PART II

 

Item 5.

Market for Common Equity, Related Stockholder Matters and Small Business Issuer Purchases of Equity Securities

 

Market Information

 

Our shares of common stock are listed on the Over the Counter Bulletin Board (symbol ROEX; however, trading has not yet commenced. Therefore, no table of high/low bid prices is presented in this report.

 

Number of Holders

 

As of September 30, 2007, the Company’s issued and outstanding common stock was held by a total of thirty (30) shareholders of record.

 

Dividends

 

We have not paid any cash dividends since our inception and do not foresee declaring any dividend on our common stock in the foreseeable future.

 

Recent Sales of Unregistered Securities

 

None.

 

Purchase of our Equity Securities by Officers and Directors

 

None.

 

Other Stockholder Matters

 

None.

 

 

 

5

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Item 6.

Management’s Discussion and Analysis of Financial Condition and Results of Operation

 

You should read the following discussion and analysis in conjunction with (1) our financial statements, including the notes thereto, included in this Report, and (2) the “Risk Factors” section of our Registration Statement on Form SB2, filed in January, 2007 and this Form 10K-SB. Some of the information contained in this Report may contain forward-looking statements within the meaning of Section 27A of the Securities Exchange Act of 1933, as amended (the “Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). This information may involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements which involve assumptions and describe our future plans, strategies and expectations, are generally identifiable by the use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend” or “project” or the negative of these words or other variations on these words or comparable terminology. These forward-looking statements are based on assumptions that may be incorrect, and there can be no assurance that the projections included in these forward-looking statements will come to pass. Our actual results could differ materially from those expressed or implied by the forward-looking statements as a result of various factors. We undertake no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

 

Summary Financial Data

 

		For year ended September 30, 2007			For year ended September 30, 2006
Statements of Operations Data:
Revenues		0			0
Acquisition of mineral property		0			6,375
General and administrative expenses		64,567			27,690
Exploration costs and expenses		0			6,125
Net loss		(64,567	)		(40,190	)
Net loss per common share—basic and diluted		(0.005	)		(0.006	)
Weighted average number of shares of common stock outstanding		13,506,831			6,273,973

 

Balance Sheet Data:
Cash and cash equivalents		42,170			3,000
Working capital surplus (deficit)		37,493			(6,940	)
Total assets		42,170			3,000
Accumulated deficit		(105,507	)		(40,940	)

 

 

6

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Overview

 

We have incurred net losses since our inception and expect to incur substantial and increasing losses for the next several years as we expand our exploration activities and move into later stages of development. Since inception, we have incurred an accumulated deficit of $105,507. We have funded our losses to date through the sale of equity securities and advances from stockholders.

 

Results of Operations — 2007 compared to 2006

 

We are a start-up company currently in the exploration and development stage and have not generated any revenues since inception.

 

General and administrative expense consists mainly of consulting fees, legal and accounting fees, management fees, rent, licenses and permits and miscellaneous filing fees and expenses incurred in the day-to-day operation of our business. General and administrative expenses increased to $64,567 for the fiscal year ending September 30, 2007, compared to $27,690 for the fiscal year ended September 30, 2006. The majority of the increase was mainly due to legal and accounting fees in the amount of $28,524, as compared to $3,040 for the fiscal year ended September 30, 2006 and consulting fees of $7,500, compared to $0 for the fiscal year ended September 30, 2006. The increase in legal, accounting and consulting fees were incurred in the current year in connection with the preparation and filing of our Form SB-2 registration statement with the SEC and continuing period reports.

 

We did not have any cash interest income or expense.

 

Liquidity and Capital Resources — 2007 compared to 2006

 

At September 30, 2007, we had available cash in the bank of $42,170, compared to $3,000 at September 30, 2006.

 

Cash used in operations was $45,830 for the fiscal year ended September 30, 2007, compared with $7,000 for the fiscal year ended September 30, 2007. This increase in negative cash flow from operations was primarily caused by a significant increase in legal and accounting fees, as described above.

