ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
This Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) contains forward-looking statements that involve known and unknown risks, significant uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed, or implied, by those forward-looking statements. You can identify forward-looking statements by the use of the words may, will, should, could, expects, plans, anticipates, believes, estimates, predicts, intends, potential, proposed, or continue or the negative of those terms. These statements are only predictions. In evaluating these statements, you should consider various factors which may cause our actual results to differ materially from any forward-looking statements. Although we believe that the exceptions reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.
On November 16, 2012, Centor Energy, Inc., a Nevada corporation, (the "Company") entered into a purchase agreement with Bullnet Gold Resources Limited. (“BGR”) Pursuant to the terms and conditions of the purchase agreement, the Company shall acquire 100% interest in the Nobewam Concession located in Ghana West Africa, of which BGR directly owns 100% of the Concession. The Company shall acquire 100% as well as, any right, title or interest in the foregoing as the same relates to the Nobewan Concession, either held, or otherwise owned, by BGR shall be referred to hereinafter as the “Property” . As consideration for the acquisition the Company shall pay BGR an aggregate of $750,000 in cash at the closing of the purchase agreement. To date, the Company has paid $100,000 towards the purchase of the Property and the transaction has not closed. On January 31, 2014, it was determined by the board of directors to allow the agreement on the Nobewan Property expire. The Company recorded an impairment value of $100,000 as of December 31, 2013.
On April 24, 2013, Centor Energy, Inc., a Nevada corporation (the “Company”), and Achaa Mining Company Limited, a Ghanaian Company ("Achaa") entered into a Memorandum of Understanding (the "MOU”), dated as of April 24, 2013.
Under the MOU, the Company will pay Achaa $10,000 (the "Option Fee") and receive the right to perform due diligence and on-site reconnaissance of the Achaa mining concession (The "Anyinaso Concession") located in the Atwima Mponua district in the Ashanti Region of Ghana approximately 30 km southeast of the Newmont mine at Kenyasi. The Anyinaso Concession covers an area of approximately 26.67 sq km along the eastern margin of the Setwi Belt. The term of the option is six months, subject to certain adjustments. The Company paid the Option Fee on May 7, 2013. This option has been subsequently amended and extended for the period of 6 months. This option is still in good standing.
On December 17, 2013 (the “Effective Date”), Centor Energy, Inc., a Nevada corporation (the “Company”), and 1583412 Alberta Ltd., an Alberta Canada Company entered into a Offer to Purchase Agreement (the "Offer to Purchase"), dated as of December 17, 2013 of certain oil and gas properties located in Alberta Canada.
Under the Offer to Purchase, subject to and in accordance with the terms and conditions of the Offer to Purchase, a 55 percent working interest in the title, estate and interest in and to the lands, the leases, the leased substances, all wells, facilities and pipelines, proprietary seismic data, equipment and material related thereto all as described in Schedule "A" of the Offer to purchase Agreement is being offered to purchase.
Purchase
Price and
Payment
:
The purchase price shall be Two Million Four Hundred Seventy Five Thousand Dollars
($2,475,000) in Canadian Funds, to be paid as follows:
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(i)
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A cash sum of fifty thousand dollars CDN ($50,000) to Vendor on acceptance and signing of offer; and
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(ii)
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A cash sum of two hundred seventy thousand dollars CDN ($270,000) to Vendor on closing, which has been paid during the three months ended December 31, 2013; and
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(iii)
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A cash sum of three hundred fifty thousand dollars CDN ($350,000) to be held in trust and applied to the completion of the Hatch pre-feasibility study and further modified Fischer analysis at Umatac, on closing; and
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(iv)
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Deferred cash payments totaling three hundred forty thousand dollars CON ($340,000) to be paid in four equal monthly installments of eighty five thousand dollars CDN ($85,000) commencing 60 days after closing; and
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(v)
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Issuance of common shares of Centor Energy, Inc.
