Black Sea Metals 10Q 2009 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 2009
OR
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 000-51563

TEXADA VENTURES INC.

(Exact Name of Registrant as Specified in its Charter)

NEVADA		98-0431245
(State of other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

11616 East Montgomery Drive, No. 54
Spokane Valley, Washington		99206
(Address of Principal Executive Offices)		(Zip Code)

(509) 301-6635

(Registrant’s Telephone Number, including Area Code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 past 90 days. [X] Yes [ ] 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 (§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).

[X] Yes [ ] No

Indicate by check mark whether the Registrant is [ ] a large accelerated filer, [ ] an accelerated file, [ ] a non-accelerated filer, or [X] a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act)

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)

[ ] Yes [X] No

Number of shares of issuer’s common stock outstanding as of July 15, 2009: 24,293,334

TABLE OF CONTENTS

		Page
PART I – FINANCIAL INFORMATION		2


Item 1:	Financial Statements

	Balance Sheets, May 31, 2009 and November 30, 2008	4

	Statements of Operations for the six months and three months ended May 31, 2009 and 2008 and from the date of inception on October 17, 2001 through May 31, 2009	5

	Statements of Cash Flows for the six months ended May 31, 2009 and 2008and from the date of inception on October 17, 2001 through May 31, 2009	6

	Notes to Financial Statements	7

Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17

Item 3:	Qualitative and Quantitative Disclosures About Market Risk	24

Item 4T:	Controls and Procedures	24


PART II – OTHER INFORMATION		25


Item 1:	Legal Proceedings	25

Item 1A:	Risk Factors	25

Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	25

Item 3:	Defaults Upon Senior Securities	25

Item 4:	Submission of Matters to a Vote of Security Holders	25

Item 5:	Other Information	25

Item 6:	Exhibits	25

Signatures		26

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

The accompanying unaudited financial statements have been prepared in accordance with the instructions to Form 10-Q, and, therefore, do not include all information and notes necessary for a complete presentation of financial position, results of operations, cash flows, and stockholders' equity in conformity with generally accepted accounting principles. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature. Operating results for the six months ended May 31, 2009 are not necessarily indicative of the results that can be expected for the year ending November 30, 2009.

As used in this Quarterly Report, the terms "we", "us", "our", “the Company” and “Texada” mean Texada Ventures Inc., unless otherwise indicated. All dollar amounts in this Quarterly Report are in U.S. dollars unless otherwise stated.

Texada Ventures Inc.

(An Exploration Stage Company)

May 31, 2009

	Index

Balance Sheets	4

Statements of Operations	5

Statements of Cash Flows	6

Notes to the Financial Statements	7

Texada Ventures Inc.

(An Exploration Stage Company)

Balance Sheets

(Expressed in US dollars)

	May 31, 2009			November 30,
	(unaudited)			2008
ASSETS

Current Assets

Cash	$	2,510		$	3,352
Note receivable (Note 4)		93,160			83,284
Prepaid expenses and deposits		10,000			5,120

Total Current Assets		105,670			91,756

Total Assets	$	105,670		$	91,756

LIABILITIES AND STOCKHOLDERS’ DEFICIT

Current Liabilities

Accounts payable (Note 6(c))	$	99,425		$	72,296
Accrued liabilities (Note 5)		113,242			79,915
Due to related parties (Notes 6(a) and (b))		33,591			7,080
Promissory notes payable (Note 7)		365,000			290,000
Convertible debentures, less unamortized discount of $16,124 (Note 8)		–			568,876

Total Current Liabilities		611,258			1,018,167

Convertible debentures, less unamortized discount of $6,551 (Note 8)		578,449			–

Total Liabilities		1,189,707			1,018,167

Nature of Operations and Continuance of Business (Note 1)
Commitments (Note 11)

Stockholders’ Deficit

Preferred shares, 100,000,000 shares authorized, $0.001 par value; None issued and outstanding		–			–

Common shares, 200,000,000 shares authorized, $0.001 par value; 24,293,334 shares issued and outstanding		24,293			24,293

Additional paid-in capital		340,107			340,107

Deficit accumulated during the exploration stage		(1,448,437	)		(1,290,811	)

Total Stockholders’ Deficit		(1,084,037	)		(926,411	)

Total Liabilities and Stockholders’ Deficit	$	105,670		$	91,756

(The accompanying notes are an integral part of these financial statements)

Texada Ventures Inc.

(An Exploration Stage Company)

Statements of Operations

(Expressed in US dollars)

(unaudited)

	Accumulated from October 17, 2001 (Date of Inception)			For the Six months Ended			For the Six months Ended			For the Three months Ended			For the Three months Ended
	to May 31,			May 31,			May 31,			May 31,			May 31,
	2009			2009			2008			2009			2008

Revenue	$	–		$	–		$	–		$	–		$	–

Operating Expenses

Amortization		798			–			–			–			–
Consulting (Notes 6(a) and (b))		141,169			34,615			24,000			15,340			12,000
Exploration costs		20,091			–			–			–			–
General and administrative		489,254			75,869			65,941			25,339			27,946
Gain on foreign exchange		(5,662	)		3,402			3,226			3,767			914
Mineral property costs		3,747			–			–			–			–

Total Operating Expenses		649,397			113,886			93,167			44,446			40,860

Loss from Operations		(649,397	)		(113,886	)		(93,167	)		(44,446	)		(40,860	)

Other Income (Expense)

Accretion of discount on convertible debentures		(227,449	)		(9,573	)		(74,436	)		(194	)		(45,614	)
Interest income		4,022			–			–			–			–
Interest on convertible debentures		(78,361	)		(23,347	)		(21,022	)		(11,795	)		(14,532	)
Interest on promissory notes		(34,880	)		(10,820	)		(6,017	)		(5,649	)		(3,043	)
Interest on related party loans		(8,500	)		–			(1,793	)		–			(297	)
Loss on disposal of equipment		(2,075	)		–			–			–			–
Loss on write down of note receivable		(86,797	)		–			–			–			–
Loss on write down of oil and gas deposit		(365,000	)		–			–			–			–

Total Other Income (Expense)		(799,040	)		(43,740	)		(103,268	)		(17,638	)		(63,486	)

Net Loss	$	(1,448,437	)	$	(157,626	)		(196,435	)	$	(62,084	)	$	(104,346	)

Net Loss Per Share – Basic and Diluted				$	(0.01	)	$	(0.01	)	$	–		$	–

Weighted Average Shares Outstanding					24,293,334			24,293,334			24,293,334			24,293,334

(The accompanying notes are an integral part of these financial statements)

Texada Ventures Inc.

(An Exploration Stage Company)

Statements of Cash Flows

(Expressed in US dollars)

(unaudited)

	Accumulated from October 17, 2001 (Date of Inception) to May 31, 2008			For the Six months Ended May 31, 2009			For the Six months Ended May 31, 2008

Operating Activities

Net loss	$	(1,448,437	)	$	(157,626	)	$	(196,435	)

Adjustments to reconcile net loss to net cash used in operating activities:
Accretion of convertible debt discount		227,449			9,573			74,436
Amortization		798			–			–
Loss on disposal of equipment		2,075			–			–
Loss on write down of note receivable		86,797			–			–
Write-off of oil and gas deposit		365,000			–			–

Changes in operating assets and liabilities:
Note receivable		(9,876	)		(9,876	)		–
Prepaid expenses		(10,000	)		(4,880	)		–
Accounts payable and accrued liabilities		212,667			60,456			23,871
Due to related parties		33,591			26,511			(6,707	)

Net Cash Used in Operating Activities		(539,936	)		(75,842	)		(104,835	)

Investing Activities

Acquisition of oil and gas interests		(365,000	)		–			(5,000	)
Advance of note receivable		(170,081	)		–			–
Purchase of equipment		(2,873	)		–			–

Net Cash Used In Investing Activities		(537,954	)		–			(5,000	)

Financing Activities

Advances from related party loan		50,000			–			–
Repayment of related party loan		(50,000	)		–			–
Proceeds from convertible debentures		585,000			–			(50,000	)
Proceeds from promissory notes payable		365,000			75,000			150,000
Proceeds from issuance of common shares		130,400			–			–

Net Cash Provided by Financing Activities		1,080,400			75,000			100,000

Increase (Decrease) in Cash		2,510			(842	)		(9,835	)

Cash - Beginning of Period		–			3,352			20,665

Cash - End of Period	$	2,510		$	2,510		$	10,830

Supplemental Disclosures
Interest paid	$	8,500		$	–		$	8,500
Income taxes paid	$	–		$	–		$	–

(The accompanying notes are an integral part of these financial statements)

Texada Ventures Inc.