 

Financing activities in 2007 consisted of the issuance of 8,500,000 shares of common stock for proceeds of $85,000 pursuant to a public offering of our securities, filed with the SEC and made effective on February 20, 2007.

 

The Company continues to search for additional sources of capital, as and when needed; however, there can be no assurance funding will be successfully obtained. Even if it is obtained, there is no assurance that it will not be secured on terms that are highly dilutive to existing shareholders.

 

Debt

 

At September 30, 2007, we owed $14,700 to an officer and director of the company for management fees resulting from services rendered and accrued rent. Please see Notes 5 and 8 to our audited financial statements in Item 7, for a more detailed description of these transactions.

 

Our actual cash needs might vary materially from those now planned because of a number of factors, including:

 

•

The scope, rate of progress and costs of our exploration and development activities;

 

•

Changes in our research, exploration and/or development plans;

 

•

The terms and timing of any collaborative, licensing and/or other arrangements that we may establish;

 

•

The cost and timing of regulatory approvals; and

  

•

The cost of filing, prosecuting, defending and enforcing any claims against our property rights.

We currently believe our cash in the bank will allow us to complete our initial Phase I exploration activities, after which we intend to raise substantial additional capital to fund our development and operations activities. We expect to finance our future cash needs through the sale of equity securities and possibly strategic collaborations or debt financing or through other sources that may be dilutive to existing stockholders.

If and when we seek to raise additional money to fund our operations, funding may not be available to us on acceptable terms, or at all. If we are unable to raise additional funds when needed, we may not be able to continue our planned exploration and development activities, or we could be required to delay, scale back or eliminate some or all of our research, exploration and development programs. If we raise additional funds through equity sales, these sales may be highly dilutive to existing investors.

 

 

7

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Critical Accounting Policies and Significant Judgments and Estimates

 

Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States and reflect the application of certain significant accounting policies as described in Note 2 to our audited financial statements and critical accounting policies as described below. A “critical accounting policy” is one which is both important to the portrayal of our financial condition and results and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates.

 

Net Loss per Share

 

We compute net income (loss) per share in accordance with SFAS No.128, “Earnings per Share”. SFAS No. 128 requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.

 

Mineral Property Costs

 

We have been in the exploration stage since inception and have not yet realized any revenues from planned operations. We are 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. Although we have taken steps to verify title to mineral properties in which we have an interest, according to the usual industry standards for the stage of exploration of such properties, these procedures do not guarantee title. Such properties may be subject to prior agreements or transfers and title may be affected by undetected defects.

 

Reclamation Costs

 

Our policy for recording reclamation costs is to record a liability for the estimated costs to reclaim mined land by recording charges to production costs for each tonne of ore mined over the life of the mine. The amount charged is based on management’s estimation of reclamation costs to be incurred. The accrued liability will be reduced as reclamation expenditures are made. Certain reclamation work will be performed concurrently with mining and these expenditures will be charged to operations at that time.

 

Material Off-Balance Sheet Arrangements

 

We have no material commitments for capital expenditures and no off-balance sheet arrangements.

 

Risk Factors

 

The material risks affecting our company and our common stock are set forth in detail in our initial Form SB-2 Registration Statement, which can be found in its entirety on the SEC website at www.sec.gov under our SEC File No. 333-140299. Those risk factors are incorporated herein by this reference and are not being restated; however, we have updated or added the following additional material risk factors:

 

Risks Related to Our Financial Results and Need for Additional Financing

 

Our auditors’ reports contain a statement that our net loss and limited working capital raise substantial doubt about our ability to continue as a going concern.

 

Our independent registered public accountants have stated in their report, included in Item 7. Financial Statements, that our significant operating losses and working capital deficit raise substantial doubt about our ability to continue as a going concern. We had net losses of $64,567 and $40,190, respectively, for the fiscal years ended September 30, 2007 and 2006. Our accumulated deficit from inception to the fiscal year ended September 30, 2007 was $105,507. We will be required to raise substantial capital to fund our capital expenditures, working capital, and other cash requirements since our current cash assets are expected to last only through December 31, 2008. We continue to search for sources of additional funding, including seeking potential joint venture partners, while we continue the initial exploration phase on our mining claims. The successful outcome of future financing activities cannot be determined at this time and there are no assurances that, if achieved, we will have sufficient funds to execute our intended business plan or generate positive operational results.

