
 
5

 
 
HOMELAND RESOURCES, LTD.
NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS
APRIL 30, 2012

 
NOTE 1 - BASIS OF PRESENTATION


The interim financial statements of Homeland Resources Ltd. (“we,” “us,” “our,” “Homeland” or the “Company”) are unaudited and contain all adjustments (consisting primarily of normal recurring accruals) necessary for a fair statement of the results for the interim periods presented. Results for interim periods are not necessarily indicative of results to be expected for a full year or for previously reported periods due in part, but not limited to, interest rates, drilling risks, geological risks, the timing of acquisitions, and our ability to obtain additional capital. These interim financial statements should be read in conjunction with the audited financial statements and notes thereto included in Homeland’s Annual Report on Form 10-K for the year ended July 31, 2011, as filed with the Securities and Exchange Commission (“SEC”) on October 28, 2011. The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.
 
NOTE 2–GOING CONCERN

As of April 30, 2012, our current liabilities exceeded our current assets by $186,655 and for the nine months ended April 30, 2012, our net loss was $59,314.  Our results of operations have resulted in an accumulated deficit of $206,095 as of April 30, 2012.  We have participated in the drilling of test wells on undeveloped properties.  We plan further potential participation in drilling and seismic operations for the remainder of the fiscal year.  It is difficult to anticipate our capital requirements for the remainder of the fiscal year as we participate in a seismic program wherein significant drilling activities may commence in the near future. We may need to raise equity or borrow additional capital to fund our continued participation in planned activities. If additional financing is not available, we may be compelled to reduce the scope of our business activities.  If we are unable to fund our operating cash flow needs and planned capital investments, it may be necessary to sell all or a portion of our interests in our oil and gas properties.

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Accounts Receivable – Accounts receivable consists of amounts receivable from oil and gas sold from our well interests. As of April 30, 2012, our accounts receivable amounted to $43,000, all of which is due from one party, the operator of our oil and gas properties.  Management believes this amount to be fully collectible; we will continue to monitor amounts receivable for collectability on a periodic basis.

Asset Retirement Obligation– Asset retirement obligations associated with tangible long-lived assets are accounted for in accordance with ASC 410, “Accounting for Asset Retirement Obligations.” The estimated fair value of the future costs associated with dismantlement, abandonment and restoration of oil and gas properties is recorded generally upon the completion of a well. The net estimated costs are discounted to present values using a risk adjusted rate over the estimated economic life of the oil and gas properties. Such costs are capitalized as part of the related asset. The asset is depleted on the units-of-production method on a field-by-field basis. The liability is periodically adjusted to reflect: (1) new liabilities incurred; (2) liabilities settled during the period; (3) accretion expense; and (4) revisions to estimated future cash flow requirements. The accretion expense is recorded as a component of depreciation, depletion, accretion and amortization expense in the accompanying statements of operations.

Revenue Recognition– The Company recognizes oil and gas revenue when production is sold at a fixed or determinable price, persuasive evidence of an arrangement exists, delivery has occurred and title has transferred, and collectability is reasonably assured.

 
6

 
 
HOMELAND RESOURCES, LTD.
NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS
APRIL 30, 2012

 
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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 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 under different assumptions or conditions.

NOTE 4 – RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Accounting standards-setting organizations frequently issue new or revised accounting rules. We regularly review all new pronouncements that have been issued to determine their impact, if any, on our financial statements.

There were various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to have a material impact on the Company's financial position, results of operations or cash flows.

NOTE 5 – OIL AND GAS PROPERTIES
 
The Company holds the following oil and gas interests:

   
April 30,
2012
   
July 31,
2011
 
Oil and Gas Properties
           
Washita Bend 3D Exploration Project
  $ 499,176     $ 478,628  
2010-1 Drilling Program
    39,162       39,162  
Total Oil and Gas Properties - unproved
    538,338       517,790  
                 
Oil and Gas Properties - proved
    208,047       208,047  
Asset Retirement Cost
    3,191       3,191  
Less: accumulated depletion and impairment
    (64,309 )     (41,611 )
Total
  $ 685,267     $ 687,417  