(An Exploration Stage Company)

Notes to the Financial Statements

May 31, 2009

(Expressed in US dollars)

(unaudited)

1. Nature of Operations and Continuance of Business

Texada Ventures Inc. (the “Company”) was incorporated in the State of Nevada on October 17, 2001. The Company is an Exploration Stage Company, as defined by Statement of Financial Accounting Standard (“SFAS”) No. 7, “Accounting and Reporting for Development Stage Enterprises”. The Company’s principal business is the acquisition and exploration of oil and gas and mineral resources. The Company has not presently determined whether its properties contain mineral or petroleum reserves that are economically recoverable.

These financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has never generated revenues since inception and has never paid any dividends and is unlikely to pay dividends or generate earnings in the immediate or foreseeable future. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing to continue operations, and the attainment of profitable operations. As at May 31, 2009, the Company has a working capital deficit of $505,588 and has accumulated losses of $1,448,437 since inception. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

As at May 31, 2009, the Company had cash of $2,510 on hand, and for the next twelve months, management anticipates that the minimum cash requirements to fund its proposed exploration program and continued operations will be $500,000. Accordingly, the Company does not have sufficient funds to meet planned expenditures over the next twelve months, and will need to seek additional debt or equity financing to meet its planned expenditures. There is no assurance that the Company will be able to raise sufficient cash to fund its future exploration programs and operational expenditures.

On September 16, 2008, the Company signed a term sheet (the “Term Sheet”), as amended on November 12, 2008 and March 9, 2009, that sets forth the principal terms upon which the Company will enter into a definitive agreement (the “Definitive Agreement”) to acquire Royalty Exploration (the “REX Acquisition”) and commence a concurrent financing of $10,000,000 to $40,000,000. Royalty Exploration (REX) has entered into an agreement to acquire substantially all of the assets of a business unit of a large research and development and manufacturing company engaged in the business of providing exploration and environmental surveys to resource companies for a purchase price of $40,000,000, of which up to $30,000,000 is due at closing and the balance is payable by issuing a promissory note. The Term Sheet is non-binding, except for customary binding provisions.

2. Summary of Significant Accounting Policies

a)	Basis of Presentation

These financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States, and are expressed in US dollars. The Company’s fiscal year-end is November 30.

b)	Interim Financial Statements

The interim unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Securities and Exchange Commission (“SEC”) Form 10-QSB. They do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Therefore, these financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto for the year ended November 30, 2008, included in the Company’s Annual Report on Form 10-K filed on February 27, 2009 with the SEC.

The financial statements included herein are unaudited; however, they contain all normal recurring accruals and adjustments that, in the opinion of management, are necessary to present fairly the Company’s financial position at May 31, 2009, and the results of its operations and consolidated cash flows for the six months ended May 31, 2009 and 2008. The results of operations for the three and six months ended May 31, 2009 are not necessarily indicative of the results to be expected for future quarters or the full year.

c)	Reclassifications

Certain reclassifications have been made to prior period financial statements to conform to the current period presentation.

Texada Ventures Inc.

(An Exploration Stage Company)

Notes to the Financial Statements

May 31, 2009

(Expressed in US dollars)

(unaudited)

2. Summary of Significant Accounting Policies (continued)

d)	Use of Estimates

The preparation of financial statements in conformity with US generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company regularly evaluates estimates and assumptions related to its investment in oil and gas properties, valuation of note receivable, stock-based compensation, and deferred income tax asset valuations. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

e)	Earnings (Loss) Per Share

The Company computes earnings (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 earnings (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. As at May 31, 2009, the Company has 936,000 (May 31, 2008 –936,000) split-adjusted dilutive securities outstanding.

f)	Mineral Property Costs

The Company is engaged in the acquisition, exploration and development of mineral properties. Mineral property acquisition costs are capitalized in accordance with EITF 04-2, “Whether Mineral Rights Are Tangible or Intangible Assets” when management has determined that probable future benefits consisting of a contribution to future cash inflows have been identified and adequate financial resources are available or are expected to be available as required to meet the terms of property acquisition and budgeted exploration and development expenditures. Mineral property acquisition costs are expensed as incurred if the criteria for capitalization are not met. In the event that a mineral property is acquired through the issuance of the Company’s shares, the mineral property will be recorded at the fair value of the respective property or the fair value of common shares, whichever is more readily determinable.

When mineral properties are acquired under option agreements with future acquisition payments to be made at the sole discretion of the Company, those future payments, whether in cash or shares, are recorded only when the Company has made or is obliged to make the payment or issue the shares. When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves and feasibility, the costs incurred to develop such property are capitalized.

g)	Stock-based Compensation

The Company records stock-based compensation in accordance with SFAS No. 123R, “Share Based Payments”, using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.

Texada Ventures Inc.

(An Exploration Stage Company)

Notes to the Financial Statements

May 31, 2009

(Expressed in US dollars)

(unaudited)

2. Summary of Significant Accounting Policies (continued)

h)	Long-lived Assets

In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset and its fair value which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value.

i)	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 May 31, 2009 and 2008, the Company has no items that represent a comprehensive loss and, therefore, has not included a schedule of comprehensive loss in the financial statements.

j)	Cash and Cash Equivalents

The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents.

k)	Financial Instruments

SFAS No. 157 “Fair Value Measurements” requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. SFAS No. 157 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. SFAS No. 157 prioritizes the inputs into three levels that may be used to measure fair value:

Level 1

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

Our financial instruments consist principally of cash, note receivable, accounts payable, amounts due to related parties, promissory notes payable, and convertible debentures. Pursuant to SFAS No. 157, the fair value of our cash equivalents is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. We believe that the recorded values of all of our other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

The Company has operations in Canada, which results in exposure to market risks from changes in foreign currency rates. The financial risk is the risk to the Company’s operations that arise 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.

Texada Ventures Inc.

(An Exploration Stage Company)

Notes to the Financial Statements

May 31, 2009

(Expressed in US dollars)

(unaudited)

2. Summary of Significant Accounting Policies (continued)

l)	Income Taxes

The Company accounts for income taxes using the asset and liability method in accordance with SFAS No. 109, “Accounting for Income Taxes”. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.

m)	Foreign Currency Translation

The Company’s functional and reporting currency is the United States dollar. Occasional transactions may occur in a foreign currency and the Company follows 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. Non-monetary assets and liabilities denominated in foreign currencies are translated at rates of exchange in effect at the date of the transaction. Average monthly rates are used to translate revenues and expenses. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income.

n)	Asset Retirement Obligations

The Company has adopted SFAS No. 143, “Accounting for Asset Retirement Obligations”, which requires that an asset retirement obligation (“ARO”) associated with the retirement of a tangible long-lived asset be recognized as a liability in the period which it is incurred and becomes determinable, with an offsetting increase in the carrying amount of the associated asset.