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Plan of Operation
Our plan of operation or objective is to conduct exploration activities on our mining claims in order to assess whether they possess commercially exploitable mineral deposits. We are presently in the exploration stage of our business and we can provide no assurance that commercially viable mineral deposits exist on our mineral claims or that we will discover commercially exploitable levels of mineral resources on our properties, or if such deposits are discovered, that we will enter into further substantial exploration programs. Further exploration is required before a final evaluation as to the economic and legal feasibility is required to determine whether our mineral claims possess commercially exploitable mineral deposits. We have not, nor has any predecessor, identified any commercially exploitable reserves of these minerals on our mineral claims.
During our exploration activities on the Anyinaso Concession and the Nobewan Concession, our President will devote less than full-time hours per week to our business. We do not foresee this limited involvement as negatively impacting our company over the next twelve months as all exploratory work has been and will continue to be performed by outside consultants. Additionally, we will not have a need to hire any employees over the next twelve months. We do not plan to make any purchases of equipment over the next twelve months due to reliance upon outside consultants to provide all equipment needed for the exploratory work being conducted.
Current exploration activities have been focused on the Anyinaso Concession, where stockpiling and washing of alluvial gravel has been conducted in preparation for a test production run. We anticipate this occurring within the next 30 Days. The results of the test production run of alluvial gravel was not as favorable as we had hoped and it was determined by the Board of Directors to suspend operations in Ghana Until the price of gold improved.
On December 17, 2013 (the “Effective Date”), Centor Energy, Inc., a Nevada corporation (the “Company”), and 1583412 Alberta Ltd., an Alberta Canada Company entered into a Offer to Purchase Agreement (the "Offer to Purchase"), dated as of December 17, 2013 of certain oil and gas properties located in Alberta Canada.
Under the Offer to Purchase, subject to and in accordance with the terms and conditions of the Offer to Purchase, a 55 percent working interest in the title, estate and interest in and to the lands, the leases, the leased substances, all wells, facilities and pipelines, proprietary seismic data, equipment and material related thereto all as described in Schedule "A" of the Offer to purchase Agreement. To date the Company has paid a total amount of $250,000 has been paid in conjunction with the purchase of this property.
Purchase
Price and
Payment
:
The purchase price shall be Two Million Four Hundred Seventy Five Thousand Dollars
($2,475,000) in Canadian Funds, to be paid as follows:
(i) A cash sum of fifty thousand dollars CDN ($50,000) to Vendor on acceptance and signing of offer, which has been paid during the three months ended December 31, 2013; and
(ii) A cash sum of two hundred seventy thousand dollars CDN ($270,000) to Vendor on closing; and
(iii) A cash sum of three hundred fifty thousand dollars CDN ($350,000) to be held in trust and applied to the completion of the Hatch pre-feasibility study and further modified Fischer analysis at Umatac, on closing; and
(iv) Deferred cash payments totaling three hundred forty thousand dollars CDN ($340,000) to be paid in four equal monthly installments of eighty five thousand dollars CDN ($85,000) commencing 60 days after closing; and
(v) Issuance of common shares of Centor Energy, Inc.
Government Regulation
If we decide to continue with the acquisition and exploration of natural resource properties, we will be required to comply with all regulations, rules and directives of governmental authorities and agencies applicable to the exploration of minerals and oil and gas . All mineral exploration activities carried out on a mineral claim or oil and gas lease must be done in compliance within the jurisdiction’s appropriate agency. This applies to all natural resource properties during exploration, development, construction, production, closure, reclamation and abandonment as well as oil and gas leases during exploration, development, construction, production, closure, reclamation and abandonment.
Additionally, the provisions of the Health, Safety and Reclamation Code for mines and oil and gas contain standards for employment, occupational health and safety, accident investigation, work place conditions, protective equipment, training programs, and site supervision and also, contains standards for exploration activities including construction and maintenance, site preparation, drilling, trenching and work in and about a water body.
