UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2010
Commission File Number 333-162168
SAGUARO RESOURCES, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
71 The Mead
Darlington, County Durham DL1 1EU
United Kingdom
(Address of principal executive offices, including zip code)
Telephone 011-44-7753-998016 Facsimile 011-44-7006-050347
(Telephone number, including area code)
Abby L. Ertz, Esq.
Ertz Law Group
3960 West Point Loma Blvd, Suite H-436
San Diego, CA 92110
Telephone (619)840-4566 Facsimile (619)564-8753
(Name, address and telephone number of agent for service)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the last 90 days. YES [X] 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 (ss.232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). 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,"
"non-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 [ ]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 4,500,000 shares as of May 6, 2010
ITEM 1. FINANCIAL STATEMENTS
The un-audited quarterly financial statements for the three and nine month
periods ended March 31, 2010, prepared by the company, immediately follow.
2
Saguaro Resources, Inc.
(A Development Stage Enterprise)
Balance Sheet
--------------------------------------------------------------------------------
As of As of
March 31, June 30,
2010 2009
-------- --------
(Unaudited) (Audited)
ASSETS
CURRENT ASSETS
Cash $ 16,859 $ 4,925
-------- --------
TOTAL CURRENT ASSETS 16,859 4,925
OTHER ASSETS -- --
-------- --------
TOTAL OTHER ASSETS -- --
-------- --------
TOTAL ASSETS $ 16,859 $ 4,925
======== ========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ -- $ --
Advances from Officers 8,245 3,250
-------- --------
TOTAL CURRENT LIABILITIES 8,245 3,250
TOTAL LIABILITIES 8,245 3,250
STOCKHOLDERS' EQUITY
Common stock, ($0.0001 par value, 100,000,000 shares
authorized; 4,500,000 and 2,500,000 shares issued and
outstanding as of March 31, 2010 and June 30, 2009 450 250
Additional paid-in capital 32,050 12,250
Deficit accumulated during development stage (23,886) (10,825)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 8,614 1,675
-------- --------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 16,859 $ 4,925
======== ========
See Notes to Financial Statements
3
Saguaro Resources, Inc.
(A Development Stage Enterprise)
Statement of Operations
--------------------------------------------------------------------------------
February 29, 2008
Three Months Three Months Nine Months Nine Months (inception)
Ended Ended Ended Ended through
March 31, March 31, March 31, March 31, March 31,
2010 2009 2010 2009 2010
---------- ---------- ---------- ---------- ----------
REVENUES
Revenues $ -- $ -- $ -- $ -- $ --
---------- ---------- ---------- ---------- ----------
TOTAL REVENUES -- -- -- -- --
GENERAL & ADMINISTRATIVE EXPENSES 3,786 100 13,061 3,600 16,886
---------- ---------- ---------- ---------- ----------
TOTAL GENERAL & ADMINISTRATIVE EXPENSES (3,786) (100) (13,061) (3,600) (16,886)
---------- ---------- ---------- ---------- ----------
OTHER INCOME (EXPENSE)
Impairement of mining rights -- -- -- -- (7,000)
---------- ---------- ---------- ---------- ----------
TOTAL OTHER INCOME (EXPENSE) -- -- -- -- (7,000)
---------- ---------- ---------- ---------- ----------
NET INCOME (LOSS) $ (3,786) $ (100) $ (13,061) $ (3,600) $ (23,886)
========== ========== ========== ========== ==========
BASIC EARNINGS PER SHARE $ (0.001) $ (0.000) $ (0.003) $ (0.001) $ (0.009)
========== ========== ========== ========== ==========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 3,073,529 2,500,000 4,255,556 2,500,000 2,740,370
========== ========== ========== ========== ==========
See Notes to Financial Statements
4
Saguaro Resources, Inc.