Washita Bend 3D Exploration Project 

In April 2010, we acquired a 5% working interest in the Washita Bend 3D Exploration Project for a total buy-in cost of $46,250.  The project provides for the acquisition of approximately 135 miles of 3D seismic data to identify drillable prospects in a study area comprising 119,680 acres in Oklahoma.  The Washita prospect area is located in Cleveland, Garvin, McCain and Pottawatomie Counties, Oklahoma.  As of April 30, 2012, all of the permitted area had been shot and data acquired.  All initial or first run processing data has been completed and interpretation of the data and mapping as well as prospect delineation has started.  Regional structural and porosity mapping for the primary target formations has been completed and numerous prospective structural closures have been defined. Over 10,000 acres have been targeted for title research with over half of the title search completed.  Lease acquisition has commenced and it is anticipated that up to a 10-well exploration program on 10 individual prospects will commence in the early summer 2012.



 
7

 
HOMELAND RESOURCES, LTD.
NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS
APRIL 30, 2012


NOTE 5 – OIL AND GAS PROPERTIES (continued)
 
            2010–1 Drilling Program

In April 2010, we acquired a 5% working interest in a drilling program located in Garvin County, Oklahoma for a total buy in cost of $39,163. The Company agreed to participate in the drilling operations to casing point in the initial test well of each prospect.  The before casing point interest shall be 6.25% and the after casing point interest shall be 5.00%.  

As of April 30, 2012, we have participated in the drilling of four test wells.  Of the four wells, one was abandoned in October 2010 and three have been placed into production. Costs of $38,986 associated with the abandoned well have been moved to the proved properties. 

The costs associated with the three wells that have been placed into production have been transferred to proved properties.

Impairment

Under the full cost method, the Company is subject to a ceiling test.  This ceiling test determines whether there is any impairment to the proved properties.  The impairment amount represents the excess of capitalized costs over the present value, discounted at 10%, of the estimated future net cash flows from the proven oil and gas reserves plus the cost, or estimated fair market value.  There was no impairment cost as of April 30, 2012.

Depletion

Under the full cost method, depletion is computed on the units of production method based on proved reserves, or upon reasonable estimates where proved reserves have not yet been established due to the recent commencement of production.  Depletion expense recognized was $7,566 and $21,227 for the three month periods ended April 30, 2012 and 2011, respectively, and was $22,698 and $21,227 for the nine month periods ended April 30, 2012 and 2011, respectively.

NOTE 6 – NOTES PAYABLE

The Company has recorded the following notes payable:

   
April 30, 2012
   
July 31, 2011
 
Radium Ventures 6.5%
  $ 55,000     $ 55,000  
Radium Ventures 6.5%
    50,000       50,000  
Radium Ventures 7.5%
    604,709       604,709  
                 
Total
  $ 709,709     $ 709,709  

Interest expense incurred during the three and nine month periods ended April 30, 2012 amounted to $12,866 and $39,169, respectively. Accrued interest expense related to these notes amounted to $85,206 at April 30, 2012 and has been included in accrued liabilities on the Company’s balance sheet.
 
During the nine month period ended April 30, 2012, the Company had no borrowings on the $1,000,000 loan facility with Radium Ventures Corp. (“Radium”).  Advances under the loan bear interest at 7.5% and are payable within 36 months. The Company has agreed to issue the lender 50,000 restricted shares of common stock for every $100,000 borrowed under the loan facility.


 
8

 
HOMELAND RESOURCES, LTD.
NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS
APRIL 30, 2012


NOTE 7– DEFERRED FINANCING COSTS

The Company records deferred financing costs in connection with the cumulative issuance of 250,000 shares of our common stock in connection with our $1,000,000 loan facility (Note 6). The Company considered ASC 835-30, “Interest – Imputation of Interest,” in recording these amounts. The Company recognizes debt issue costs on the balance sheet as deferred charges, and amortizes the balance over the term of the related debt. The Company amortized $4,289 and $2,583 of deferred financing costs for the three month periods ended April 30, 2012 and 2011, respectively, and amortized $14,238 and $5,931 of deferred financing costs for the nine month periods ended April 30, 2012 and 2011, respectively.

NOTE 8 –STOCKHOLDERS’ (DEFICIT)
 
As of April 30, 2012, we had 250,000,000 and 500,000,000 shares of preferred stock and common stock authorized, respectively.  10,000,000 shares of preferred stock were designated as Series A Preferred Stock, with a par value of $0.0001 per share.  As of April 30, 2012, there were nil and 60,300,000 shares of preferred stock and common stock outstanding, respectively.

