text: Empress Mining Inc. - FORM 10-Q - January 14, 2013
  EXCEL - IDEA: XBRL DOCUMENT - Empress Mining Inc. Financial_Report.xls
  EX-32.1 - CERTIFICATION - Empress Mining Inc. penola_ex321.htm
  EX-31.2 - CERTIFICATION - Empress Mining Inc. penola_ex312.htm
  EX-31.1 - CERTIFICATION - Empress Mining Inc. penola_ex311.htm
  Balance Sheets as of November 30, 2012 (unaudited) and February 29, 2012.
  Statements of Operations for the three and nine months ended November 30, 2012 and 2011 (unaudited), and for the period from May 7, 2010 (Inception) to November 30, 2012 (unaudited).
  Statements of Cash Flows for the nine months ended November 30, 2012 and 2011 (unaudited), and the period from May 7, 2010 (Inception) through November 30, 2012 (unaudited).
  This Quarterly Report on Form 10-Q of Penola Inc., a Nevada corporation (the "Company"), contains "forward-looking statements," as defined in the United States Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by terminology such as "may", "will", "should", "could", "expects", "plans", "intends", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of such terms and other comparable terminology. These forward-looking statements include, without limitation, statements about our market opportunity, our strategies, competition, expected activities and expenditures as we pursue our business plan, and the adequacy of our available cash resources. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Actual results may differ materially from the predictions discussed in these forward-looking statements. The economic environment within which we operate could materially affect our actual results. Additional factors that could materially affect these forward-looking statements and/or predictions include, among other things: the volatility of minerals prices, the possibility that exploration efforts will not yield economically recoverable quantities of minerals, accidents and other risks associated with mineral exploration and development operations, the risk that the Company will encounter unanticipated geological factors, the Company's need for and ability to obtain additional financing, the possibility that the Company may not be able to secure permitting and other governmental clearances necessary to carry out the Company's exploration and development plans, the exercise of the approximately 63.2% control the Company's sole officer and director holds of the Company's voting securities, other factors over which we have little or no control; and other factors discussed in the Company's filings with the Securities and Exchange Commission ("SEC").
  3,449 684
  18,907 7,169
  19,765 7,169
  3,160,000 common shares
  (February 29, 2012 - 3,160,000)
  29,057 28,029
  (48,533 ) (37,674 )
  (16,316 ) (6,485 )
  187 1,104 6,660 1,953 9,409
  - 21,246 4,200 24,246 31,421
  - - - - 7,703
  187 22,350 10,860 26,199 48,533
  3,160,000 2,000,000 3,160,000 2,000,000
  (10,860 ) (26,199 ) (48,533 )
  1,029 - 1,217
  - - 7,703
  (8,973 ) (26,199 ) (38,755 )
  - - (7,703 )
  11,738 19,060 18,907
  11,738 19,060 49,907
  2,765 (7,139 ) 3,449
  684 21,737 -
  3,449 14,598 3,449
  These unaudited interim financial statements may not include all information and footnotes required by US GAAP for complete financial statement disclosure. However, except as disclosed herein, there have been no material changes in the information contained in the notes to the audited financial statements for the year ended February 29, 2012, included in the Company's Form S-1 and filed with the Securities and Exchange Commission. These unaudited interim financial statements should be read in conjunction with the audited financial statements included in the Form S-1. In the opinion of management, all adjustments considered necessary for fair presentation and consisting solely of normal recurring adjustments have been made. Operating results for the nine months ended November 30, 2012 are not necessarily indicative of the results that may be expected for the year ending February 28, 2013.
  These financial statements have been prepared on a going concern basis. The Company has incurred losses since inception resulting in an accumulated deficit of $48,533 at November 30, 2012 and further losses are anticipated in the development of its business raising substantial doubt about the Company's ability to continue as a going concern. Its ability to continue as a going concern is dependent upon the ability of the Company to generate profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management has plans to seek additional capital through a private placement of its common stock or further director loans as needed. These financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue.
  The Company has been in the exploration stage since its formation on May 7, 2010 and has not yet realized any revenues from its planned operations. It is primarily engaged in the acquisition and exploration of mining properties. Mineral property acquisition and exploration costs are charged to operations as incurred. When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs incurred to develop such property are capitalized. Such costs will be amortized using the units-of-production method over the estimated life of the probable reserve.