(A Development Stage Enterprise)
Statement of changes in Shareholders' Equity
--------------------------------------------------------------------------------
Deficit
Common Stock Additional During
------------------- Paid-in Development
Shares Amount Capital Stage Total
------ ------ ------- ----- -----
BALANCE, FEBRUARY 29, 2008 (INCEPTION) -- $ -- $ -- $ -- $ --
Commn stock issued, June 16, 2008 at $.005
per share 2,500,000 250 12,250 12,500
Loss for the period beginning February 29, 2008
(inception) to June 30, 2008 (7,000) (7,000)
---------- ------ -------- --------- --------
BALANCE, JUNE 30, 2008 (AUDITED) 2,500,000 250 12,250 (7,000) 5,500
========== ====== ======== ========= ========
Loss for the year ended June 30, 2009 (Audited) (3,825) (3,825)
---------- ------ -------- --------- --------
BALANCE, JUNE 30, 2009 (AUDITED) 2,500,000 250 12,250 (10,825) 1,675
========== ====== ======== ========= ========
Loss for the 3-months ended September 30, 2009 (6,595) (6,595)
---------- ------ -------- --------- --------
BALANCE, SEPTEMBER 30, 2009 (UNAUDITED) 2,500,000 250 12,250 (17,420) (4,920)
========== ====== ======== ========= ========
Loss for the 3-months ended December 31, 2009 (2,680) (2,680)
---------- ------ -------- --------- --------
BALANCE, DECEMBER 31, 2009 (UNAUDITED) 2,500,000 250 12,250 (20,100) (7,600)
========== ====== ======== ========= ========
Common stock issued, January 11, 2010 at $0.01
per share 2,000,000 200 19,800 20,000
Loss for the 3-months ended March 31, 2010 (3,786) (3,786)
---------- ------ -------- --------- --------
BALANCE, MARCH 31, 2010 (UNAUDITED) 4,500,000 $ 450 $ 32,050 $ (23,886) $ 8,614
========== ====== ======== ========= ========
See Notes to Financial Statements
5
Saguaro Resources, Inc.
(A Development Stage Enterprise)
Statement of Cash Flows
--------------------------------------------------------------------------------
February 29, 2008
Nine Months Nine Months (inception)
Ended Ended through
March 31, March 31, March 31,
2010 2009 2010
-------- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $(13,061) $ (3,600) $(23,886)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Changes in operating assets and liabilities:
Increase(Decrease) in Accounts payable and accrued liabilities --
Increase(Decrease) in Advance from Officers 4,995 -- 8,245
-------- -------- --------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (8,066) (3,600) (15,641)
CASH FLOWS FROM INVESTING ACTIVITIES
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES -- -- --
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock 20,000 -- 32,500
-------- -------- --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 20,000 -- 32,500
-------- -------- --------
NET INCREASE (DECREASE) IN CASH 11,934 (3,600) 16,859
CASH AT BEGINNING OF THE PERIOD 4,925 5,750 --
-------- -------- --------
CASH AT END OF PERIOD $ 16,859 $ 2,150 $ 16,859
======== ======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during year for:
Interest $ -- $ -- $ --
======== ======== ========
Income Taxes $ -- $ -- $ --
======== ======== ========
See Notes to Financial Statements
6
Saguaro Resources, Inc.
(A Development Stage Enterprise)
Notes to Financial Statements
March 31, 2010
--------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Saguaro Resources, Inc. (the "Company") was incorporated on February 29, 2008
under the laws of the State of Delaware. The Company's activities to date have
been limited to organization and capital. The Company has been in the
exploration stage since its formation and has not yet realized any revenues from
its planned operations.
The Company is primarily engaged in the acquisition and exploration of mining
properties. The Company has acquired Sky 1-4 mineral claims in the Lida
Quadrangle Area, Esmeralda County, NV for exploration and has formulated a
business plan to investigate the possibilities of a viable mineral deposit.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The Company reports revenue and expenses using the accrual method of accounting
for financial and tax reporting purposes.
USE OF ESTIMATES
Management uses estimates and assumptions in preparing these financial
statements in accordance with generally accepted accounting principles. Those
estimates and assumptions affect the reported amounts of assets and liabilities,
the disclosure of contingent assets and liabilities, and the reported revenues
and expenses.
MINERAL PROPERTY ACQUISITION AND EXPLORATION COSTS
The Company expenses all costs related to the acquisition and exploration of
mineral properties in which it has secured exploration rights prior to
establishment of proven and probably reserves. To date, the Company has not
established the commercial feasibility of any exploration prospects; therefore,
all costs are being expensed.