The cost of the tangible asset, including the initially recognized ARO, is depleted, such that the cost of the ARO is recognized over the useful life of the asset. The ARO is recorded at fair value, and accretion expense is recognized over time as the discounted liability is accreted to its expected settlement value. The fair value of the ARO is measured using expected future cash flow, discounted at the Company’s credit-adjusted risk-free interest rate. To date, no significant asset retirement obligation exists due to the early stage of exploration. Accordingly, no liability has been recorded.

o)	Adopted Accounting Pronouncements

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles”. SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United States. SFAS 162 is effective November 15, 2008. The adoption of this statement did not have a material effect on the Company’s financial statements.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities – an amendment to FASB Statement No. 133”. SFAS No. 161 is intended to improve financial standards for derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity's financial position, financial performance, and cash flows. Entities are required to provide enhanced disclosures about: (a) how and why an entity uses derivative instruments; (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations; and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. It is effective for financial statements issued for fiscal years beginning after November 15, 2008, with early adoption encouraged. The adoption of this statement did not have a material effect on the Company’s financial statements.

p)	Recent Accounting Pronouncements

In June 2008, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities”. FSP EITF 03-6-1 addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting, and therefore need to be included in the computation of earnings per share under the two-class method as described in FASB Statement of Financial Accounting Standards No. 128, “Earnings per Share.” FSP EITF 03-6-1 is effective for financial statements issued for fiscal years beginning on or after December 15, 2008 and earlier adoption is prohibited. The adoption of this statement is not expected to have a material effect on the Company’s financial statements.

Texada Ventures Inc.

(An Exploration Stage Company)

Notes to the Financial Statements

May 31, 2009

(Expressed in US dollars)

(unaudited)

2. Summary of Significant Accounting Policies (continued)

Recent Accounting Pronouncements (continued)

In December 2007, the FASB issued SFAS No. 141R, “Business Combinations”. This statement replaces SFAS 141 and defines the acquirer in a business combination as the entity that obtains control of one or more businesses in a business combination and establishes the acquisition date as the date that the acquirer achieves control. SFAS 141R requires an acquirer to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values as of that date. SFAS 141R also requires the acquirer to recognize contingent consideration at the acquisition date, measured at its fair value at that date. This statement is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Earlier adoption is prohibited. The adoption of this statement is not expected to have a material effect on the Company's financial statements.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements Liabilities –an Amendment of ARB No. 51”. This statement amends ARB 51 to establish accounting and reporting standards for the Noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. This statement is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Earlier adoption is prohibited. The adoption of this statement is not expected to have a material effect on the Company's financial statements.

In April 2009 the FASB issued FSP No. 141R-1 “Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies”, or FSP 141R-1. FSP 141R-1 amends the provisions in Statement 141R for the initial recognition and measurement, subsequent measurement and accounting, and disclosures for assets and liabilities arising from contingencies in business combinations. The FSP eliminates the distinction between contractual and non-contractual contingencies, including the initial recognition and measurement criteria in Statement 141R and instead carries forward most of the provisions in SFAS 141 for acquired contingencies. FSP 141R-1 is effective for contingent assets and contingent liabilities acquired in business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. We expect FSP 141R-1 will have an impact on our financial statements, but the nature and magnitude of the specific effects will depend upon the nature, term and size of the acquired contingencies. The effect of adopting FSP 141R-1 will depend upon the nature, terms and size of any acquired contingencies consummated after the effective date of December 1, 2009.

On April 9, 2009, the FASB issued three FSPs intended to provide additional application guidance and enhanced disclosures regarding fair value measurements and other-than-temporary impairments of securities.

FSP FAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly,” provides guidelines for making fair value measurements more consistent with the principles presented in FASB Statement No. 157, “Fair Value Measurements.” FSP FAS 157-4 must be applied prospectively and retrospective application is not permitted. FSP FAS 157-4 is effective for interim and annual periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. An entity early adopting FSP FAS 157-4 must also early adopt FSP FAS 115-2 and FAS 124-2.

FSP FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments,” provides additional guidance designed to create greater clarity and consistency in accounting for and presenting impairment losses on debt securities. FSP FAS 115-2 and FAS 124-2 is effective for interim and annual periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. An entity may early adopt this FSP only if it also elects to early adopt FSP FAS 157-4.

FSP FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments,” enhances consistency in financial reporting by increasing the frequency of fair value disclosures. FSP 107-1 and APB 28-1 is effective for interim periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. However, an entity may early adopt these interim fair value disclosure requirements only if it also elects to early adopt FSP FAS 157-4 and FSP FAS 115-2 and FAS 124-2.

The Company is currently evaluating the impact, if any, that the adoption of these FSPs will have on its financial statements.

Texada Ventures Inc.

(An Exploration Stage Company)

Notes to the Financial Statements

May 31, 2009

(Expressed in US dollars)

(unaudited)

2. Summary of Significant Accounting Policies (continued)

Recent Accounting Pronouncements (continued)

On April 13, 2009, the Securities and Exchange Commission’s (“SEC”) Office of the Chief Accountant and Division of Corporation Finance issued SEC Staff Accounting Bulletin 111 (“SAB 111”). SAB 111 amends and replaces SAB Topic 5M, “Miscellaneous Accounting—Other Than Temporary Impairment of Certain Investments in Equity Securities” to reflect FSP FAS 115-2 and FAS 124-2. This FSP provides guidance for assessing whether an impairment of a debt security is other than temporary, as well as how such impairments are presented and disclosed in the financial statements. The amended SAB Topic 5M maintains the prior staff views related to equity securities but has been amended to exclude debt securities from its scope. SAB 111 is effective upon the adoption of FSP FAS 115-2 and FAS 124-2. The Company is currently evaluating the impact, if any, that the adoption of SAB 111 will have on the financial statements of the Company.

3. Mineral Properties

Pursuant to an agreement dated November 2, 2001, the Company acquired a 100% interest in eight mineral claims located in the Whitehorse Mining District, Yukon Territory, Canada known as the Peek claims for $2,500. The property is being held in trust for the Company by a third party.

4. Note Receivable

The Company provided a note receivable of $93,160 to the Royalty Exploration pursuant to the Term Sheet described in Note 11(a). The note receivable is due upon the close of the REX acquisition or, if the REX acquisition is not consummated, in 12 equal monthly installments after the termination of the Term Sheet. The receivable is unsecured and does not accrue interest.

5. Accrued Liabilities

Accrued liabilities consist of accrued interest of $113,242 (November 30, 2008 - $79,075) on the convertible debentures and promissory notes payable and accrued liabilities for services of $nil (November 30, 2008 - $840).

6. Related Party Transactions

On September 12, 2008, Company entered into an engagement letter with the Chief Executive Officer (“CEO”) of the Company as described in Note 11(b). Pursuant to the agreement the Company incurred $10,616 (2008 - $Nil) in consulting fees to a company owned and controlled by the CEO of the Company during the six month period ended May 31, 2009 and May 31, 2008. A $10,000 retainer was paid to the company owned and controlled by the CEO. As at May 31, 2009, $11,161 (November 30, 2008 - $3,080) in consulting fees are owed to the CEO. Upon the acquisition of REX, a success fee consisting of 11,392 split adjusted common shares is due for services rendered through May 31, 2009.

During the six months ended May 31, 2009, the Company incurred $24,000 (2008 - $24,000) in consulting fees to the former President of the Company. As at May 31, 2009, $20,000 (November 30, 2008 - $4,000) in consulting fees and $2,430 (November 30, 2008 - $nil) of expenditures incurred on behalf of the Company are owed to the former President of the Company.

c)	As at May 31, 2009, accounts payable includes $3,125 (November 30, 2008 - $3,125) owing to a former director for expenses incurred on the Company’s behalf.

d)	The Company neither owns nor leases any real or personal property. The Chief Financial Officer provides office services without charge. Such costs are immaterial to the financial statements and accordingly, have not been reflected therein.

Texada Ventures Inc.