 

 

 

8

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We will likely need additional capital to achieve our current business strategy and our inability to obtain additional financing will inhibit our ability to expand or even maintain our research, exploration and development efforts.

 

In addition to our current accumulated deficit, we expect to incur additional losses during the foreseeable future. Until we are able to determine if there are mineral deposits available for extraction on our properties, we are unlikely to be profitable. Consequently, we will require substantial additional capital to continue our exploration and development activities. We believe our current cash in the bank will allow us to complete our planned exploration activities for the calendar year 2008; however, there is no assurance we will not incur additional and unplanned expenses. When additional funding is required, we intend to raise funds either through private placements or public offerings of our equity securities. There is no assurance that we will be able to obtain additional financing through private placements and/or public offerings necessary to support our working capital requirements. To the extent that funds generated from any private placements and/or public offerings are insufficient, we will have to raise additional working capital through other sources, such as bank loans and/or financings. No assurance can be given that additional financing will be available, or if available, will be on acceptable terms.

 

If we are unable to secure adequate sources of funds, we may be forced to delay or postpone the exploration, development and research of our properties, and as a result, we might be required to diminish or suspend our business plans. These delays in development would have an adverse effect on our ability to generate revenues and could require us to possibly cease operations. In addition, such inability to obtain financing on reasonable terms could have a negative effect on our business, operating results or financial condition to such extent that we are forced to restructure, file for bankruptcy protection, sell assets or cease operations, any of which could put your investment dollars at significant risk.

 

We incur increased costs as a result of being a publicly company.

 

As a publicly listed and trading company, we are incurring significant legal, accounting and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act of 2002, as well as new rules subsequently implemented by the Securities and Exchange Commission, have required changes in corporate governance practices of public companies. These new rules and regulations have increased our legal and financial compliance costs and have made some activities more time-consuming and costly. For example, as a result of becoming a public company, we adopted policies regarding internal controls and disclosure controls and procedures. In addition, these new rules and regulations have made it more difficult and more expensive for us to obtain director and officer liability insurance, which we currently cannot afford to do. As a result of the new rules, it may become more difficult for us to attract and retain qualified persons to serve on our Board of Directors or as executive officers. We cannot predict or estimate the amount of additional costs we may incur as a result of being a public company or the timing of such costs.

 

 

 

 

9

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Item 7.

Financial Statements

 

 

 

 

 

 

 

 

 

 

 

 

Rose Explorations Inc.

(A Development Stage Company)

Financial Statements

(Expressed in U.S. Dollars)

30 September 2007

 

 

 

 

 

 

 

 

 

 

10

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James Stafford    James Stafford

 

 

 

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of  

Rose Explorations Inc.

(A Development Stage Company)

We have audited the balance sheets of Rose Explorations Inc. (the “Company”) as at 30 September 2007 and 2006, and the related statements of operations, cash flows and changes in stockholders’ equity for the years then ended and for the period from the date of inception on 5 December 2003 to 30 September 2007. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of 30 September 2007 and 2006 and the results of its operations, cash flows and changes in stockholders’ equity for the years then ended and for the period from the date of inception on 5 December 2003 to 30 September 2007 in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, conditions exist which raise substantial doubt about the Company’s ability to continue as a going concern unless it is able to generate sufficient cash flows to meet its obligations and sustain its operations. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

                                                                                                                                                                                 /s/ James Stafford

Vancouver, Canada                                                                                                                                           Chartered Accountants

29 November 2007

 

 

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Rose Explorations Inc.