DEPRECIATION, AMORTIZATION AND CAPITALIZATION
The Company records depreciation and amortization, when appropriate, using both
straight-line and declining balance methods over the estimated useful life of
the assets (five to seven years). Expenditures for maintenance and repairs are
charged to expense as incurred. Additions, major renewals and replacements that
increase the property's useful life are capitalized. Property sold or retired,
together with the related accumulated depreciation is removed from the
appropriate accounts and the resultant gain or loss is included in net income.
7
INCOME TAXES
The Company accounts for its income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes". Under
Statement 109, a liability method is used whereby deferred tax assets and
liabilities are determined based on temporary differences between basis used for
financial reporting and income tax reporting purposes. Income taxes are provided
based on tax rates in effect at the time such temporary differences are expected
to reverse. A valuation allowance is provided for certain deferred tax assets if
it is more likely than not, that the Company will not realize the tax assets
through future operations.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments", requires the Company to disclose, when
reasonably attainable, the fair market values of its assets and liabilities
which are deemed to be financial instruments. The Company's financial
instruments consist primarily of cash and certain investments.
INVESTMENTS
Investments that are purchased in other companies are valued at cost less any
impairment in the value that is other than temporary in nature.
PER SHARE INFORMATION
The Company computes per share information by dividing the net loss for the
period presented by the weighted average number of shares outstanding during
such period.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Recently issued accounting pronouncements will have no significant impact on the
Company and its reporting methods.
NOTE 3 - PROVISION FOR INCOME TAXES
Realization of deferred tax assets is dependent upon sufficient future taxable
income during the period that deductible temporary differences and
carry-forwards are expected to be available to reduce taxable income. As the
achievement of required future taxable income is uncertain, the Company recorded
a valuation allowance.
As of March 31, 2010
--------------------
Net Operating Loss $23,886
Deferred tax assets 8,360
Other 0
Gross deferred tax assets 8,360
Valuation allowance 8,360
-------
Net deferred tax assets $ 0
=======
8
NOTE 4 - COMMITMENTS AND CONTINGENCIES
LITIGATION
The Company is not presently involved in any litigation.
NOTE 5 - GOING CONCERN
Future issuances of the Company's equity or debt securities will be required in
order for the Company to continue to finance its operations and continue as a
going concern. The Company's present revenues are insufficient to meet operating
expenses.
The financial statement of the Company have been prepared assuming that the
Company will continue as a going concern, which contemplates, among other
things, the realization of assets and the satisfaction of liabilities in the
normal course of business. The Company has incurred cumulative net losses of $
23,886 since its inception and requires capital for its contemplated operational
and marketing activities to take place. The Company's ability to raise
additional capital through the future issuances of common stock is unknown. The
obtainment of additional financing, the successful development of the Company's
contemplated plan of operations, and its transition, ultimately, to the
attainment of profitable operations are necessary for the Company to continue
operations. The ability to successfully resolve these factors raise substantial
doubt about the Company's ability to continue as a going concern. The financial
statement of the Company do not include any adjustments that may result from the
outcome of these aforementioned uncertainties.
NOTE 6 - RELATED PARTY TRANSACTIONS
Lynn Briggs, the sole officer and director of the Company may, in the future,
become involved in other business opportunities as they become available, thus
she may face a conflict in selecting between the Company and her other business
opportunities. The Company has not formulated a policy for the resolution of
such conflicts.
Lynn Briggs, the sole officer and director of the Company, will not be paid for
any underwriting services that she performs on behalf of the Company with
respect to the Company's upcoming S-1 offering. She will also not receive any
interest on any funds that she advances to the Company for offering expenses
prior to the offering being closed which will be repaid from the proceeds of the
offering. Advance to her as of March 31, 2010 is $ 8,245.
NOTE 7 - STOCK TRANSACTIONS
Transactions, other than employees' stock issuance, are in accordance with
paragraph 8 of Statement of Financial Accounting Standards 123. Transactions
with employees' stock issuance are in accordance with paragraphs (16-44) of
Statement of Financial Accounting Standards 123. These issuances shall be
accounted for based on the fair value of the consideration received or the fair
value of the equity instruments issued, or whichever is more readily
determinable.
9
On June 16, 2008, the Company issued a total of 2,500,000 shares of common stock
to one director for cash in the amount of $0.005 per share for a total of
$12,500.
