3258 MOB NECK ROAD, HEATHSVILLE, VIRGINIA 22473
(Address of principal executive offices)
Indicated by check mark whether the registrant files or will file annual reports under
cover of Form 20-F or Form 40-F. Form 20-F X Form 40-F
Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulations S-T Rule 101(b)(1):
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Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulations S-T Rule 101(b)(7):
Note:
Regulation S-T Rule 101(b)(7) only permits the submission in paper of a
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private issuer must furnish and make public under the laws of the jurisdiction in which
the registrant is incorporated, domiciled or legally organized (the registrant's
"home country"), or under the rules of the home country exchange on which the
registrant's securities are traded, as long as the report or other document is not a press
release, is not required to be and has not been distributed to the registrant's security
holders, and, if discussing a material event, has already been the subject of a Form 6-K
submission or other Commission filing on EDGAR.
Indicate by check mark whether by furnishing the information contained in this Form,
the registrant is also thereby furnishing the information to the Commission pursuant to
Rule 12g3-2(b) under the Securities Exchange Act of 1934. Yes X No
If "Yes" is marked, indicate below the file number assigned to the registrant
in connection with Rule 12g3-2(b): 82-4009
Management’s Discussion and Analysis of
Financial Condition and Results of Operations
The following discussion (the
“MD&A”) of the financial condition and results of operations of
Sharpe Resources Corporation Inc. (the “Corporation”) constitutes
management’s review of the factors that affected the Corporation’s
financial and operating performance for the third quarter ending September 30, 2009. The
MD&A was prepared as of November 18, 2009 and should be read in conjunction with the
Consolidated Financial Statements for the Three & Nine Months ended September 30, 2009
and the audited Annual Consolidated Financial Statements for the Years Ended December 31,
2008, 2007 and 2006 of the Corporation, including the notes thereto. Unless otherwise
stated, all amounts discussed herein are denominated in United States dollars.
Overview
The Corporation is continued under the New Brunswick Business
Corporation Act and its common shares are listed in the United Sates on the OTC:BB symbol
SHGP.
The Corporation is considered in the exploration stage as of January 1,
2002 as it started disposing of its interest in petroleum and natural gas properties that
year. The Corporation completed the disposal of these properties during the fiscal year
ended on December 31, 2005. The Corporation is currently engaged in the development of
coal and coal gas projects in the northern and central Appalachian region of the eastern
United States.
The Corporation has one reportable business segment. Substantially all
of the Corporation’s assets are located in the United States except for small
balances held in Canadian banks. The Corporation’s operations in Canada consist
of general and administrative expenses necessary to maintain the Corporation’s
public Corporation status.
Results of Operations
The net loss for the nine months ending September 30, 2009 was
$108,013 as compared to the net loss of $254,429 for the nine months ending September 30,
2008 a decrease of $146,416 and is primarily due to the decrease in Stock option
compensation from $190,801 for the nine months ending September 30, 2008 to zero in 2009.
General and Administrative expenses increased by $39,778.
Revenue decreased from $31,127 for the nine months ending September 30,
2008 to $26,681 for the nine months ending September 30, 2009 and represents interest
income and various small override interests in petroleum and natural gas properties.
On December 1, 2007, the Corporation entered into an agreement to
acquire a 100% interest in Standard Energy Corporation (“Standard”).
Standard is a private company related by virtue of its ownership to an officer and
director of the Company. Standard's primary asset includes 100% ownership interest in all
of the coal seams on more than 17,000 acres in Preston County, West Virginia. Standard and
the Company are also applying for up to 10 drilling permits to test the property. The
purchase price consists of the forgiveness of the repayment of $250,000 demand promissory
note owing from Standard to the Company and the issuance of 2 million shares o f the
Company’s common stock. As of September 30, 2009, the business combination has
not been completed.
The Company has entered into an option agreement whereby it agreed to
an option for RSM to acquire a 50% interest in coal properties in eastern Kentucky by
advancing to the project $2million prior to December 9, 2009. Once the option is exercised
by RSM a 50/50 joint venture agreement will be entered into by the parties. The optionee
of the agreement is RSM which is related to the Company due to the fact that they have
common management and directors. On September 11, 2009, RSM obtained an extension of the
option and joint venture agreement it has with the Company. The extension allows RSM to
incur expenditures of $2,000,000 under the agreement up to December 9, 2011.
Liquidity and Capital Resources
The Corporation’s cash balance at September 30, 2009 was
$108,366 compared to $239,155 at December 31, 2008. Total assets at September 30, 2009
were $372,811 compared to $493,260 at December 31, 2008.
Total Liabilities decreased from $916,851 at December 31, 2008 to
$904,415 at September 30, 2009 a decrease of $12,436. Accounts payable increased from
$192,327 at December 31, 2008 to $203,611 at September 30, 2009. The Current portion of
due to related parties decreased from $74,708 at December 31, 2008 to $25,400 at September
30, 2009.
On a forward going basis equity and debt financings will remain the
single major source of cash flow for the Corporation. As revenue from operations improve
the capital requirement of the Corporation will also improve. However, debt and equity
financings will continue to be a source of capital to expand the Corporation’s
activities in the future.