(A Development Stage Company)

Balance Sheets

(Expressed in U.S. Dollars)

_________________________________________________________________________________________________________________________________________________________________________________

		As at 30 September 2007		As at 30 September 2006
		$		$
Assets
Current
Cash and cash equivalents		42,170		3,000
		42,170		3,000
Liabilities
Current
Accounts payable and accrued liabilities (Note 4)		4,677		9,940
Stockholders’ equity
Capital stock (Note 6)
Authorized
75,000,000 of common shares, par value $0.001
Issued and outstanding
2007 - 18,500,000 common shares, par value $0.001
2006 - 10,000,000 common shares, par value $0.001		18,500		10,000
Additional paid-in capital		124,500		24,000
Deficit, accumulated during the development stage		(105,507)		(40,940)
		37,493		(6,940)
		42,170		3,000

Nature and Continuance of Operations (Note 1)

On behalf of the Board:

/s/ Greg Cowan  Director  

12

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Rose Exploratisons Inc.

(A Development Stage Company)

Statements of Operation

(Expressed in U.S. Dollars)

_________________________________________________________________________________________________________________________________________________________________________________

	For the period from the date of inception on 5 December 2003 to 30 September 2007		For the year ended 30 September 2007		For the year ended 30 September 2006		For the year ended 30 September 2005
	$		$		$		$
Expenses
Acquisition of mineral property (Note 3)	6,375		-		6,375		-
Bank charges	379		379		-		-
Consulting (Note 5)	7,500		7,500		-		-
Exploration and development (Note 3)	6,125		-		6,125		-
Filing fees	1,534		1,534		-		-
Legal and accounting	31,564		28,524		3,040		-
Licences and permits	1,100		-		550		200
Management fees (Notes 5 and 8)	36,000		18,000		18,000		-
Registered agent	400		100		100		100
Rent (Notes 5 and 8)	12,000		6,000		6,000		-
Transfer agent	2,530		2,530		-		-
Net loss for the period	(105,507)		(64,567)		(40,190)		(300)
Basic and diluted loss per common share			(0.005)		(0.006)		(300)
Weighted average number of common shares used in per share calculations			13,506,831		6,273,973		1

 

 

 

 

 

 

 

13

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Rose Explorations Inc.

(A Development Stage Company)

Statements of Cash Flows

(Expressed in U.S. Dollars)

_________________________________________________________________________________________________________________________________________________________________________________

		For the period from the date of inception on 5 December 2003 to 30 September 2007		For the year ended 30 September 2007		For the year ended 30 September 2006		For the year ended 30 September 2005
		$		$		$		$
Cash flows from operating activities
Net loss for the period		(105,507)		(64,567)		(40,190)		(300)
Adjustments to reconcile loss to net cash used by operating activities
Contributions to capital by related parties (Notes 5 and 8)		48,000		24,000		24,000		-
Changes in operating assets and liabilities
(Decrease) Increase in accounts payable and accrued liabilities		4,677		(5,263)		9,190		300
		(52,830)		(45,830)		(7,000)		-
Cash flows from financing activities
Common shares issued for cash		95,000		85,000		10,000		-
Common shares redeemed		-		-		(1)		-
		95,000		85,000		9,999		-
Increase in cash and cash equivalents		42,170		39,170		2,999		-
Cash and cash equivalents, beginning of period		-		3,000		1		1
Cash and cash equivalents, end of period		42,170		42,170		3,000		1

Supplemental Disclosures with Respect to Cash Flows (Note 8)

 

 

 

 

 

 

 

 

 

14

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Rose Explorations Inc.

(A Development Stage Company)

Statements of Changes in Stockholders' Equity

(Expressed in U.S. Dollars)

_________________________________________________________________________________________________________________________________________________________________________________

	Number of shares issued		Share capital		Additional paid in capital		Deficit, accumulated during the development stage		Stockholders’ equity
				$		$		$		$
Balance at 5 December 2003 (inception)		-		-		-		-		-
Common share issued for cash ($1 per share) (Note 6)		1		-		1		-		1
Net loss for the period		-		-		-		(450)		(450)
Balance at 30 September 2004		1		-		1		(450)		(449)
Net loss for the year		-		-		-		(300)		(300)
Balance at 30 September 2005		1		-		1		(750)		(749)
Common shares issued for cash ($0.001 per share) (Note 6)		10,000,000		10,000		-		-		10,000
Common shares redeemed - cash ($1 per share) (Note 6)		(1)		-		(1)		-		(1)
Contributions to capital by related parties - expenses (Notes 5 and 8)		-		-		24,000		-		24,000
Net loss for the year		-		-		-		(40,190)		(40,190)
Balance at 30 September 2006		10,000,000		10,000		24,000		(40,940)		(6,940)