  The fair value of the Company's financial instruments consisting of cash, accounts payable, and amounts due to related party approximate their carrying values due to the immediate or short-term maturity of these financial instruments. The Company operates in Australia and therefore is exposed to foreign exchange risk. It is management's opinion that the Company is not exposed to significant interest or credit risks arising from these financial instruments.
  Deferred income taxes are provided for tax effects of temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements. The Company uses the liability method to account for income taxes, which requires deferred taxes to be recorded at the statutory rate expected to be in effect when the taxes are paid. Valuation allowances are provided for a deferred tax asset when it is more likely than not that such asset will not be realized.
  On July 6, 2010 the Company entered into an Option Agreement to acquire a 100% undivided legal, beneficial and register-able interest in an Exploration License E 80/3757 located in Halls Creek Shire in Western Australia. The option period is for two years from the effective date of the Agreement. Initial cash consideration is AUD$7,000 (paid) upon signing the agreement. The exercise price of the option is AUD$200,000 cash at the time the notice of exercise of option is sent to the Owner.
  At November 30, 2012, the accumulated costs totalled $7,703. These costs have been expensed in a prior period.
  In the prior year, the Company issued 2,000,000 common shares at $0.001 per share to the Company's President for cash proceeds of $2,000. The Company owed $18,907 and $7,169 to the president and the director of the Company for funds advanced as of November 30, 2012 and February 29, 2012 respectively. Interest of $1,028 was imputed for the nine months ended November, 2012 and $189 was imputed for the year ended February, 29, 2012. This amount is unsecured, bears no interest and is payable on demand.
  The Company has evaluated subsequent events through the date of issuance of the unaudited interim financial and has determined there are none to be disclosed.
  The following information should be read in conjunction with (i) the condensed consolidated financial statements of Penola Inc., a Nevada corporation and development stage company, and the notes thereto appearing elsewhere in this Form 10-Q together with (ii) the more detailed business information and the February 29, 2012 audited financial statements and related notes included in the Company's most recent Annual report on Form 10-K, as amended (File No. 333-175529; the Form 10-K), for the year ended February 29, 2012, as filed with the SEC on May 30, 2012. Statements in this section and elsewhere in this Form 10-Q that are not statements of historical or current fact constitute "forward-looking" statements
  Penola Inc. (the "Company" or "we") was incorporated in the State of Nevada on May 7, 2010 and has a fiscal year end of February 28. It is an exploration-stage Company.
  To date the Company has no operations or revenues and consequently has incurred recurring losses from operations. No revenues are anticipated until we complete the financing described in our Registration Statement on Form S-1, as amended (File No. 333-175529), declared effective by the SEC on November 15, 2011 and implement our initial business plan. The ability of the Company to continue as a going concern is dependent on raising capital to fund our business plan and ultimately to attain profitable operations. Accordingly, these factors raise substantial doubt as to the Company's ability to continue as a going concern.
  Our activities have been financed primarily from the proceeds of share subscriptions. From our inception to November 30, 2012, we raised a total of $31,000 from private offerings of our common stock.
  Our plan of operation for the twelve months following the date of filing of this Form 10-Q is to complete the first and second of the three phases of the exploration program on our prospects. In addition to the $210,508 we anticipate spending for the first two phases of the exploration program as outlined below, we anticipate spending an additional $12,508 on general and administration expenses including fees payable in connection with the filing of our registration statement and complying with reporting obligations, and general administrative costs. Total expenditures over the next 12 months are therefore expected to be approximately $223,016. We will experience a shortage of funds prior to funding and we may utilize funds from our president, however they have no formal commitment, arrangement or legal obligation to advance or loan funds to the company.
  · Collection, purchase and collation of all relevant geological, geophysical and mining data available;
  · Re-interpretation of available geophysics to determine location of possible mineralized shears and faults; and
  · Field mapping and rock chip sampling of the license.
  · Soil sampling of any significant areas highlighted in Phase 1; and
  · Ground geophysics of targets generated by the re-interpretation of available geophysical data.
  · Drilling of any significant targets generated during Phase 2 work.
  15% of costs
  $ 10,987.50
  $ 84,237.50
  $ 210,507.50
  We plan to commence Phase 1 of the exploration program on the prospects in the spring of 2013. We expect this phase to take 7 days to complete and an additional one to two months for the geologist to prepare his report.