(An Exploration Stage Company)

Notes to the Financial Statements

May 31, 2009

(Expressed in US dollars)

(unaudited)

7. Promissory Notes Payable

a)	On March 25, 2009, the Company entered into a promissory note with a third party for $25,000, which is due on demand and bears interest at 5% per annum. Interest and principal are due on demand.

b)	On December 19, 2008, the Company entered into a promissory note with a third party for $50,000, which is due on demand and bears interest at 5% per annum. Interest and principal are due on demand.

c)	On October 27, 2008, the Company entered into a promissory note with a third party for $140,000, which is due on demand and bears interest at 5% per annum. Interest and principal are due on demand.

On February 15, 2007, the Company entered into a promissory note with a third party for $50,000, which is due on demand and bears interest at 8% per annum. Interest is payable annually due on or before February 14 of each year. Interest due on February 14, 2009 and 2008 is recorded as accrued interest as of May 31, 2009.

e)	On November 20, 2006, the Company entered into a promissory note with a third party for $100,000, which is due on demand and bears interest at 8% per annum.

8. Convertible Debentures

On April 10, 2007, the Company issued a 6% convertible debenture with a principal amount of $200,000 which was due and payable on December 31, 2008. Interest is payable semi-annually beginning on September 30, 2007, and thereafter on March 31st and September 30th of each year, payable at the option of the Company in cash or shares. As at May 31, 2009, the Company had not made any interest payments and pursuant to the debenture has accrued default interest of 8% since September 30, 2007. The principal and accrued interest on the debenture may be converted at any time into shares of the Company’s common stock at a price of $0.625 per share, at the option of the holder.

In accordance with EITF 98-5 “Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios”, the Company recognized the intrinsic value of the embedded beneficial conversion feature of $80,000 as additional paid-in capital and an equivalent discount which will be charged to operations over the term of the convertible debenture. The Company records accretion expense over the term of the convertible debenture up to its face value of $200,000. On December 18, 2008, the Company entered into an amendment to the convertible debenture to extend the maturity date of the note from December 31, 2008 to December 31, 2010. As at December 18, 2008, $78,352 had been accreted increasing the carrying value of the convertible debenture to $198,352. As at December 18, 2008, the Company had accrued interest of $25,151.

Pursuant to EITF 02-4 “Determining Whether a Debtor's Modification or Exchange of Debt Instruments is within the scope of FASB Statement No. 15” and SFAS No. 15 “Accounting by Debtors and Creditors for Troubled Debt Restructuring,” the total future cash flows of the restructured debt was compared with the carrying value of the original debt. As the total future cash flows of the restructured debt were greater than the carrying value at the date of amendment, the carrying value of the original debt at the date of modification was not adjusted. Pursuant to SFAS No. 15, a new effective interest rate was computed and used to determine interest expense for the modified debenture. As at May 31, 2009, $78,305 has been accreted increasing the carrying value of the convertible debenture to $198,305. As at May 31, 2009, the Company has accrued interest of $32,340.

On May 2, 2007, the Company issued a 6% convertible debenture with a principal amount of $125,000 which was due and payable on December 31, 2008. Interest is payable semi-annually beginning on September 30, 2007, and thereafter on March 31st and September 30th of each year, payable at the option of the Company in cash or shares. As at May 31, 2009, the Company had not made any interest payments and pursuant to the debenture has accrued default interest of 8% since September 30, 2007. The principal and accrued interest on the debenture may be converted at any time into shares of the Company’s common stock at a price of $0.625 per share, at the option of the holder.

In accordance with EITF 98-5 “Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios”, the Company recognized the intrinsic value of the embedded beneficial conversion feature of $50,000 as additional paid-in capital and an equivalent discount which will be charged to operations over the term of the convertible debentures. The Company records accretion expense over the term of the convertible debenture up to its face value of $125,000. On December 18, 2008, the Company entered into an amendment to the convertible debenture to extend the maturity date of the note from December 31, 2008 to December 31, 2010. As at December 18, 2008, $48,910 had been accreted increasing the carrying value of the convertible debenture to $123,933. As at December 18, 2008, the Company had accrued interest of $15,267.

Texada Ventures Inc.

(An Exploration Stage Company)

Notes to the Financial Statements

May 31, 2009

(Expressed in US dollars)

(unaudited)

8. Convertible Debentures (continued)

Pursuant to EITF 02-4 “Determining Whether a Debtor's Modification or Exchange of Debt Instruments is within the scope of FASB Statement No. 15” and SFAS No. 15 “Accounting by Debtors and Creditors for Troubled Debt Restructuring,” the total future cash flows of the restructured debt was compared with the carrying value of the original debt. As the total future cash flows of the restructured debt were greater than the carrying value at the date of amendment, the carrying value of the original debt at the date of restructuring was not adjusted. Pursuant to SFAS No. 15, a new effective interest rate was computed and used to determine interest expense for the modified debenture. As at May 31, 2009, $48,961 has been accreted increasing the carrying value of the convertible debenture to $123,910. As at May 31, 2009, the Company has accrued interest of $19,760.

On November 19, 2007, the Company issued a 6% convertible debenture with a principal amount of $110,000 which was due and payable on December 31, 2008. Interest is payable semi-annually beginning on May 31, 2008, and thereafter on May 31st and November 30th of each year, payable at the option of the Company in cash or shares. As at May 31, 2009, the Company had not made any interest payments and pursuant to the debenture has accrued default interest of 8% since May 31, 2008. The principal and accrued interest on the debenture may be converted at any time into shares of the Company’s common stock at a price of $0.625 per share, at the option of the holder.

In accordance with EITF 98-5 “Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios”, the Company recognized the intrinsic value of the embedded beneficial conversion feature of $44,000 as additional paid-in capital and an equivalent discount which will be charged to operations over the term of the convertible debenture. The Company records accretion expense over the term of the convertible debenture up to its face value of $110,000. On December 18, 2008, the Company entered into an amendment to the convertible debenture to extend the maturity date of the note from December 31, 2008 to December 31, 2010. As at December 18, 2008, $42,598 had been accreted increasing the carrying value of the convertible debenture to $108,598. As at December 18, 2008, the Company had accrued interest of $8,333.

Pursuant to EITF 02-4 “Determining Whether a Debtor's Modification or Exchange of Debt Instruments is within the scope of FASB Statement No. 15” and SFAS No. 15 “Accounting by Debtors and Creditors for Troubled Debt Restructuring,” the total future cash flows of the restructured debt was compared with the carrying value of the original debt. As the total future cash flows of the restructured debt were greater than the carrying value at the date of amendment, the carrying value of the original debt was not adjusted. Pursuant to SFAS No. 15, a new effective interest rate was computed and used to determine interest expense for the modified debenture. As at May 31, 2009, $42,659 has been accreted increasing the carrying value of the convertible debenture to $108,659. As at May 31, 2009, the Company has accrued interest of $12,287.

On March 11, 2008, the Company issued a 6% convertible debenture with a principal amount of $150,000 which was due and payable on December 31, 2008. Interest is payable semi-annually beginning on May 31, 2008, and thereafter on May 31st and November 30th of each year, payable at the option of the Company in cash or shares. As at May 31, 2009, the Company had not made any interest payments and pursuant to the debenture has accrued default interest of 8% since May 31, 2008. The principal and accrued interest on the debenture may be converted at any time into shares of the Company’s common stock at a price of $0.625 per share, at the option of the holder.

In accordance with EITF 98-5 “Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios”, the Company recognized the intrinsic value of the embedded beneficial conversion feature of $60,000 as additional paid-in capital and an equivalent discount which will be charged to operations over the term of the convertible debenture. The Company records accretion expense over the term of the convertible debenture up to its face value of $150,000. On December 18, 2008, the Company entered into an amendment to the convertible debenture to extend the maturity date of the note from December 31, 2008 to December 31, 2010. As at December 18, 2008, $57,356 had been accreted increasing the carrying value of the convertible debenture to $147,356. As at December 18, 2008, the Company had accrued interest of $8,584.