 The Company did not issue any shares of its common stock or preferred shares during the three and nine months period ended April 30, 2012.

NOTE 9 – STOCK BASED COMPENSATION
 
During the three months ended April 30, 2012 our board of directors approved the issuance of 250,000 non-qualified stock options to an employee and a director of the Company.
 
 
A summary of activity for the nine months ended April 30, 2012is as follows:
   
Number of
Shares
   
Weighted-Average
Exercise Price
 
Options outstanding —July 31, 2011
   
-
   
$
-
 
Options exercisable — July 31, 2011
   
-
   
$
-
 
                 
Granted
   
250,000
   
$
0.18
 
Forfeited
   
-
   
$
-
 
Expired
   
-
   
$
-
 
  Options outstanding — April 30, 2012
   
250,000
   
$
0.18
 
Options exercisable — April 30, 2012
   
250,000
   
$
0.18
 
 
All options granted during the period vested 100% as of the date of grant. Options expire two years from the date of grant and are non-transferable.



 
9

 
HOMELAND RESOURCES, LTD.
NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS
APRIL 30, 2012


 
The fair value of each share-based award is estimated on the date of grant using a Black-Scholes pricing model that incorporates the assumptions noted in the following table for the nine months ended April 30:
 
   
2012
   
2011
 
Expected option term — years
   
2
     
-
 
Weighted-average risk-free interest rate
   
0.34%
     
-
 
Expected dividend yield
   
0
     
-
 
Weighted-average volatility
   
273.21%
     
-
 

 
In connection with the issuance of the options to purchase our common shares we have recorded share based compensation of $42,620 for the three and nine months ended April 30, 2012, as compared to $nil and $nil for the corresponding prior periods. This amount has been included as a component of general and administrative expense in our unaudited statements of operations.
 
NOTE 10 – COMMITMENTS AND CONTINGENCIES
 
Although not completely estimable as of April 30, 2012, based on the terms of the Company’s original agreements with the operator, the Company anticipates additional expenditures related to its share of the drilling program during the remainder of the fiscal year, and that additional expenditures related to its seismic program may be significant during the remainder of the fiscal year as drilling may commence on the prospect area.  In addition, should the Company choose to terminate its involvement in the seismic program, the Company may incur significant additional liabilities per the terms of its initial agreement with the operator.


NOTE 11 – RELATED PARTY TRANSACTIONS

As of April 30, 2012, the Company owed $158,354 to a related party. As of April 30, 2012, amounts payable to the related party included $82,500 in connection with consulting services provided to the Company, while remaining amounts owed are related to expenses paid on behalf of the Company. During the three and nine months ended April 30, 2012, the Company incurred $7,500 and $22,500, respectively, in consulting expense with the related party.  The Company made no cash payments to related parties during the nine months ended April 30, 2012.

 NOTE 12 – SUBSEQUENT EVENTS

The Company has evaluated all transactions through the date of issuance of these financial statements and noted there are no subsequent events that would require disclosure.




 
10

 

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

General

Our original business plan was to proceed with the exploration of the Home Ranch Prospect to determine whether there were commercially exploitable reserves of minerals located on the property comprising such mineral claims.  In fiscal 2010, we determined that our ability to explore for minerals on these claims had become economically non-feasible and we therefore suspended our activities on the Home Ranch Prospect indefinitely in order to focus on our oil and gas interests.  We did not conduct any operations or exploration activities on the Home Ranch Prospect during the nine month period ended April 30, 2012.  At the time of this report, we do not know when or if we will proceed with the Home Ranch Prospect.
 
In April 2010, we acquired working interests in a seismic exploration program as well as a drilling program in oil and gas properties located in Oklahoma, as further described below.  Our present plan of operation is to continue to invest in oil and gas properties. 

Oil and Gas Properties

“Bbl” is defined herein to mean one stock tank barrel, or 42 U.S. gallons liquid volume, used in reference to oil or other liquid hydrocarbons.

“Mcf” is defined herein to mean one thousand cubic feet of natural gas at standard atmospheric conditions.
 