The Corporation is authorized to issue an unlimited number of Common
Shares of which 46,619,863 are outstanding at September 30, 2009. Also at September 30,
2009 the Corporation had outstanding options to purchase 3,580,000 common shares with
exercise prices of C$0.10 per share and expiration dates ranging from May 2010 to May
2013. Options to purchase 200,000 shares were cancelled during the first quarter 2009.
There are no warrants outstanding at September 30, 2009.
Selected Annual Information
The following selected financial information is derived from the
financial statements of the Corporation and should be read in conjunction with such
statements, including the notes thereto:
|
|
|
2008
|
2007
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2006
|
|
Selected Operating Data
|
|
|
|
Revenue
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$43,039
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$10,808
|
$20,885
|
|
Operating Costs
|
($1,824)
|
($26,210)
|
($32,544)
|
|
Expenses
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($362,710)
|
($240,425)
|
($254,968)
|
|
Management Fee
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($0)
|
($15,000)
|
($154,000)
|
|
Write-off of an option to acquire
|
|
|
|
|
mineral property
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$0
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$0
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($78,125)
|
|
Net loss for the year
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($321,495)
|
($255,827)
|
($344,752)
|
|
Loss per share - basic
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($0.01)
|
($0.01)
|
($0.01)
|
|
Loss per share - diluted
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($0.01)
|
($0.01)
|
($0.01)
|
|
|
2008
|
2007
|
2006
|
|
Selected Balance Sheet Data
|
|
|
|
|
Total Assets
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$493,260
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$554,548
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$454,866
|
|
Long Term Debt
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$0
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$0
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$0
|
|
Share Capital
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($11,463,430)
|
($11,463,430)
|
($11,174,108)
|
|
Warrants
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($0)
|
($0)
|
($204,408)
|
|
Deficit
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($12,342,356)
|
($12,020,861)
|
($11,765,034)
|
|
Selected
Quarterly Information
|
|
|
|
The following is a summary of selected financial information of the
Corporation for the quarterly periods indicated:
|
3 Mos.
|
3 Mos.
|
3 Mos.
|
3 Mos.
|
|
Ending Sept 30, 2009
|
Ending June 30, 2009
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Ending Mar 31, 2009
|
Ending Dec 31, 2008
|
|
Revenue
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$21,652
|
$3,100
|
$1,929
|
$13,724
|
|
Expenses Net Income
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($62,635)
|
($50,418)
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($21,641)
|
($78,978)
|
|
(Loss) Net Income
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($40,983)
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($47,318)
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($19,712)
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($67,066)
|
|
(Loss) per Common
|
|
|
|
|
|
share basic
|
|
|
|
|
|
and diluted
|
($0.00)
|
($0.00)
|
($0.00)
|
($0.01)
|
|
3 Mos. Ending Sept 30, 2008 $17,110
($41,607) ($22,685)
|
3 Mos. Ending June 30, 2008 $11,901
($228,470) ($216,569)
|
3 Mos. Ending Mar 31 2008 $304
($15,479) ($15,175)
|
3 Mos. Ending Dec 31 2007 $645
($60,752) ($60,107)
|
|
($0.00)
|
($0.00)
|
($0.00)
|
($0.01)
|
Transactions with Related Parties
Following is a summary of the related party transactions of the Corporation:
|
September
30, 2009
|
December 31, 2008
|
December 31, 2007
|
|
Due From Related Party
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Standard Energy Corporation (i)
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$250,000 $250,000
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$250,000 $250,000
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$250,000 $250,000
|
|
Due To Related Parties
|
Roland M. Larsen (ii) Royal Standard
Minerals Inc. (iii) Kentucky Standard Energy Corporation (iv)
|
$25,400 $111,586 $0 $136,986
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$25,400 $110,306 $25,000 $160,706
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$25,400 $108,813$0 $134,213
|
-
(i)
-
The purpose of this transaction was to acquire an asset that Sharpe would become an
interest holder in the project either in Standard Energy Corporation
("Standard") or a direct interest in the Kingwood Coal Project. Standard is
related by virtue of its ownership by an officer and director of the Corporation. The loan
receivable was unsecured, non-interest bearing and no date was set for its repayment. On
December 1, 2007, Sharpe entered into an agreement to acquire a 100% interest in Standard
Energy as described in Note 10(a) of the Consolidated Financial Statements for the Three
& Nine Months Ended September 30, 2009.
-
(ii)
-
This loan is payable to an officer and director of the Corporation and was used to fund
payables. It is unsecured, bearing interest at 8% and has no date set for repayment. The
interest payable on this loan has been accrued but has not yet been paid.