Pursuant to EITF 02-4 “Determining Whether a Debtor's Modification or Exchange of Debt Instruments is within the scope of FASB Statement No. 15” and SFAS No. 15 “Accounting by Debtors and Creditors for Troubled Debt Restructuring,” the total future cash flows of the restructured debt was compared with the carrying value of the original debt. As the total future cash flows of the restructured debt were greater than the carrying value at the date of amendment, the carrying value of the original debt was not adjusted. Pursuant to SFAS No. 15, a new effective interest rate was computed and used to determine interest expense for the modified debenture. As at May 31, 2009, $57,575 has been accreted increasing the carrying value of the convertible debenture to $147,575. As at May 31, 2009, the Company has accrued interest of $13,975.

Texada Ventures Inc.

(An Exploration Stage Company)

Notes to the Financial Statements

May 31, 2009

(Expressed in US dollars)

(unaudited)

9. Common Stock

On March 30, 2009, the Company effected a 2.5 to 1 reverse stock split of the authorized, issued and outstanding common stock. As a result, the authorized share capital decreased from 500,000,000 shares of common stock with a par value of $0.001 per share to 200,000,000 shares of common stock with a par value of $0.001 per share. The issued and outstanding shares decreased from 60,733,335 shares of common stock to 24,293,334 shares of common stock. All share amounts have been retroactively adjusted for all periods presented.

10. Segment Disclosures

The Company operates in one operating segment, which is the acquisition and exploration of oil and gas resources and mineral resources. The Chief Executive Officer is the Company’s Chief Operating Decision Maker (“CODM”) as defined by SFAS 131, “Disclosure about Segments of an Enterprise and Related Information.” The CODM allocates resources and assesses the performance of the Company based on the results of operations.

11. Commitments

On September 16, 2008, the Company signed a term sheet (The Term Sheet) that sets forth the principal terms upon which the Company will enter into a definitive agreement (the “Definitive Agreement”) to acquire Royalty Exploration (the “REX Acquisition”) and commence a concurrent financing of $40,000,000. Subsequent to the period end the Term Sheet was amended to reduce the concurrent financing to between $10,000,000 and $40,000,000. Royalty Exploration (REX) has entered into an agreement to acquire substantially all of the assets of a business unit of a large research and development and manufacturing company engaged in the business of providing exploration and environmental surveys to resource companies for a purchase price of $40,000,000, of which $30,000,000 is due at closing and the balance is payable by issuing a promissory note. The Term Sheet is non-binding, except for customary binding provisions.

The Company intends to use commercially reasonable efforts to commence a financing to raise between $10,000,000 and $40,000,000 by issuing securities (the “Placement”) to fund the REX Acquisition and general working capital requirements of the combined company following the REX Acquisition. The Company, at its option, may raise such financing through mezzanine debt financing, which may be satisfied by a subsequent placement of issuing the Company’s securities.

The Company proposes to enter into a Definitive Agreement under which the Company will acquire all of the issued and outstanding equity of REX by issuing shares of the Company’s common stock (“Consideration Shares”) to the equity holders of REX (“REX Unitholders”) up to 40% of the issued an outstanding voting stock of the Company after giving effect to the Placement and the REX Acquisition.

The Company has provided funds for the purposes of (i) reimbursing REX for transaction related expenses, (ii) the Company’s transaction related expenses, and (iii) subject to satisfaction of certain conditions, making a cash advance to REX. REX is required to repay the Company for REX’s transaction related expenses and cash advances on the later of (a) September 30, 2009, (b) closing date of the transaction, or (c) termination of the Term Sheet or, if the transaction does not close, in 12 monthly installments.

The Term Sheet may be terminated by either party if the conditions set forth in the Term Sheet have not been satisfied on or before May 29, 2009. The Term Sheet may be terminated by REX if the Company has not provided to REX satisfactory evidence of financial commitments to raise at least $40,000,000 in the Placement by or before May 15, 2009.

On November 12, 2008, the Company amended the term sheet to extend the closing date of the transaction from December 31, 2008 to June 30, 2009 and to waive the ability to terminate the term sheet for failure to provide evidence of financial commitments on or before October 31, 2008. Effective October 31, 2008, the Company’s obligations to advance funds to REX were suspended unless previously approved by the Company.

On March 9, 2009, the Company entered into an Amended and Restated Term Sheet which with Royalty Exploration, LLC and its wholly-owned subsidiary, Royalty Exploration Acquisition Co., LLC. The Amended and Restated Term Sheet is for substantively the same transaction as the superseded term sheet, as amended, except that provision has been made for funding less than $40,000,000 for the REX business combination.

As at July 14, 2009, the Company is negotiating an extension of the Term Sheet to provide additional time for the Company and its agents to continue to pursue and close on financing commitments.

Texada Ventures Inc.

(An Exploration Stage Company)

Notes to the Financial Statements

May 31, 2009

(Expressed in US dollars)

(unaudited)

11. Commitments (continued)

On September 12, 2008, the Company entered into an engagement letter with the Company’s Chief Executive Officer to provide management services in consideration for fees based upon time expended, with a designated portion payable in cash. Pursuant to the engagement letter, a retainer of $10,000, to be maintained during the entire service period, was required. The amount not paid in cash per invoice will be satisfied as a success fee upon consummation of the REX Acquisition of Texada and REX by payment of cash or issuance of shares of the Company’s common stock at a deemed price of $2.50 per split-adjusted share, thereafter payable and issued quarterly against an invoice for services rendered for the proceeding quarter. Refer to Note 6(a).

On February 9, 2009, the Company and REX entered into an agreement for corporate and financial advisory services with an agent. The agreement expires on May 31, 2009, unless the parties mutually agree to renew the agreement. Pursuant to the agreement, the Company will pay an initial non-refundable work fee of $25,000 which is included in accounts payable at May 31, 2009. The Company agreed to pay a commission of 8% in cash less the work fee on any equity private placements from investors introduced by the financial advisor. The Company will also provide a warrant to purchase 8% of the aggregate number of shares or units sold in an offering, exercisable at a price per share equal to the subscription price of the offering for a period of 12 months from the closing. The warrant contains a forced exercise provision if the Company’s common stock volume weighted average trading price for any five trading day period exceeds 150% of the exercise price. The Company also agreed to pay a commission of 5% less the work fees on any debt sourced by the financial advisor. The Company will also pay reasonable expenses incurred in relation to the financial services provided.

As at July 14, 2009, the Company is continuing to work with this agent under the continuation terms of the expired agreement to develop, commit and close financing sources introduced during the agency contract period.

On March 19, 2009, the Company and REX entered into an agreement with an agent for capital funding services for a period from March 19, 2009 to May 31, 2009. Pursuant to the agreement, the Company agreed and to pay a success fee of 7%, inclusive of all fees, in cash of the amount of capital raised and issue 60,000 split-adjusted common shares of the Company (unissued) upon a successful capital funding transaction.

On June 24, 2009, the Company and REX entered into an agreement with an agent for capital funding services for a period from June 24, 2009 to December 24, 2009. Pursuant to the agreement, the Company agreed to pay a success fee of 8%, inclusive of all fees, in cash of the amount of capital raised. The Company will also pay reasonable expenses incurred in relation to the financial services provided.