Washita Bend 3D Exploration Project   

In April 2010, we acquired a 5% working interest in the Washita Bend 3D Exploration Project for a total buy-in cost of $46,250.  The project provides for the acquisition of approximately 135 miles of 3D seismic data to identify drillable prospects in a study area comprising 119,680 acres in Oklahoma.  The Washita prospect area is located in Cleveland, Garvin, McCain and Pottawatomie Counties, Oklahoma.  As of April 30, 2012, all of the permitted area had been shot and data acquired.  All initial or first run processing data has been completed and interpretation of the data and mapping as well as prospect delineation has started.  Regional structural and porosity mapping for the primary target formations has been completed and numerous prospective structural closures have been defined. Over 10,000 acres have been targeted for title research with over half of the title search completed. Lease acquisition has commenced and it is anticipated that up to a 10-well exploration program on 10 individual prospects will commence in the early summer 2012.
 
 2010–1 Drilling Program

In April 2010, we acquired a 5% working interest in a Drilling Program located in Garvin County, Oklahoma.  We have participated in the drilling of four exploratory wells on the prospect acreage. Of the four wells in which we had participated, as of April 30, 2012, three were in production.  Cumulative gross production to date related to the three  wells in which we participate is 139,180 Bbls of oil and 25,007 Mcf of gas.

Loans

For the three and nine month periods ended April 30, 2012, we did not borrow any funds under the terms of our $1,000,000 loan facility.

Results of Operations

Three months ended April 30, 2012 compared to the three months ended April 30, 2011.

Revenues - We recognized $60,443 in revenues during the three months ended April 30, 2012, compared with $101,628 for the three months ended April 30, 2011.  The revenues recorded for the three month periods results from the recognition of production revenue related to three of our shallow wells placed into service during the
 
 
 
11

 
 
 
quarter ended April 30, 2011.  The decrease in revenue for the three months ended April, 30, 2012 relates to a decrease in production of these wells. Since these wells are shallow wells, the initial months following the production inception yield a significantly higher level of production and then diminish, thus, the decline in revenues is related to the decline in production from these wells.

Expenses - During the three months ended April 30, 2012, we incurred operating expenses of $87,498 as compared to $60,201 during the three months ended April 30, 2011, resulting in an increase of $27,297.  The increase in direct costs is primarily attributable to the following:

·     
decreased lease operating expenses of $5,201 as compared to $6,207 in the corresponding prior period;
·     
depreciation, depletion and accretion expense of $7,628 as compared to $21,284 in the corresponding prior period resulting primarily from our recording of depletion expense related to the decrease in production from the wells placed into production in 2011 and accretion of our asset retirement obligations; and
·     
share based compensation recorded as component of general and administrative expense of $42,620 offset by decreases in general and administrative expenses (excluding share based compensation) to $24,550 as compared to $25,210 in the corresponding prior period particularly our accounting and audit, and investor relations costs, partially offset by increases in management fees and subscriptions;

Other expenses– We incurred $17,155 in other expenses during the three months ended April 30, 2012 as compared to $14,209 during the three months ended April 30, 2011 resulting in an increase of $2,946.  The increase in other expenses is attributable to interest expense related to our loans and the amortization of deferred financing costs. Our borrowings increased to approximately $710,000 during the fiscal year ended July 31, 2011, and that amount has remained outstanding as of April 30, 2012 resulting in greater interest expense in the current period as compared to the same prior year period.

Nine months ended April 30, 2012 compared to the nine months ended April 30, 2011.

Revenues - We recognized $188,097 in revenues during the nine months ended April 30, 2012, compared with $170,488 for the nine months ended April 30, 2011.  Three of our wells were placed into service during the second quarter of 2011.  The resulting difference in revenue is derived from the net effect of an additional quarter of production in 2012 and the decrease in production from the shallow wells.

Expenses - During the nine months ended April 30, 2012, we incurred operating expenses of $194,004 as compared to $140,004 during the nine months ended April 30, 2011, resulting in an increase of $54,000.  The increase in direct costs is primarily attributable to the following:

·     
increased lease operating expenses of $15,139 as compared to $8,487 in the corresponding prior period;
·     
depreciation, depletion and accretion expense of $22,885 as compared to $21,328 in the corresponding prior period resulting primarily from our recording of depletion expense related to our wells recently placed into production and accretion of our asset retirement obligations;
·     
share based compensation recorded as component of general and administrative expense of $42,620; and
·     
increases in general and administrative expenses (excluding share based compensation) to $90,860 as compared to $72,689 in the corresponding prior period, particularly our accounting and audit, website development expenses, and investor relations costs.

