UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
x |
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2008 | ||
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: 000-52516
PLAZA RESOURCES INC.
(Exact Name of Registrant as Specified in its Charter)
NEVADA |
| 20-3629431 |
(State of other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
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3830 8th Street SW |
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Calgary, Alberta, Canada |
| T2T 3A9 |
(Address of Principal Executive Offices) |
| (Zip Code) |
(403) 630-3830
(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. 
Yes 
No
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes No
Number of shares of issuer’s common stock outstanding as of July 8, 2008: 10,030,000
Transitional Small Business format (check one): 
Yes 
No
PART I - FINANCIAL INFORMATION
ITEM 1. | FINANCIAL STATEMENTS. |
The accompanying unaudited financial statements have been prepared in accordance with the instructions to Form 10-QSB and Item 310 (b) of Regulation S-B, and, therefore, do not include all information and footnotes 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 three and six months ended March 31, 2008 are not necessarily indicative of the results that can be expected for the year ending September 30, 2008.
As used in this Quarterly Report, the terms "we", "us", "our", “the Company” and “Plaza” mean Plaza Resources Inc., unless otherwise indicated. All dollar amounts in this Quarterly Report are in U.S. dollars unless otherwise stated.
Plaza Resources Inc.
(An Exploration Stage Company)
March 31, 2008
| Index |
Balance Sheets | 1 |
Statements of Operations | 2 |
Statements of Cash Flows | 3 |
Notes to the Financial Statements | 4 |
Plaza Resources Inc.
(An Exploration Stage Company)
Balance Sheets
(Expressed in US dollars)
| March 31, 2008 $ |
September 30, 2007 $ |
| (Unaudited) |
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ASSETS |
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Current Assets |
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Cash | 1,375 | 1,468 |
Prepaid Expenses | – | 1,125 |
Due from related party (Note 3) | – | 12 |
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Total Assets | 1,375 | 2,605 |
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LIABILITIES AND STOCKHOLDERS’ DEFICIT |
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Current Liabilities |
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Accounts payable | 19,994 | 8,497 |
Accrued liabilities (Note 4) | 8,738 | 2,500 |
Due to related party (Note 3) | 8,698 | – |
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Total Liabilities | 37,430 | 10,997 |
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Contingencies (Note 1) |
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Stockholders’ Deficit |
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Common Stock, 100,000,000 shares authorized, $0.001 par value 10,030,000 shares issued and outstanding | 10,030 | 10,030 |
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Additional Paid-in Capital | 62,470 | 62,470 |
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Donated Capital (Note 3(a)) | 22,500 | 19,500 |
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Deficit Accumulated During the Exploration Stage | (131,055) | (100,392) |
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Total Stockholders’ Deficit | (36,055) | (8,392) |
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Total Liabilities and Stockholders’ Deficit | 1,375 | 2,605 |
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Plaza Resources Inc.
(An Exploration Stage Company)
Statements of Operations
(Expressed in US dollars)
(Unaudited)
| Accumulated From October 6, 2005 (Date of Inception) | For the Three Months Ended | For the Three Months Ended | For the Six Months Ended | For the Six Months Ended |
| to March 31, | March 31, | March 31, | March 31, | March 31, |
| 2008 | 2008 | 2007 | 2008 | 2007 |
| $ | $ | $ | $ | $ |
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Revenue | – | – | – | – | – |
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Expenses |
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General and administrative (Note 3) | 44,932 | 3,943 | 5,820 | 8,183 | 12,175 |
Impairment of mineral property costs | 7,500 | – | – | – | – |
Mineral property costs | 184 | – | – | – | – |
Professional fees | 78,439 | 16,200 | 9,598 | 22,480 | 21,095 |
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Total Expenses | (131,055) | (20,143) | (15,418) | (30,663) | (33,270) |
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Net Loss | (131,055) | (20,143) | (15,418) | (30,663) | (33,270) |
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Net Loss Per Share – Basic and Diluted |
| (0.00) | (0.00) | (0.00) | (0.00) |
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Weighted Average Shares Outstanding |
| 10,030,000 | 10,030,000 | 10,030,000 | 10,030,000 |
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Plaza Resources Inc.
(An Exploration Stage Company)
Statements of Cash Flows
(Expressed in US dollars)
(Unaudited)
| Accumulated From October 6, 2005 (Date of Inception) to March 31, | For the Six Months Ended March 31, | For the Six Months Ended March 31, |
| 2008 | 2008 | 2007 |
| $ | $ | $ |
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Operating Activities |
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Net loss for the period | (131,055) | (30,663) | (33,270) |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Donated services and expenses | 22,500 | 3,000 | 4,500 |
Impairment of mineral property | 7,500 | – | – |
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Changes in operating assets and liabilities: |
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Prepaid expenses | – | 1,125 | 4,500 |
Accounts payable | 19,994 | 11,497 | 3,432 |
Accrued liabilities | 8,738 | 6,238 | 1,139 |
Due from related parties | – | 12 | – |
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Net Cash Used in Operating Activities | (72,323) | (8,791) | (19,699) |
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Investing Activities |
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Acquisition of mineral property | (7,500) | – | – |
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Net Cash Used in Investing Activities | (7,500) | – | – |
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Financing Activities |
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Proceeds from issuance of common stock | 72,500 | – | – |
Advances from related parties | 8,698 | 8,698 | – |
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Net Cash Provided by Financing Activities | 81,198 | 8,698 | – |
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Increase (Decrease) In Cash | 1,375 | (93) | (19,699) |
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Cash - Beginning of Period | – | 1,468 | 37,036 |
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Cash - End of Period | 1,375 | 1,375 | 17,337 |
Supplemental Disclosures |
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Interest Paid | – | – | – |
Income taxes paid | – | – | – |
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Plaza Resources Inc.