Cautionary Statement Regarding Forward-Looking Statements

Certain statements contained in this Quarterly Report constitute “forward-looking statements”. These statements, identified by words such as “plan”, “anticipate”, “believe”, “estimate”, “should”, “expect” and similar expressions include our expectations and objectives regarding our future financial position, operating results and business strategy. These statements reflect the current views of management with respect to future events and are subject to risks, uncertainties and other factors that may cause our actual results, performance or achievements, or industry results, to be materially different from those described in the forward-looking statements. Such risks and uncertainties include those set forth under the caption “Management’s Discussion and Analysis or Plan of Operation” and elsewhere in this Quarterly Report. We advise you to carefully review the reports and documents we file from time to time with the United States Securities and Exchange Commission (the “SEC”), particularly our Annual Reports on Form 10-K and our Current Reports on Form 8-K.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

OVERVIEW

Texada Ventures Inc. (the “Company”) is engaged in the business of acquisition and exploration of mineral and resource properties. We were incorporated on October 17, 2001 under the laws of the State of Nevada. Our principal office is located at 11616 E. Montgomery Drive, Suite 54, Spokane Valley, WA 99206. Our phone number is 509-301-6635. Our facsimile number is 509-924-2524.

OUR BUSINESS

We have acquired a 100% undivided interest in a group of mineral claims located in the Wheaton River District in the Yukon Territory, Canada that we refer to as the Peek Claims. We have not earned any revenues to date. Our plan of operation is to continue to carry out exploration work on these claims in order to ascertain whether they possess commercially exploitable mineral deposits. We are presently in the exploration stage of our business and we can provide no assurance that commercially viable mineral deposits exist on our claims or that we will discover commercially exploitable levels of mineral resources on our properties, or if such deposits are discovered, that we will enter into further substantial exploration programs. We will not be able to determine whether or not our mineral claims contain a commercially exploitable mineral deposit, or reserve, until appropriate exploratory work is done and an economic evaluation based on that work concludes economic viability.

We generally conduct our business through verbal agreements with consultants and arms-length third parties. Our verbal agreement with our geologist includes his reviewing all of the results from the exploratory work performed upon the site and making recommendations based on those results in exchange for payments equal to the usual and customary rates received by geologists performing similar consulting services.

As a result of our failure to generate substantial revenues since our inception, we have decided to review our initial business plan in order to evaluate the progress of our mining business. We have not attained profitable operations to date and are dependent upon obtaining financing to pursue our plan of operation. Following Dr. John Veltheer’s acquisition of 49% of our issued and outstanding shares and his appointment to the board of Texada in October 2006, we decided to continue to develop our current mining business and to seek other business opportunities. In accordance with that decision, in September 2008, we appointed Ted R. Sharp as our President, Chief Executive Officer, Chief Financial Officer, Treasurer, Secretary and a member of our Board of Directors. Also in September 2008, we entered into a Term Sheet with Royalty Exploration, LLC for the purchase of that company, which Term Sheet was amended in November 2008 and in March 2009, the Company entered into an Amended and Restated Term Sheet which superseded the term sheet dated September 16, 2008, as amended November 12, 2008, with Royalty Exploration, LLC and its wholly-owned subsidiary, Royalty Exploration Acquisition Co., LLC (collectively, “REX”). The Amended and Restated Term Sheet is for substantively the same transaction as the superseded term sheet, as amended, except that provision has been made for funding less than $40,000,000 for the REX business combination.

RECENT CORPORATE DEVELOPMENTS

We have experienced the following significant corporate developments since the completion of our fiscal year ended November 30, 2008:

Authorized Shares:

On March 20, 2009, we filed a Certificate of Change Pursuant to NRS 78.209, which decreased the number of shares of common stock from 500,000,000 to 200,000,000 effective March 30, 2009. Shareholders were deemed to own one share for every 2.5 shares of common stock owned as of the record and effective date of March 30, 2009. The new CUSIP number for the common stock is 881718 308 and the new symbol is TXVN.

Term Sheet:

On September 16, 2008, we signed a Term Sheet (the “Term Sheet”) that sets forth the principal terms upon which we propose to enter into a definitive agreement (the “Definitive Agreement”) to acquire Royalty Exploration, LLC (“REX”) and commence a concurrent financing of $40,000,000. REX has entered into an agreement to acquire substantially all of the assets of a business unit of a large research and development and manufacturing company engaged in the business of providing exploration and environmental surveys to resource companies for a purchase price of $40,000,000, of which $30,000,000 is due at closing and the balance is payable by issuing a promissory note. The Term Sheet is non-binding, except for customary binding provisions. The Term Sheet was subsequently amended on November 12, 2008 and amended and restated on March 9, 2009.

We intend to use commercially reasonable efforts to commence a financing to raise between $10,000,000 and $40,000,000 by issuing securities (the “Placement”) to fund the REX acquisition and general working capital requirements of the combined company. We, at our option, may raise such financing through mezzanine debt financing, which may be satisfied by a subsequent placement of issuing our securities.

We propose to enter into a Definitive Agreement under which we will acquire all of the issued and outstanding equity of REX by issuing shares of our common stock (“Consideration Shares”) to the equity holders of REX (“REX Unitholders”) equal up to 40% of our issued and outstanding voting stock after giving effect to the Placement and the REX acquisition.

We have provided funds for the purposes of (i) reimbursing REX for transaction related expenses, (ii) our transaction related expenses, and (iii) subject to satisfaction of certain conditions, making a cash advance to REX. REX is required to repay us for REX’s transaction related expenses and cash advances on the later of (a) September 30, 2009, (b) closing date of the transaction, or (c) termination of the Term Sheet or, if the transaction does not close, in 12 monthly installments.

The Term Sheet may be terminated by either party if the conditions set forth in the Term Sheet have not been satisfied on or before June 30, 2009, as extended from December 31, 2008 by Amendment No. 1 to the Term Sheet dated November 12, 2008. That Amendment also waived REX’s ability to terminate the Term Sheet if we had not provided to REX satisfactory evidence of financial commitments to raise at least $40,000,000 in the Placement by or before October 31, 2008.

On March 9, 2009, the Company entered into an Amended and Restated Term Sheet which superseded the term sheet dated September 16, 2008, as amended November 12, 2008, with Royalty Exploration, LLC and its wholly-owned subsidiary, Royalty Exploration Acquisition Co., LLC (collectively, “REX”). The Amended and Restated Term Sheet is for substantively the same transaction as the superseded term sheet, as amended, except that provision has been made for funding less than $40,000,000 for the REX business combination.

As at July 7, 2009, the Company is negotiating an extension of the Term Sheet to provide additional time for the Company and its agents to continue to pursue and close on financing commitments.

The significant terms and disclosures of the Term Sheet and its subsequent amendment were reported in Forms 8-K filed with the SEC on September 22, 2008, November 12, 2008, and March 9, 2009, respectively, which are herein incorporated by reference.

The Company has entered into agreements with three agents to assist with the financing required in connection with the REX transaction. The Company is also continuing to work with each agent under the continuation terms of two of the agreements that have expired, to develop, commit and close financing sources introduced during the representation contract periods.

Other Funding and Acquisition Activities:

During the quarter ended February 28, 2009, the Company was successful in obtaining extensions of the four convertible debentures totaling $585,000 until December 31, 2010 under the same terms as original debentures. This resulted in the debentures being classified as long-term debt for the quarter ended May 31, 2009, whereas at November 30, 2008, they had been classified with current liabilities. At May 31, 2009, the Company had not made any interest payments. The principal and accrued interest on the debenture may be converted at any time into shares of the Company’s common stock at a rate of $0.25 per share, at the option of the holder. The Company intends to convert the debentures to common stock as part of the acquisition covered by the Term Sheet described in the Recent Corporate Developments section of this filing. The offerings of these debentures were conducted by the Company in a non-brokered private placement to a non-U.S. person outside the United States pursuant to an exemption from registration available under Rule 903 of Regulation S of the Securities Act of 1933, as amended.

PLAN OF OPERATION

As a result of our failure to generate any revenues since our inception, we have not been satisfied with our initial business plan to this point. In September 2008, we appointed Ted R. Sharp as a member of our Board of Directors and as our President, Chief Executive Officer and Chief Financial Officer. We are presently reviewing the current state of our business in detail with consultants in order to evaluate the progress of our mining business. As a result of its change in strategic direction, we entered into the Term Sheet with REX described above in Recent Significant Corporate Developments. We are currently evaluating financing options to complete the transaction with REX but there can be no assurance that such financing will be available in acceptable terms, if at all.