(iii) Royal Standard Minerals Inc. ("RSM") is a related
Corporation by virtue of common management and common directors. The loan payable was
unsecured, non-interest bearing and had no date set for its repayment. On September 9,
2008, the Corporation entered into an agreement with RSM for the repayment of the loan. To
this end, the Corporation has executed a promissory note (the "Note") in favor
of RSM that provides for the repayment of the loan over a three-year period commencing on
September 9, 2008. The first principle payment of $42,499 is due on September 9, 2009,
$42,499 on September 9, 2010 and $42,499 on September 9, 2011. Pursuant to the Note, the
outstanding amount of the loan will accumulate interest at the rate of 4% per annum, such
interest to accrue daily and be payable monthly, in arrears on the first business day of
each and every month commencing on October 9, 2008 until the full amount of the loan
together with all interest on such amount has been repaid in full.
On September 11, 2009, RSM obtained an extension of the option and
joint venture agreement It has with the Company as disclosed in Note 10(b) of the
Company’s Financial Statements for the Three and Nine months ended September 30,
2009. As consideration for this extension, RSM cancelled the Note received from the
Company and received an new promissory note in the amount of $133,134 at 0% interest
payable in three equal installments on September 9, 2011, 2012 and 2013.
(iv) This loan was payable to Kentucky Standard Energy Corporation with
which the Company has common management and common directors. It was unsecured,
non-interest bearing, and was repaid in February, 2009.
These transactions are in the normal course of
operations and are considered to be in the best interest of all shareholders to support
corporate growth and future development and are measured at the exchange amount (the
amount of consideration established and agreed to by the related parties which approximate
the arm’s length equivalent value).
Changes in Accounting Policies
Changes in accounting policies are explained in detail in Note 2 of
the Consolidated Financial Statements for the Three & Nine Months Ended September 30,
2009.
Risk and Uncertainties
At the present time, the Corporation does not have sufficient
assets to maintain ongoing profitability. The Corporation’s ability to acquire
and develop new projects is a function of its ability to raise the necessary capital to
pursue the efforts successfully.
The Corporation has limited financial resources and there is no
assurance that additional capital will be available to it for further acquisitions,
exploration and development of new or existing projects. Failure to obtain such additional
financing could result in delay or indefinite postponement of further exploration and
development of the property interests of the Corporation with the possible dilution or
loss of such interests. The Corporation’s Audited Financial Statements contain a
note about the Corporation’s ability to continue as a Going concern.
The Corporation’s business is subject to variety of risks and
uncertainties. These risks are explained in detail in Note 4 of the Consolidated Financial
Statements for the Three & Nine Months Ended September 30, 2009.
Environment
Operations, development and exploration projects could potentially
be affected by environmental laws and regulations of the country in which the activities
are undertaken. The environmental standards continue to change and the global trend is to
a longer, more complex process. Although the Corporation continuously reviews
environmental matters and undertakes to comply with changes as expeditiously as possible,
there is no assurance that existing or future environmental regulation will not materially
adversely affect the Corporation’s financial condition, liquidity and results of
operation. Certain environmental issues, such as storm events, tailings storage seepage,
dust and noise emissions, while having been assessed and strategies based on best
practices have been adopted, there can be no assurance an unforeseen event will not occur
which could have a material adverse effect on the viability of the Corporation’s
business and affairs.
Off-Balance Sheet Arrangements
The Corporation has no off-balance sheet arrangements
Management’s Responsibility for Financial Information
The Corporation’s financial statements are the
responsibility of the Corporation’s management, and have been approved by the
Board of Directors. The consolidated financial statements were prepared by the
Corporation’s management in accordance with Canadian and U.S. generally accepted
accounting principles. The consolidated financial statements include certain amounts based
on the use of estimates and assumptions. Management established these amounts in a
reasonable manner, in order to ensure that the financial statements are presented fairly
in all material respects.
Forward Looking Statements
This MD&A includes certain “forward-looking
statements” within the meaning of applicable Canadian securities legislation.
All statements, other than statements of historical facts, included in this MD&A that
address activities, events or developments that the Corporation expects or anticipates
will or may occur in the future, including such things as future business strategy,
competitive strengths, goals, expansion and growth of the Corporation’s
businesses, operations, plans and other such matters are forward-looking statements. When
used in this MD&A, the words “estimate”,
“plan”, “anticipate”,
“expect”, “intend”, “believe”
and similar expressions are intended to identify forward-looking statements. These
statements involve known and unknown risks, uncertainties and other factors which may
cause the actual results, performance or achievements of the Corporation to be materially
different from any future results, performance or achievements expressed or implied by
such forward-looking statements. Such factors include, among others, risks related to
joint venture operations, actual results of current exploration activities, changes in
project parameters as plans continue to be refined unavailability of financing,
fluctuations in oil and gas prices and other factors. Although the Corporation has
attempted to identify important factors that could cause actual results to differ
materially, there may be other factors that cause results to be different than
anticipated, estimated or intended. There can be no assurance that such statements will
prove to be accurate as actual results and future events could differ materially from
those anticipated in such statements. Accordingly, readers should not place undue reliance
on forward-looking statements.
Additional Information
Additional information relating to the Corporation, including the
annual information form of the Corporation, can be found on SEDAR at www.sedar.com and on
the Corporation’s website at www.sharperesourcescorporation.com.
s Roland M. Larsen
Roland M. Larsen President
Heathsville, VA September 18, 2009