On January 11, 2010, the Company issued a total of 2,000,000 shares of common
stock to twenty five individuals for cash in the amount of $0.01 per share for a
total of $20,000.
As of March 31, 2010 and June 30, 2009, the Company had 4,500,000 and 2,500,000
shares of common stock issued and outstanding respectively.
NOTE 8 - STOCKHOLDERS' EQUITY
The stockholders' equity section of the Company contains the following classes
of capital stock as of March 31, 2010 and June 30, 2009:
Common stock, $ 0.0001 par value: 100,000,000 shares authorized; 4,500,000 and
2,500,000 shares issued and outstanding.
NOTE 9 - MINERAL CLAIMS
On June 20, 2008, the Company acquired a 100% interest in the Sky 1-4 Mineral
Claims located in the Lida Quadrangle Area, Esmeralda County, Nevada. No proven
or probable reserves on the property have been established. The cost of the
Mineral Rights was impaired 100% during the quarter ended June 30, 2008.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
FORWARD LOOKING STATEMENTS
Some of the statements contained in this Form 10-Q that are not historical facts
are "forward-looking statements" which can be identified by the use of
terminology such as "estimates," "projects," "plans," "believes," "expects,"
"anticipates," "intends," or the negative or other variations, or by discussions
of strategy that involve risks and uncertainties. We urge you to be cautious of
the forward-looking statements, that such statements, which are contained in
this Form 10-Q, reflect our current beliefs with respect to future events and
involve known and unknown risks, uncertainties and other factors affecting our
operations, market growth, services, products and licenses. No assurances can be
given regarding the achievement of future results, as actual results may differ
materially as a result of the risks we face, and actual events may differ from
the assumptions underlying the statements that have been made regarding
anticipated events.
All written forward-looking statements, made in connection with this Form 10-Q
that are attributable to us or persons acting on our behalf, are expressly
qualified in their entirety by these cautionary statements. Given the
uncertainties that surround such statements, you are cautioned not to place
undue reliance on such forward-looking statements.
The safe harbors of forward-looking statements provided by the Securities
Litigation Reform Act of 1995 are unavailable to issuers not subject to the
reporting requirements set forth under Section 13(a) or 15(D) of the Securities
Exchange Act of 1934, as amended. As we have not registered our securities
pursuant to Section 12 of the Exchange Act, such safe harbors set forth under
the Reform Act are unavailable to us.
BUSINESS
Saguaro Resources, Inc. was incorporated in the State of Delaware on February
29, 2008 to engage in the acquisition, exploration and development of natural
resource properties. We intend to use the net proceeds from our offering,
pursuant to a registration statement filed with the U.S. Securities and Exchange
Commission, to develop our business operations. We are an exploration stage
company with no revenues and a limited operating history. The principal
executive offices are located at 71 The Mead, Darlington, County Durham, DL1
1EU, United Kingdom. The telephone number is 011 44 7753998016.
We currently own a 100% undivided interest in a mineral property, the Sky 1-4
Mineral Claims (known as the "Sky Property"). The Sky Property consists of an
area of 82.64 acres located in the Lida Quadrangle, Esmeralda County, Nevada.
Title to the Sky Property is held by Saguaro Resources, Inc. Our plan of
operation is to conduct mineral exploration activities on the property in order
to assess whether it contains mineral deposits capable of commercial extraction.
We have not earned any revenues to date and we do not anticipate earning
revenues until such time as we enter into commercial production of our mineral
property. We are presently in the exploration stage of our business and we can
11
provide no assurance that we will discover commercially exploitable levels of
mineral resources on our property. Moreover, if such deposits are discovered,
there is no guarantee that we will enter into further substantial exploration
programs.
RESULTS OF OPERATIONS
We are still in our exploration stage and have generated no revenues to date. We
incurred operating expenses of $3,786 and $100 for the three months ended March
31, 2010 and 2009, respectively. These expenses consisted of general operating
expenses incurred in connection with the day to day operation of our business
and the preparation and filing of our required reports with the U.S. Securities
and Exchange Commission.
Our net loss from inception (February 29, 2008) through March 31, 2010 was
$23,886.
Our auditors have issued a going concern opinion. This means that there is
substantial doubt that we can continue as an on-going business for the next
twelve months unless we obtain additional capital to pay our bills. This is
because we have not generated revenues and no revenues are anticipated until we
begin removing and selling minerals. There is no assurance we will ever reach
that point.