The above increases were partially offset by a decrease in related party consulting to $22,500 during the nine months ended April 30, 2012, from $37,500 in the corresponding period in 2011, and a decrease in legal costs to $11,280 during the nine months ended April 30, 2012, from $20,793 in the corresponding period in 2011.

Other expenses– We incurred $53,407 in other expenses during the nine months ended April 30, 2012 as compared to $36,324 during the nine months ended April 30, 2011 resulting in an increase of $17,083.  The increase in other expenses is attributable to interest expense related to our loans and the amortization of deferred financing costs. Our borrowings increased to approximately $710,000 during the fiscal year ended July 31, 2011, and that amount has remained outstanding as of April 30, 2012 resulting in greater interest expense in the current period as compared to the same prior year period.

 
 
 
12

 
 
Liquidity and Capital Resources

As of April 30, 2012, we had cash of $138,865, compared to cash of $65,811 as of July 31, 2011.  Our working capital deficit at April 30, 2012 was $186,655, compared to $186,536 as of July 31, 2011. The small increase in our working capital deficit relates to increased cash balances resulting from cash generated through operations offset by increases in accounts payable and accounts payable due a related party. The statement of cash flows reflects cash of $20,548 used for the purchase of oil and gas properties, and a total of $nil of cash provided by financing transactions.

We anticipate that we may be required to make additional expenditures relating to our share of the drilling programs during the remainder of the fiscal year. While we have over $100,000 of cash currently, such cash may not be sufficient to meet our requirements under our existing agreements.  Our loan facility with Radium expired on December 31, 2011.  Although we are in negotiations with Radium to extend such loan facility, there is no assurance that an agreement can be finalized before we are required to make any expenditure for these drilling programs in excess of what we hold in cash. If we exhaust all our cash, are unable to timely arrange for new financing, and do not pay our share of drilling program costs, we will be in default of our agreements.  In such event, we may incur significant liabilities per our initial agreement with the operator, forfeit our rights to our interest and be forced to impair the interest.
 
Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of April 30, 2012.

Going Concern

In its report prepared in connection with our fiscal year 2011 financial statements, our independent registered public accounting firm included an explanatory paragraph stating that, because we had an accumulated deficit of $146,781 and a working capital deficit of $186,536 at July 31, 2011, there was substantial doubt about our ability to continue as a going concern.  At April 30, 2012, our accumulated deficit was $206,095.  Our continued existence will depend in large part upon our ability to raise sufficient additional capital adequate to fund our participation in drilling and seismic programs through debt and or equity offerings.  Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Forward Looking Statements

Certain statements in this Quarterly Report on Form 10-Q, as well as statements made by us in periodic press releases and oral statements made by our officials to analysts and shareholders in the course of presentations about the Company, constitute “forward-looking statements.”   Such forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward looking statements.  Such factors include, among other things: (1) the prices of oil and gas; (2) general economic and business conditions; (3) interest rate changes; (4) the relative stability of the debt and equity markets; (5) government regulations particularly those related to the natural resources industries; (6) required accounting changes; (7) disputes or claims regarding our property interests; and (8) other factors over which we have little or no control.

Item 3.      Quantitative and Qualitative Disclosures About Market Risk

Not required for smaller reporting companies.

Item 4.      Controls and Procedures

Evaluation of Disclosure Controls and Procedures
 
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 15d-15(f) under the Exchange Act.  Our internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation and fair presentation of our financial
 
 
 
13

 
 
statements for external purposes in accordance with generally accepted accounting principles.  Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
 
Our sole officer has assessed the effectiveness of our internal controls over financial reporting as of April 30, 2012.  In making this assessment, management used the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In conducting his evaluation, our sole officer considered advice from our Independent Registered Public Accounting Firm, StarkSchenkein, LLP (“StarkSchenkein”), that based on several minor corrections to our financial statements and related disclosures proposed by StarkSchenkein, there may be material weaknesses in our internal controls over financial reporting.  Specifically, the following deficiencies are noted:

·
We do not have an Audit Committee.  Although we are not legally required to have one, this means that we do not have entity control over our financial statements.
 