Common shares issued for cash ($0.001 per share) (Note 6)		8,500,000		8,500		76,500		-		85,000
Contributions to capital by related parties - expenses (Notes 5 and 8)		-		-		24,000		-		24,000
Net loss for the year		-		-		-		(64,567)		(64,567)
Balance at 30 September 2007		18,500,000		18,500		124,500		(105,507)		37,493

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Rose Explorations Inc.

(A Development Stage Company)

Notes to Financial Statements

(Expressed in U.S. Dollars)

September 30,  2007

_________________________________________________________________________________________________________________________________________________________________________________

1.	Nature and Continuance of Operations

               

       Rose Explorations Inc. (the “Company”) was incorporated under the laws of the State of Nevada on 5 December 2003. The Company changed its name to Rose Explorations Inc.

       from Computer Maid, Inc. on 13 February 2006. The Company was incorporated for the purpose to promote and carry on any lawful business for which a corporation may be

       incorporated under the laws of the State of Nevada.

 

  The Company is a development stage enterprise, as defined in Financial Accounting Standards Board No. 7. The Company is devoting all of its present efforts in securing and   

   establishing a new business, and its planned principle operations have not commenced, and, accordingly, no revenue has been derived during the organization period.

 

   The Company’s financial statements as at 30 September 2007 and for the year then ended have been prepared on a going concern basis, which contemplates the realization of

   assets and the settlement of liabilities and commitments in the normal course of business. The Company has a loss of $64,567 for the year ended 30 September 2007 (2006 -

   $40,190, 2005 - $300) and has working capital of $37,493 at 30 September 2007 (and a working capital deficit at 30 September 2006 - $6,940).

 

   Management cannot provide assurance that the Company will ultimately achieve profitable operations or become cash flow positive, or raise additional debt and/or equity

   capital. Management believes that the Company’s capital resources should be adequate to continue operating and maintaining its business strategy during the fiscal year

   ending 30 September 2008. However, if the Company is unable to raise additional capital in the near  future, due to the Company’s liquidity problems, management expects that

   the Company will need to curtail operations, liquidate assets, seek additional capital on less favourable terms and/or pursue other remedial measures.

 

   These financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be

   necessary should the Company be unable to continue as a going concern.

 

   At 30 September 2007, the Company had suffered losses from development stage activities to date. Although management is currently attempting to implement its business

   plan, and is seeking additional sources of equity or debt financing, there is no assurance these activities will be successful. Accordingly, the Company must rely on its

   president to perform essential functions without compensation until a business operation can be  commenced. These factors raise substantial doubt about the ability of the

   Company to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

2.	Significant Accounting Policies

 

The following is a summary of significant accounting policies used in the preparation of these financial statements.

 

Basis of presentation

 

   The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America applicable to

   development stage enterprises, and are expressed in U.S. dollars. The Company’s fiscal year end is 30 September.

 

Cash and cash equivalents

 

Cash and cash equivalents include highly liquid investments with original maturities of three months or less.

 

 

 

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Rose Explorations Inc.

(A Development Stage Company)

Notes to Financial Statements

(Expressed in U.S. Dollars)

September 30,  2007

_________________________________________________________________________________________________________________________________________________________________________________

 

Mineral property costs

 

The Company has been in the exploration stage since its formation on 5 December 2003 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.

 

   Although the Company has taken steps to verify title to mineral properties in which it has an interest, according to the usual industry standards for the stage of exploration of

   such properties, these procedures do not  guarantee the Company’s title. Such properties may be subject to prior agreements or transfers and title may be affected by

   undetected defects.