LIQUIDITY AND CAPITAL RESOURCES
Our cash balance at March 31, 2010 was $16,859 with $8,245 in outstanding
liabilities consisting of a note payable to our officer and director for funds
she has loaned the company. In order to achieve our exploration program goals we
needed the funding of $20,000 from the offering of registered shares pursuant to
a registration statement on Form S-1 filed with the SEC under file number
333-162168 which became effective on January 7, 2010. On January 11, 2010, the
Company issued a total of 2,000,000 shares of common stock to 25 individuals for
cash in the amount of $.01 per share for a total of $20,000 to complete the S-1
offering.
PLAN OF OPERATION
Our plan of operation for the next twelve months is to complete the first phase
of the exploration program on our claims consisting of geological mapping, soil
sampling and rock sampling. In addition to the $8,500 we anticipate spending for
Phase 1 as outlined below, we anticipate spending an additional $6,250 on
professional fees, including fees payable in connection with reporting
obligations, and $2,250 in general administrative costs. Total expenditures over
the next 12 months are therefore expected to be approximately $17,000. If we
experience a shortage of funds prior to funding during the next 12 months, we
may utilize funds from our director, who has informally agreed to advance funds
to allow us to pay for operation expenses, however, she has no formal
commitment, arrangement or legal obligation to advance or loan funds to the
company. She has also agreed to pay for reclamation costs in the event we
experience a shortage of funds during exploration and abandon the claims.
12
We engaged Mr. James W. McLeod, P. Geo., to prepare a geological evaluation
report on the Sky Property. Mr. McLeod's report summarizes the results of the
history of the exploration of the mineral claims, the regional and local geology
of the mineral claims and the mineralization and the geological formations
identified as a result of the prior exploration in the claim areas. The
geological report also gives conclusions regarding potential mineralization of
the mineral claims and recommends a further geological exploration program on
the mineral claims. The exploration program recommended by Mr. McLeod is as
follows:
PHASE 1
Detailed prospecting, mapping and soil geochemistry.
The estimated cost for this program is all inclusive.
The timeline for accomplishing this phase of fieldwork
including the turn-around time on analyses is approximately
two months $ 8,500
PHASE 2
Magnetometer and VLF electromagnetic, grid controlled
surveys over the areas of interest determined by the
Phase 1 survey. Included in this estimated cost is
transportation, accommodation, board, grid installation,
two geophysical surveys, maps and report 9,500
-------
Total $18,000
=======
The geologist has commenced the fieldwork for Phase 1 of the exploration
program. We have a verbal agreement with James McLeod, the consulting geologist,
who prepared the geology report on our claims, to retain his services for our
planned exploration program. We expect this phase to take two weeks to complete
and an additional three months for the consulting geologist to receive the
results from the assay lab and prepare his report. If Phase 1 of the exploration
program is successful, we anticipate commencing Phase 2 in winter of 2010 or
spring 2011. We expect this phase to take three weeks to complete and an
additional three months for the consulting geologist to receive the results from
the assay lab and prepare his report.
The above program costs are management's estimates based upon the
recommendations of the professional consulting geologist's report and the actual
project costs may exceed our estimates. To date, we have not commenced
exploration.
We will require additional funding to proceed with any subsequent work on the
claims, we have no current plans on how to raise the additional funding. We
cannot provide investors with any assurance that we will be able to raise
sufficient funds to proceed with any work after the first phase of the
exploration program.
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ITEM 4. CONTROLS AND PROCEDURES
Our management is responsible for establishing and maintaining adequate internal
control over financial reporting. Internal control over financial reporting is
defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange
Act of 1934 as a process designed by, or under the supervision of, the company's
principal executive and principal financial officers and effected by the
company's board of directors, management and other personnel, to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
accounting principles generally accepted in the United States of America and
includes those policies and procedures that:
- Pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and dispositions of the
assets of the company;
- Provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance
with accounting principles generally accepted in the United States of
America and that receipts and expenditures of the company are being
made only in accordance with authorizations of management and
directors of the company; and
- Provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use or disposition of the company's
assets that could have a material effect on the financial statements.