·
While our external consultants provide sufficient documentation of our financial statements preparation and review procedures, our sole officer must rely on such documentation.

·
We do not have proper segregation of duties for the preparation of our financial statements, resulting in journal entries being prepared and approved by the same person and lack of entity control over the preparation of financial statements.

As a result of these deficiencies in our internal controls, our sole officer concluded further that the design and operation of our disclosure controls and procedures may not be effective and that our internal control over financial reporting was not effective.

Our sole officer also considered various mitigating factors in making his determination.  Our sole officer also noted that we are still evaluating and implementing changes in our internal controls in response to the requirements of Sarbanes Oxley §404.  During fiscal year ending July 31, 2012, we will continue to implement appropriate changes as they are identified, including changes to remediate material weaknesses in our internal controls.
 
Changes In Internal Controls Over Financial Reporting

In connection with the evaluation of our internal controls during our last fiscal quarter, our sole officer has concluded that there were no changes in our internal control over financial reporting that occurred during the fiscal quarter ended April 30, 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


PART II - OTHER INFORMATION

Item 1.       Legal Proceedings

None.

Item 1A.     Risk Factors

Not required for smaller reporting companies.

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

During the quarter ended April 30, 2012, the registrant issued no shares of the Company’s common stock.
 
 
 
14

 
Item 3.       Defaults Upon Senior Securities

None.

Item 4.       Mine Safety Disclosures

Not applicable.

Item 5.       Other Information

Not applicable

Item 6.       Exhibits
  
Regulation S-K
Number
Exhibit
3.1
Articles of Incorporation (1)
3.2
Amendment to Articles of Incorporation (1)
3.3
Certificate of Change Pursuant to NRS 78.209 (2)
3.4
Bylaws (1)
10.1
Notice of Mining Claims HR #1-6, recorded by Luna County, New Mexico, on March 24, 2004 (1)
10.2
Confirmation of Agreement with Leroy Halterman dated August 1, 2007 (1)
10.3
Loan Commitment Letter from Wellington Financial Corporation dated August 1, 2007 (1)
10.4
Notice of Intent to Hold the HR #1-6 Lode Mining Claims, filed with the Bureau of Land Management on August 15, 2007 (1)
10.5
Notice of Intent to Hold the HR #1-6 Lode Mining Claims recorded by Luna County, New Mexico, on August 17, 2007 (1)
10.6
Loan Commitment dated April 19, 2010 from Radium Ventures Corp. (3)
10.7
Loan Commitment dated May 11, 2010 from Radium Ventures Corp. (3)
10.8
Loan Agreement dated May 15, 2010 from Radium Ventures Corp. (3)
31.1
Rule 15d-14(a) Certification of Armando Garcia
32.1
Certification of Armando Garcia Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act Of 2002
101*
Financial statements from the Quarterly Report on Form 10-Q of Homeland Resources Ltd. for the quarter ended April 30, 2012, formatted in XBRL: (i) the Balance Sheets; (ii) the Statements of Operations; (iii) the Statements of Cash Flows; and (v) the Notes to Financial Statements tagged as blocks of text.
______________________
(1)  
Incorporated by reference to the exhibits to the registrant’s registration statement on Form SB-1 filed November 19, 2007, file number 333-147501.
(2)  
Incorporated by reference to the exhibits to the registrant’s current report on Form 8-K filed June 29, 2009, file number 333-147501.
(3)  
Incorporated by reference to the exhibits to the registrant’s current report on Form 8-K filed April 19, 2010, file number 333-147501
(4)  
*In accordance with Rule 406T of Regulation S-T, the information in these exhibits shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such filing.
 
 
15

 



SIGNATURES

 
Pursuant to the requirements of the Securities and Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
HOMELAND RESOURCES LTD.
     
Date: June 14, 2012
By:
/s/ Armando Garcia
   
Armando Garcia
   
President, Secretary, Treasurer
   
(principal executive and financial officer)

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
16
 
 


 

PINX:HMLA Homeland Resources Ltd Quarterly Report 10-Q Filling

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PINX:HMLA Homeland Resources Ltd Quarterly Report 10-Q Filing - 4/30/2012
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