Mineral Properties:

As described in previous filings, we have taken a phased approach to our exploration efforts on the Peek Claims, and have received a geological report on the results of Phase III of our program with further recommendations from our geological consultant of additional activities prior to engaging in Phase IV of our plan. In his report, our geologist recommended that, prior to proceeding with Phase IV, further geological engineering should be undertaken to define the exact source areas for the known and new vein float material. Our geologist recommended reserving a total of $10,000 for a two-stage delineation program prior to commencing Phase IV of our exploration program. We proceeded with our geologist’s recommendation and completed the first phase of the delineation program during the summer exploration season of 2006. A detailed, close-spaced, soil geochemical survey over the conductors using a plugger style overburden sampling drill was recommended to locate the bed rock source of the mineralization following completion of Phase I of the delineation program.

Our decision to proceed to Phase IV of our initial exploration program will be made based on factors such as other business opportunities, the final assay results and the recommendations of our geologist, the grades of any mineralization found, the size and extent of the mineralized zones, and the strength of metal prices in international markets.

Our expenditures toward the exploration of our mineral claims may not result in the discovery of mineral deposits. Problems such as unusual or unexpected formations and other conditions are involved in mineral exploration and often result in unsuccessful exploration efforts. If the results of exploration do not reveal viable commercial mineralization, we may decide to abandon our claims and acquire new claims for new exploration. The acquisition

of additional claims will be dependent upon our possessing sufficient capital resources at the time in order to purchase such claims. If no funding is available, we may be forced to abandon our operations. This assessment will include an assessment of our cash reserves after the completion of Phase III, the price of minerals and the market for financing of mineral exploration projects at the time of our assessment.

Corporate Acquisition:

Our entrance into the Term Sheet with REX is a strategic change in direction, and is expected to enable us to diversify into a complementary industry and acquire income-producing assets. As part of this acquisition, we will be required to raise from $10 million to $40 million of new investment dollars. As we move through the acquisition process, we will perform appropriate due diligence activities to more fully assure investors of the benefits of this strategic move. We cannot assure you that our capital raising efforts will be successful given the current state of the financial markets or that we can successfully complete the acquisition of REX.

Plan of Operations:

During the exploration stage, Ted R. Sharp, our President, Secretary, Treasurer, Chief Executive Officer and Chief Financial Officer, and Dr. Veltheer will only be devoting approximately twenty hours per week of their time to our business. We do not foresee this limited involvement as negatively impacting the Company over the next twelve months. All exploratory work is being performed by our geological consultant, Mr. Timmins, who contracts with appropriately experienced parties to complete work programs. However, if as a result of our acquisition efforts, the demands of our business require more business time of Mr. Sharp or Dr. Veltheer, such as raising additional capital or addressing unforeseen issues with regard to our exploration efforts, they are prepared to adjust their timetable to devote more time to our business.

If the full funding of $40,000,000 is achieved and our acquisition of REX is successful, we anticipate that we will require capital for the following over the next twelve months:

Category	Planned Expenditures over the Next Twelve Months (US$)
Acquisition of survey assets	$30,000,000
Acquisition Due Diligence	250,000
Professional Fees	250,000
General and Administrative Expenses	800,000
Budgeted Oil and Gas Drilling and Exploration	3,750,000
Business Transition and Build Out	4,000,000
Funding Working Capital Deficit	800,000
Debt Service Expense	100,000
Mineral Exploration Expenses	50,000
TOTAL 12-MONTH BUDGET	$40,000,000

In relation to the REX acquisition, we will be required to raise between $10,000,000 and $40,000,000 to fund the purchase price and working capital for the combined organization. With success in reaching the full $40,000,000 funding, our total expenditures over the next twelve months are anticipated to be approximately all of the $40,000,000, the majority of which is $30,000,000 in cash required to close the acquisition of REX. The balance of cash required is to fund legal, accounting, administrative and due diligence expenses associated with our acquisition of REX, business transition and build out costs, payment of our current liabilities, oil and gas drilling and exploration expenses, interest expense and normal general and administrative operating expenses.

We cannot assure you that we will be successful in obtaining financing sufficient to fund either the pre-acquisition costs or the $40,000,000 required to close the REX transaction. Current turmoil in equity and debt markets in the

United States and around the world may negatively affect the evaluation risk of potential investors, and therefore may discourage individuals or funds that may otherwise be willing and desirous to invest in the Company.

In the event that we are successful in securing sufficient investment funds to close the REX transaction, the combined management of the organization will then be charged with the task of profitably integrating the operations. We cannot assure you that the combined management team will be successful in merging and integrating physical facilities, corporate cultures, management teams, employee groups and other factors into a streamlined profitable and smooth running organization.

The Company has issued four separate 6% convertible debentures with principal amounts totaling $585,000 which were due and payable on December 31, 2008. Each of these convertible debentures has been extended to December 31, 2010. Interest is payable at the option of the Company in cash or shares. As at May 31, 2009, the Company had not made any interest payments and pursuant to the debentures has accrued default interest of 8% since the quarter ended May 31, 2008. Interest payable has accumulated to a total of $78,361. The principal and accrued interest on the debentures may be converted at any time into shares of the Company’s common stock at a price of $0.25 per share, at the option of the holder. As part of the financing arrangements required to fund and close the REX transaction, the Company will be required to negotiate with holders of the convertible debentures to convert the debentures and accrued interest into common stock.

In the event that we are unsuccessful in our efforts to fund the REX acquisition, we will not have cash sufficient to satisfy the debentures in cash. We estimate that we would require a minimum of $1.5 million to fund payment of our current and long-term liabilities and the maximum $500,000 pre-acquisition costs that may be paid to REX. Absent such financing, we may negotiate with the holders of the debentures to extend the due dates, convert them to common stock or modify terms sufficient to remove or delay the requirement to satisfy the obligations with cash. Should we be unable to reach conversion or modification of the debentures on terms acceptable to us, we may be required to default on the obligations.

We also maintain our position in mining claims in our mineral property referred to as the Peek Claim. In the event we decide to proceed with Phase IV of our exploration program, which is estimated to cost $120,000, we will need to obtain additional financing of nearly $1,000,000 to fund exploration, operating expenses and working capital deficit.

As of May 31, 2009, we had a working capital deficit of $505,588. We do not expect our business to achieve profitability in the near future as we expect to continue to incur substantial acquisition, development and operating expenses. We will require additional funding to fund our working capital requirements. However, we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common stock or debt to fund our estimated general administration, exploration and other working capital requirements.

Currently, we do not have any financing arrangements in place and there is no assurance that we will be able to obtain sufficient financing to fund our capital requirements. If we do not obtain the necessary financing, then our plan of operation will be scaled back according to the amount of funds available. The inability to raise the necessary financing will severely restrict our ability to continue exploration programs or acquisition activities as planned.

RESULTS OF OPERATIONS

This discussion and analysis should be read in conjunction with the accompanying financial statements and related notes. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors. The discussion and analysis of the financial condition and results of operations are based upon the financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of any contingent liabilities at the financial statement date and reported amounts of revenue and expenses during the reporting period. On an on-going basis the Company reviews its estimates and assumptions. The estimates were based on historical experience and other assumptions that

the Company believes to be reasonable under the circumstances. Actual results are likely to differ from those estimates under different assumptions or conditions, but the Company does not believe such differences will materially affect our financial position or results of operations.

Critical Accounting Policies

Critical accounting policies, the policies the Company believes are most important to the presentation of its financial statements and require the most difficult, subjective and complex judgments, are outlined below, are also disclosed in the Company’s Form 10-K as filed with the Securities and Exchange Commission on February 27, 2009, and have not changed significantly.