Additional approvals and authorizations may be required from other government agencies, depending upon the nature and scope of the proposed exploration activities. If the exploration activities require the falling of timber, then either a free use permit or a license to cut must be issued by the state. Items such as waste approvals may be required from the jurisdiction if the proposed exploration activities are significantly large enough to warrant them. Waste approvals refer to the disposal of rock materials removed from the earth which must be reclaimed. An environmental impact statement may be required.
We will also have to sustain the cost of reclamation and environmental remediation for all exploration work undertaken. Both reclamation and environmental remediation refer to putting disturbed ground back as close to its original state as possible. Other potential pollution or damage must be cleaned-up and renewed along standard guidelines outlined in the usual permits. Reclamation is the process of bringing the land back to its natural state after completion of exploration activities. Environmental remediation refers to the physical activity of taking steps to remediate, or remedy, any environmental damage caused. The amount of these costs is not known at this time as we do not know the extent of the exploration program that will be undertaken beyond completion of the recommended work program. Because there is presently no information on the size, tenor, or quality of any resource or reserve at this time, it is impossible to assess the impact of any capital expenditures on earnings, our competitive position or on us in the event a potentially economic deposit is discovered.
If we anticipate disturbing ground during our mineral exploration activities, we may be required to make an application to the State for a permit. We do not anticipate any difficulties in obtaining a permit, if needed. Initial exploration activities do not involve ground disturbance and as a result do not, at this time, require a work permit. Any follow-up trenching and/or drilling will require permits, applications for which will be submitted well in advance of the planned work.
If we enter the production phase, of which there is no assurance, the cost of complying with permit and regulatory environment laws will be greater because the impact on the project area is greater. Permits and regulations will control all aspects of the production program if the project continues to that stage. The regulatory requirements that we will have to meet will likely include:
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i.
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Ensuring that any water discharge meets drinking water standards;
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ii.
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Dust generation will have to be minimal or otherwise remediated;
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iii.
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Dumping of material on the surface will have to be re-contoured and re-vegetated with natural vegetation;
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iv.
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All material to be left on the surface will need to be environmentally benign;
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v.
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Ground water will have to be monitored for any potential contaminants;
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vi.
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The socio-economic impact of the project will have to be evaluated and if deemed negative, will have to be re-mediated; and
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vii.
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There will have to be an impact report of the work on the local fauna and flora including a study of potentially endangered species.
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We anticipate that we will incur over the next twelve months the following expenses:
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Category
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Planned
Expenditures
Over
The Next 12
Months (US$)
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Legal and Accounting Fees
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$
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20,850
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Office Expenses
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-
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Mineral Property Exploration Expenses
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TOTAL
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$
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20,850
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Our total expenditures over the next twelve months are anticipated to be approximately $20,850. Our cash on hand as of December 31, 2013 is $11,531. We do not have sufficient cash on hand to fund our operations for the next twelve months. We also require additional financing in order to commence exploration on our mining concessions.
RESULTS OF OPERATIONS
Working Capital
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|
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December 31,
2013
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|
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March 31,
2013
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Current Assets
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$
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11,531
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$
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37,252
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|
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Current Liabilities
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$
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623,878
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$
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226,891
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Working Capital Deficit
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$
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(612,347
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)
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$
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(189,639
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)
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Cash Flows
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|
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Period Ended
December 31,
2013
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|
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Period Ended
December 31,
2012
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Cash Flows used in Operating Activities
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$
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(171,313
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)
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$
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(14,990
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)
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Cash Flows used in Investing Activities
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$
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(58,150
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)
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$
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-
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Cash Flows provided by Financing Activities
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$
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218,375
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$
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-
|
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Net Decrease in Cash During Period
|
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$
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(11,088
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)
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$
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(14,990
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)
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The decrease in our working capital at December 31, 2013 from the period ended March 31, 2013 is reflective of the current state of our business development.