 

Reclamation costs

 

The Company’s policy for recording reclamation costs is to record a liability for the estimated costs to reclaim mined land by recording charges to production costs for each tonne of ore mined over the life of the mine. The amount charged is based on management’s estimation of reclamation costs to be incurred. The accrued liability is reduced as reclamation expenditures are made. Certain reclamation work is performed concurrently with mining and these expenditures are charged to operations at that time.

 

Long-lived assets

 

In accordance with SFAS No. 144, Accounting for Impairment or Disposal of Long-Lived Assets, the carrying value of long-lived assets is reviewed on a regular basis for the existence of facts or circumstance that may suggest impairment. The Company recognized an impairment when the sum if the expected undiscounted future cash flows is less than the carrying amount of the asset. Impairment losses, if any, are measured as the excess of the carrying amount of the asset over its estimated fair value.

 

Financial instruments

 

The carrying value of cash, accounts payable and accrued liabilities, and due to related parties approximates their fair value because of the short maturity of these instruments. The Company’s operations are in Canada and virtually all of its assets and liabilities are giving rise to significant exposure to market risks from changes in foreign currency rates. The Company’s financial risk is the risk that arises from fluctuations in foreign exchange rates and the degree of volatility of these rates. Currently, the Company does not use derivative instruments to reduce its exposure to foreign currency risk.

 

   Derivative financial instruments

 

   The Company has not, to the date of these financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.

 

Income taxes

 

   Deferred income taxes are reported for timing differences between items of income or expense reported in the financial statements and those reported for income tax purposes in

   accordance with SFAS No. 109, Accounting for  Income Taxes, which requires the use of the asset/liability method of accounting for income taxes. Deferred income taxes and

   tax benefits are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and

   their respective tax bases, and for tax loss and credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income

   in the years in which those temporary differences are expected to be recovered or settled. The Company provides for deferred taxes for the estimated future tax effects

   attributable to temporary differences and carry-forwards when realization is more likely than not.

 

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Rose Explorations Inc.

(A Development Stage Company)

Notes to Financial Statements

(Expressed in U.S. Dollars)

September 30,  2007

_________________________________________________________________________________________________________________________________________________________________________________

 

Basic and diluted net loss per share

 

The Company computes net loss per share in accordance with SFAS No. 128, Earnings per Share. SFAS No. 128 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all potentially dilutive common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all potentially dilutive shares if their effect is anti-dilutive.

 

Comprehensive loss

 

SFAS No. 130, Reporting Comprehensive Income, establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As at 30 September 2007, the Company has no items that represent a comprehensive loss and, therefore, has not included a schedule of comprehensive loss in the financial statements.

 

Segments of an enterprise and related information

 

SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, supersedes SFAS No. 14, Financial Reporting for Segments of a Business Enterprise. SFAS 131 establishes standards for the way that public companies report information about operating segments in annual financial statements and requires reporting of selected information about operating segments in interim financial statements issued to the public. It also establishes standards for disclosures regarding products and services, geographic areas and major customers. SFAS 131 defines operating segments as components of a company about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company has evaluated this SFAS and does not believe it is applicable at this time.

 

Start-up expenses

 

The Company has adopted Statement of Position No. 98-5, Reporting the Costs of Start-up Activities, which requires that costs associated with start-up activities be expensed as incurred.  Accordingly, start-up costs associated with the Company's formation have been included in the Company's general and administrative expenses for the period from the date of inception on 14 August 2003 to 30 September 2007.

 

Foreign currency translation

 

The Company’s functional and reporting currency is in U.S. dollar. The financial statements of the Company are translated to U.S. dollars in accordance with SFAS No. 52, Foreign Currency Translation. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income. The Company has not, to the date of these financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.

 

18

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Rose Explorations Inc.

(A Development Stage Company)

Notes to Financial Statements

(Expressed in U.S. Dollars)

September 30,  2007

_________________________________________________________________________________________________________________________________________________________________________________

 

 

    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 of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures during the reporting period. Actual results could differ from these estimates.