Mineral Property Costs

Stock-based Compensation

Revenue and Expenses

Summary
	Three Months Ended May 31						Six Months Ended May 31

	2009			2008			2009			2008
Revenue		-			-			-			-
Operating Expenses	$	44,446		$	40,860		$	113,886		$	93,167
Net Income (Loss) From Operations	$	(44,446	)	$	(40,860	)	$	(113,886	)	$	(93,167	)

Summary of Revenue

We have not earned any revenues to date. Our plan of operation, in regards to mineral properties, is to continue to carry out exploration work on our claims in order to ascertain whether they possess commercially exploitable quantities of mineral deposits and to explore acquisition opportunities. We do not anticipate earning revenues until such time as we are able to locate and process commercially exploitable levels of mineral resources on our properties or acquire commercially viable or producing properties.

We are presently in the exploration stage of our business and we can provide no assurance that a commercially viable mineral deposit exists on our claims or that we will discover commercially exploitable levels of mineral resources on our properties, or if such deposits are discovered, that we will enter into further substantial exploration

programs. We will not be able to determine whether or not our mineral claims contains a commercially exploitable mineral deposit, or reserve, until appropriate exploratory work is done and an economic evaluation based on that work concludes economic viability. Also, we cannot assure you that we will be able to acquire any commercially viable properties or, if acquired, that we will be able to develop or operate any acquired property in a profitable manner.

The Term Sheet for the acquisition of REX represents our strategy to acquire an operation that will provide revenue streams from continuing operations. After completion of our upcoming due diligence activities we will be able to more clearly ascertain the contributions REX will make to our business, and vice versa, before entering into a definitive purchase agreement for the acquisition of REX.

Summary of Expenses

Our expenses for the three and six months ended May 31, 2009 and 2008, consisted of the following:

	Three Months Ended May 31						Six Months Ended May 31
	2009			2008			2009			2008
Expenses (Operating Expenses)
Consulting	$	15,340		$	12,000		$	34,615		$	24,000
General and administrative	$	25,339		$	27,946		$	75,869		$	65,941
Loss (gain) on foreign exchange	$	3,767		$	914		$	3,402		$	3,226
Other Income (Expense)
Accretion of discount on convertible debentures	$	(194	)	$	(45,614	)	$	(9.573	)	$	(74,436	)
Interest income		-			-			-			-
Interest on convertible debentures	$	(11,795	)	$	(14,532	)	$	(23,347	)	$	(21,022	)
Interest on promissory notes	$	(5,649	)	$	(3,043	)	$	(10,820	)	$	(6,017	)
Interest on related party loans		-		$	(297	)		-		$	(1,793	)

Our operating expenses for the six months ended May 31, 2009 increased from the same period in 2008. The increase in operating expenses is primarily due increased costs related to financing efforts for the REX acquisition, which resulted in an increase in general and administrative expense of $9,928, an increase in consulting of $10,615. Other income and expense for the six months ended May 31, 2009 decreased by $59,528, primarily due to decreased accretion of discounts on the convertible debentures which had their due dates extended in the first fiscal quarter of 2009.

Liquidity and Capital Resources

Working Capital Summary	At May 31, 2009			At November 30, 2008
Current Assets	$	105,670		$	91,756
Current Liabilities		(611,258	)		(1,018,167	)
Working Capital (Deficit)	$	(505,588	)	$	(926,411	)

Summary of Cash Flows
	Six Months Ended May 31
		2009			2008
Net Cash Used In Operating Activities	$	(75,842	)	$	(104,835	)
Net Cash Used In Investing Activities		-			(5,000	)
Net Cash Provided By Financing Activities		75,000			100,000
Net Increase (Decrease) In Cash During Period	$	(842	)	$	(9,835	)

As at May 31, 2009, we had a cash balance of $2,510 and a working capital deficit of $505,588. The decrease in our working capital deficit at May 31, 2009 from our year ended November 30, 2008 is primarily a result of convertible

debentures being classified as a long-term liability in the most recent three and six months as the maturity dates on these convertible debentures have been extended to December 31, 2010.

Our auditors expressed substantial doubt regarding our ability to continue as a going concern related to our financial statements for the year ended November 30, 2008, and these circumstances have not improved. The factors related to the determination of our ability to continue as a going concern include our working capital deficit, lack of foreseeable revenues from operations, need for additional capital to maintain our interest in the Peek Claims, and need for additional capital to fund our general and administrative requirements. Management’s plan to resolve the going concern uncertainty is to raise additional capital of $10 million to $40 million to acquire REX through debt or equity financing during the next three months. The Company’s ability to continue as a going concern is dependent on its ability to raise additional capital, acquire REX and conduct successful exploration activities on its properties and appreciation in the value of exploration properties and assets, specifically the Peek Claims. If the Company is unable to raise additional capital in a timely manner, sufficient to close the REX acquisition, it may be required to sell its Peek Claims or permit such claims to lapse. The Company may be forced to discontinue operations.

We have not declared or paid dividends on our shares since incorporation and do not anticipate doing so in the foreseeable future.

OFF-BALANCE SHEET ARRANGEMENTS

We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our stockholders.

ITEM 3. QUALITATIVE AND QUANTITATIVE DISCUSSION ABOUT MARKET RISK.

Not required for smaller reporting companies.

ITEM 4T. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

At the end of the period covered by this report, an evaluation was carried out under the supervision of, and with the participation of, the Company’s management, including the Chief Executive Officer / Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a – 15(e) and Rule 15d – 15(e) of the Securities and Exchange Act of 1934, as amended). Based on that evaluation, the Chief Executive Officer / Chief Financial Officer has concluded that as of the end of the period covered by this report, due to material weaknesses in internal controls over financial reporting described below, the Company’s disclosure controls and procedures were not adequately designed and were not effective in ensuring that information required to be disclosed by the Company in its reports that it files or submits to the SEC under the Exchange Act, is recorded, processed, summarized and reported within the time period specified in applicable rules and forms.

Our Chief Executive Officer / Chief Financial Officer has also determined that, due to material weaknesses in internal controls over financial reporting described below, the disclosure controls and procedures are not effective to ensure that material information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to our management, including the Company’s Chief Executive / Chief Financial Officer, to allow for accurate required disclosure to be made on a timely basis.

Through the year ended November 30, 2008, and to the present, we have engaged legal counsel who is experienced and qualified to practice before the Securites and Exchange Commission, who actively reviewed Company events and major transactions to advise management on appropriate disclosure of those events and transactions. Additionally, the Company entered into an agreement with Ted R. Sharp, CPA, an experienced CFO of publicly-traded companies, to serve as CEO and CFO of the Company, Company filings with the SEC are reviewed by the Board of Directors, our management, and our SEC legal firm for proper and complete disclosure. Management

believes that appropriate improvements in controls over financial reporting in the future will improve the results of its evaluation of disclosure controls.

Changes in internal controls over financial reporting

There were no changes in our internal control over financial reporting (as defined in Rule 13(a)-15(f) or 15(d)-15(f)) that occurred during the period covered by this quarterly report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

None.

ITEM 1A. RISK FACTORS.

Not required for smaller reporting companies.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None.

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS.

Exhibit Number	Description of Exhibits

31.1	Certification of Chief Executive Officer and Chief Financial Officer as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.2	Certification of Chief Executive Officer and Chief Financial Officer as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

SIGNATURES

In accordance with Section 12 of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		TEXADA VENTURES INC.


	By:	s/ Ted R. Sharp
		TED R. SHARP
		Chief Executive Officer, Chief Financial Officer
		President, Secretary and Treasurer and
		Director
		(Principal Executive Officer
		and Principal Accounting Officer)

	Date:	July 15, 2009

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Black Sea Metals (BLAK) Inactive 10-Q2009 Q2 Quarterly report

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