As of December 31, 2013, we had cash on hand of $11,531. Since our inception, we have used our common stock and convertible promissory notes to raise money for our operations and for our property acquisitions. We have not attained profitable operations and are dependent upon obtaining financing to pursue our plan of operation.
Operating Revenues
We have not generated any revenues since inception.
Operating Expenses and Net Loss
Operating expenses for the three months ended December 31, 2013 was $214,554 compared with $13,401 for the three months ended December 31, 2012. The increase in operating expenditures was a result of the Company's ongoing reporting requirements, accounting, consulting, general and administrative expenses, exploration expenses, and $100,000 impairment on the Nobewam Concession.
Operating expenses for the nine months ended December 31, 2013 was $357,007 compared with $14,990 for the nine months ended December 31, 2012. The increase in operating expenditures was a result of the Company's ongoing reporting requirements, accounting, consulting, general and administrative expenses, exploration expenses, and $100,000 impairment on the Nobewam Concession.
Net loss for the three months ended December 31, 2013 was $309,004 compared with $13,401 for the three months ended December 31, 2012. The overall increase in net loss of $295,603 was attributed to the Company's ongoing reporting requirements, accounting, consulting, general and administrative expenses, exploration expenses impairment on the Nobewam Concession, and interest expense in conjunction with the Company's outstanding convertible promissory notes.
Liquidity and Capital Resources
As at December 31, 2013, the Company’s cash balance was $11,531.
As at December 31, 2013, the Company had total liabilities of $623,878.
As at December 31, 2013, the Company had a working capital deficit of $(612,347)
Cashflow from Operating Activities
During the nine month period ended December 31, 2013, the Company used $171,313 of cash for operating activities.
Cashflow from Investing Activities
During the nine month period ended December 31, 2013, the Company paid $10,000 to acquire mineral claims and $48,150 deposit to acquire a 55% working interest in an oil and gas concession.
Cashflow from Financing Activities
During the nine month period ended December 31, 2013, the Company has net cash received of $218,375 from financing activities.
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.
Going Concern
We have not attained profitable operations and are dependent upon obtaining financing to pursue any extensive activities. For these reasons, our auditors stated in their report for the year ended March 31, 2013 that they have substantial doubt that we will be able to continue as a going concern without further financing.
Future Financings
We will continue to rely on equity sales of our common shares in order to continue to fund our business operations. Issuances of additional shares will result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of the equity securities or arrange for debt or other financing to fund planned acquisitions and exploration activities.
Critical Accounting Policies
We have identified certain accounting policies, described below, that are most important to the portrayal of our current financial condition and results of operations. Our significant accounting policies are disclosed in the notes to the financial statements included in this Quarterly Report.
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 amounts reported in the financial statements and accompanying notes for the reporting period. Significant areas requiring the use of management estimates relate to the valuation of its mineral leases and claims and our ability to obtain final government permission to complete the project.
Exploration Stage Company
The Company is devoting substantially all of its present efforts to establish a new business and none of its planned principal operations have commenced. As an exploration stage enterprise, the Company discloses the deficit accumulated during the exploration stage and the cumulative statements of operations and cash flows from inception to the current balance sheet date.
Mineral Property Acquisition and Exploration Costs
The Company is primarily engaged in the acquisition and exploration of mining properties. Mineral property exploration costs are expensed as incurred. Mineral property acquisition costs are initially capitalized when incurred. The Company assesses the carrying costs for impairment under Accounting Standards 930 Extractive Activities – Mining (AS 930). An impairment is recognized when the sum of the expected undiscounted future cash flows is less than the carrying amount of the mineral property. Impairment losses, if any, are measured as the excess of the carrying amount of the mineral property over its estimated fair value. Capitalized costs will be amortized using the units-of-production method over the estimated life of the proven and probable reserves. If mineral properties are subsequently abandoned or impaired, any capitalized costs will be charged to operations.
Recent Accounting Pronouncements
The Company does not expect that the adoption of any recent accounting standards to have a material impact on its financial statements.