  Following Phase 1 of the exploration program, if it proves successful in identifying mineral deposits, we intend to proceed with Phase 2 of our exploration program. Management will rely on the consulting geologist's recommendations in making a decision to proceed with Phase 2. Subject to the results of Phase 1, we anticipate commencing with Phase 2 in the spring of 2013. We will require additional funding to commence with Phase 1 work on the prospects; we have no current plans on how to raise the additional funding. We cannot provide any assurance that we will be able to raise sufficient funds to proceed with any work after the first phase of the exploration program.
  We are a party to a Mineral Property Option Agreement whereby we have the right to acquire a 100% interest in Exploration License E 80/3757 located in the Murchison Mineral field Halls Creek Shire, in the Kimberly region of Western Australia and known as the Halls Creek Property. It is only under this option agreement that we potentially have any right to explore for mineralized material. This option agreement requires us to pay an exercise price of AUD$200,000 (approximately US$208,840) cash, in order for us to have the right to explore for mineralized materials in the area covered by Exploration License E 80/3757. Prior to the expiration of our option under the Mineral Property Option Agreement on July 7, 2012, George Lee, the licensor, granted us an extension until July 6, 2014, to negotiate another option agreement with him or amendment to the current agreement.
  If we fail to pay the exercise price, we will not have the right to conduct exploration activities at all. Currently, we do not have sufficient funds to pay the exercise price. We cannot provide investors with any assurance that we will be able to raise sufficient funds pay the $208,840 exercise price, and we have no current plans on how to raise the additional funding.
  In terms of exploratory work we will be able to conduct before we exercise the option, we anticipate completing Phases 1 and 2 of our Plan of Operation, subject to our ability to raise sufficient funds to complete Phases 1 and 2, and depending on the results of Phases 1 and 2, commencement of drilling of any significant targets generated during Phase 2 work.
  We will require additional funding to proceed with Phases 1 and 2; we have no current plans on how to raise the additional funding. We have no current plans on how to raise the additional funding. We cannot provide any assurance that we will be able to raise sufficient funds to proceed with any work after the first two phases of the exploration program.
  Three –Month Periods Ended November 30, 2012 and 2011, Nine –Month Periods Ended November 30, 2012 and 2011 and the Period from May 7, 2010 (Inception) to November 30, 2012.
  We recorded no revenues for the three-months ended November 30, 2012. For the nine months ended November 30, 2012, we also recorded no revenues. From the period of May 7, 2010 (inception) to November 30, 2012, we also recorded no revenues.
  Office and general expenses were $187, and no professional fees were incurred for the three months ending November 30, 2012. For the three months ending November 30, 2011, office and general expenses were $1,104 and professional fees were $21,246.
  Office and general expenses were $6,660, and professional fees were $4,200 for the nine months ending November 30, 2012. For the nine months ending November 30, 2011, office and general expenses were $1,953 and professional fees were $24,246.
  For the period from May 7, 2010 (Inception) to November 30, 2012, office and general expenses were $9,409 and professional fees were $31,421.
  From the period of May 7, 2010 (inception) to November 30, 2012, we incurred operating expenses of $48,533.
  At November 30, 2012, we had a cash balance of $3,449. We do not have sufficient cash on hand to commence Phase 1 of our exploration program or to fund our ongoing operational expenses beyond 12 months. We will need to raise funds to commence our exploration program and fund our ongoing operational expenses. Additional funding will likely come from equity financing from the sale of our common stock or sale of part of our interest in our mineral claims. If we are successful in completing an equity financing, existing shareholders will experience dilution of their interest in our Company. We do not have any financing arranged and we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common stock to fund our exploration activities and ongoing operational expenses. In the absence of such financing, our business will likely fail. 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 exploration of the Claims and our business will fail.
  Under the supervision and with the participation of our management, our principal executive officer and our principal financial officer are responsible for conducting an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as of the end of the fiscal year covered by this report. Disclosure controls and procedures means that the material information required to be included in our Securities and Exchange Commission reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms relating to our company, including any consolidating subsidiaries, and was made known to us by others within those entities, particularly during the period when this report was being prepared. Based on this evaluation, our principal executive officer and principal financial officer concluded as of the evaluation date that our disclosure controls and procedures were not effective as of November 30, 2012.
  *Filed and incorporated by reference to the Company's Registration Statement on Form S-1 (File No. 333-175529), as filed with the Securities and Exchange Commission on July 13, 2011.
  /s/ Lena Gencarelli
  Name: Lena Gencarelli
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