 

Recent accounting pronouncements

 

In May 2005, the Financial Accounting Standards Board (the “FASB”) issued SFAS No. 154, Accounting Changes and Error Corrections - A Replacement of APB Opinion No. 20 and SFAS No. 3. SFAS No. 154 changes the requirements for the accounting for and reporting of a change in accounting principle and applies to all voluntary changes in accounting principle. It also applies to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. SFAS No. 154 requires retrospective application to prior periods' financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. The provisions of SFAS No. 154 are effective for accounting changes and correction of errors made in fiscal years beginning after 15 December 2005. The adoption of this standard is not expected to have a material effect on the Company's results of operations or financial position.

 

In March 2005, the SEC staff issued Staff Accounting Bulletin (“SAB”) No. 107 to give guidance on the implementation of SFAS No. 123R. The Company will consider SAB No. 107 during implementation of SFAS No. 123R.

 

In December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary Assets - An Amendment of APB Opinion No. 29. The guidance in APB Opinion No. 29, Accounting for Nonmonetary Transactions, is based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. The guidance in that Opinion, however, included certain exceptions to that principle. SFAS No. 153 amends Opinion No. 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. The provisions of SFAS No. 153 are effective for nonmonetary asset exchanges occurring in fiscal periods beginning after 15 June 2005. Early application is permitted and companies must apply the standard prospectively. The adoption of this standard is not expected to have a material effect on the Company's results of operations or its financial position.

 

In December 2004, the FASB issued SFAS No. 123R, Share Based Payment. SFAS No. 123R is a revision of SFAS No. 123, Accounting for Stock-Based Compensation, and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees and its related implementation guidance. SFAS No. 123R establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity's equity instruments or that may be settled by the issuance of those equity instruments. SFAS No. 123R focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. SFAS No. 123R requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award - the requisite service period (usually the vesting period). SFAS No. 123R requires that the compensation cost relating to share-based payment transactions be recognized in the financial statements.

 

 

19

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Rose Explorations Inc.

(A Development Stage Company)

Notes to Financial Statements

(Expressed in U.S. Dollars)

September 30,  2007

_________________________________________________________________________________________________________________________________________________________________________________

   That cost will be measured based on the fair value of the equity or liability instruments issued. Public entities that file as small business issuers will be required to apply SFAS

   No. 123R in the first interim or annual reporting period that begins after 15 December 2005. The adoption of this standard is not expected to have a material effect on the

   Company's results of operations or its financial position.

 

   The FASB has also issued SFAS No. 151 and 152, but they will not have an effect of the financial reporting of the Company.

 

3.	Mineral Properties

 

   On 21 February 2006 the Company acquired an interest in a mineral claim located in Clark County, Nevada (the “Rose Prospect Lode Mining Claim”) for $6,375. In May 2006 the

   Company commissioned a geological evaluation report of the Rose Prospect Lode Mining Claim and in June 2006 commissioned a Phase I work program as recommended by an

   evaluation report. During the Phase I work program the Company staked a second claim adjacent to the west of the Rose Lode Claim to cover other indicated mineralized zones

   observed in that area (the “Rose Prospect II Lode Mining Claim”).

 

   The Company incurred no exploration and development expenditures on the Rose Prospect Lode Mining Claim property for the year ended 30 September 2007 (2006 - $6,125,

   2005 - $Nil, cumulative - $6,125).

 

4.	Accounts Payable and Accrued Liabilities

 

   Accounts payable and accrued liabilities are non-interest bearing, unsecured and have settlement dates within one year.

 

5.	Related Party Transactions

 

During the year ended 30 September 2007, an officer and director of the Company made contributions to capital for management fees in the amount of $18,000 (2006 - $18,000, 2005 - $Nil, cumulative - $36,000) and rent in the amount of $6,000 (2006 - $6,000, 2005 - $Nil, cumulative - $12,000) (Note 8).

 

During the year ended 30 September 2007, the Company paid consulting fees of $2,500 (2006 - $Nil, 2005 - $Nil) to a company controlled by a director of the Company (Note 8).