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. All internal control systems,
no matter how well designed, have inherent limitations. Therefore, even those
systems determined to be effective can provide only reasonable assurance with
respect to financial statement preparation and presentation. Because of the
inherent limitations of internal control, there is a risk that material
misstatements may not be prevented or detected on a timely basis by internal
control over financial reporting. However, these inherent limitations are known
features of the financial reporting process. Therefore, it is possible to design
into the process safeguards to reduce, though not eliminate, this risk.
As of March 31, 2010 management assessed the effectiveness of our internal
control over financial reporting based on the criteria for effective internal
control over financial reporting established in Internal Control--Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission ("COSO") and SEC guidance on conducting such assessments. Based on
that evaluation, they concluded that, during the period covered by this report,
such internal controls and procedures were not effective to detect the
inappropriate application of US GAAP rules as more fully described below. This
was due to deficiencies that existed in the design or operation of our internal
controls over financial reporting that adversely affected our internal controls
and that may be considered to be material weaknesses.
14
The matters involving internal controls and procedures that our management
considered to be material weaknesses under the standards of the Public Company
Accounting Oversight Board were: (1) lack of a functioning audit committee due
to a lack of a majority of independent members and a lack of a majority of
outside directors on our board of directors, resulting in ineffective oversight
in the establishment and monitoring of required internal controls and
procedures; (2) inadequate segregation of duties consistent with control
objectives; and (3) ineffective controls over period end financial disclosure
and reporting processes. The aforementioned material weaknesses were identified
by our Chief Executive Officer in connection with the review of our financial
statements as of March 31, 2010.
Management believes that the material weaknesses set forth in items (2) and (3)
above did not have an effect on our financial results. However, management
believes that the lack of a functioning audit committee and the lack of a
majority of outside directors on our board of directors results in ineffective
oversight in the establishment and monitoring of required internal controls and
procedures, which could result in a material misstatement in our financial
statements in future periods.
MANAGEMENT'S REMEDIATION INITIATIVES
In an effort to remediate the identified material weaknesses and other
deficiencies and enhance our internal controls, we have initiated, or plan to
initiate, the following series of measures:
We will create a position to segregate duties consistent with control objectives
and will increase our personnel resources and technical accounting expertise
within the accounting function when funds are available to us. And, we plan to
appoint one or more outside directors to our board of directors who shall be
appointed to an audit committee resulting in a fully functioning audit committee
who will undertake the oversight in the establishment and monitoring of required
internal controls and procedures such as reviewing and approving estimates and
assumptions made by management when funds are available to us.
Management believes that the appointment of one or more outside directors, who
shall be appointed to a fully functioning audit committee, will remedy the lack
of a functioning audit committee and a lack of a majority of outside directors
on our Board.
We anticipate that these initiatives will be at least partially, if not fully,
implemented by December 31, 2010. Additionally, we plan to test our updated
controls and remediate our deficiencies by December 31, 2010.
CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING
There was no change in our internal controls over financial reporting that
occurred during the period covered by this report, which has materially
affected, or is reasonably likely to materially affect, our internal controls
over financial reporting.
15
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS
The following exhibits are included with this quarterly filing. Those marked
with an asterisk and required to be filed hereunder, are incorporated by
reference and can be found in their entirety in our registration statement on
form S-1, filed under SEC File Number 333-162168, at the U.S. Securities and
Exchange Commission's website at www.sec.gov:
Exhibit No. Description
----------- -----------
3.1 Articles of Incorporation*
3.2 Bylaws*
31.1 Sec. 302 Certification of Principal Executive Officer
31.2 Sec. 302 Certification of Principal Financial Officer
32.1 Sec. 906 Certification of Principal Executive Officer
32.2 Sec. 906 Certification of Principal Financial Officer
SIGNATURES
Pursuant to the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
May 6, 2010 Saguaro Resources, Inc., Registrant
By: /s/ Lynn Briggs
-----------------------------------------------
Lynn Briggs, President and Chief Executive
Officer
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
May 6, 2010 Saguaro Resources, Inc., Registrant
By: /s/ Lynn Briggs
-----------------------------------------------
Lynn Briggs, President, Secretary and Treasurer
Chief Financial Officer (Principal Executive
Officer and Principal Accounting Officer)
16