(An Exploration Stage Company)
Notes to the Financial Statements
March 31, 2008
(Expressed in US dollars)
(unaudited)
1. | Exploration Stage Company |
The Company was incorporated in the State of Nevada on October 6, 2005. 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 mineral resources. The Company has not presently determined whether its properties contain mineral 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 March 31, 2008, the Company has a working capital deficit of $36,055 and has accumulated losses of $131,055 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.
On March 12, 2007, the Company filed an amended SB-2 Registration Statement with the United States Securities and Exchange Commission to register 4,040,000 shares of common stock for sale by certain existing shareholders of the Company. The Company will not receive any proceeds from the sale of common stock by the existing shareholders.
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 September 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 September 30, 2007, included in the Company’s Annual Report on Form 10-KSB filed on January 14, 2008 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 March 31, 2008 and September, 2007, and the results of its operations and cash flows for the six months ended March 31, 2008 and 2007. The results of operations for the six months ended March 31, 2008 are not necessarily indicative of the results to be expected for future quarters or the full year.
| c) | 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
4
Plaza Resources Inc.
(An Exploration Stage Company)
Notes to the Financial Statements
March 31, 2008
(Expressed in US dollars)
(unaudited)
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. The Company regularly evaluates estimates and assumptions related to donated services and deferred income tax asset valuation allowances. 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.
| d) | Basic and Diluted Net Income (Loss) Per Share |
The Company computes 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. At March 31, 2008, there are no dilutive potential common shares.
| e) | 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 March 31, 2008 and 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.
| f) | 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.
| g) | Mineral Property Costs |
The Company has been in the exploration stage since its inception on October 6, 2005 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 exploration costs are expensed as incurred. 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.
Mineral property exploration costs are expensed as incurred.
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. Because option
Plaza Resources Inc.
(An Exploration Stage Company)
Notes to the Financial Statements
March 31, 2008
(Expressed in US dollars)
(unaudited)
payments do not meet the definition of tangible property under EITF 04-2, all option payments are expensed as incurred.
When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves and pre feasibility, the costs incurred to develop such property are capitalized.
Estimated future removal and site restoration costs, when determinable are provided over the life of proven reserves on a units-of-production basis. Costs, which include production equipment removal and environmental remediation, are estimated each period by management based on current regulations, actual expenses incurred, and technology and industry standards. Any charge is included in exploration expense or the provision for depletion and depreciation during the period and the actual restoration expenditures are charged to the accumulated provision amounts as incurred.
As of the date of these financial statements, the Company has incurred only acquisition and exploration costs which have been expensed.
To date, the Company has not established any proven or probable reserves on its mineral properties.
| 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) | Financial Instruments |
The fair value of financial instruments, which include cash, due from a related party, accounts payable, accrued liabilities and due to a related party, were estimated to approximate their carrying values due to the immediate or short-term maturity of these financial instruments. Foreign currency transactions are primarily undertaken in Canadian dollars. 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.
| j) | Income Taxes |
Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company has adopted SFAS No. 109 “Accounting for Income Taxes” as of its inception. Pursuant to SFAS No. 109 the Company is required to compute tax asset benefits for net operating losses carried forward. Potential benefit of net operating losses have not been recognized in these financial statements because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years.
Plaza Resources Inc.
(An Exploration Stage Company)
Notes to the Financial Statements
March 31, 2008
(Expressed in US dollars)
(unaudited)
| k) | Foreign Currency Translation |
The Company’s functional and reporting currency is the United States dollar. Monetary assets and liabilities denominated in foreign currencies are translated in accordance with SFAS No. 52 “Foreign Currency Translation”, using the exchange rate prevailing at the balance sheet date. Gains and losses arising on settlement of foreign currency denominated transactions or balances are included in the determination of income. Foreign currency transactions are primarily undertaken in Canadian dollars. The Company has not, to the date of these financials statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.
| l) | Stock-based Compensation |
The Company records stock-based compensation in accordance with SFAS No. 123R “Share Based Payments”, using the fair value method. The Company had not issued any stock options and had no unvested share based payments prior to March 1, 2006. Accordingly, there was no effect on the Company’s reported loss from operations, cash flows or loss per share as a result of adopting SFAS No. 123R.
| m) | Recently Issued Accounting Pronouncements |
In March 2008, the Financial Accounting Standards Board (“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 Company is currently evaluating the impact of SFAS No. 161 on its financial statements, and 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. 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 February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an Amendment of FASB Statement No. 115”. This statement permits entities to choose to measure many financial instruments and certain other items at fair value. Most of the provisions of SFAS No. 159 apply only to entities that elect the fair value option. However, the amendment to SFAS No. 115 “Accounting for Certain Investments in Debt and Equity Securities” applies to all entities
Plaza Resources Inc.
(An Exploration Stage Company)
Notes to the Financial Statements
March 31, 2008
(Expressed in US dollars)
(unaudited)
with available-for-sale and trading securities. SFAS No. 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provision of SFAS No. 157, “Fair Value Measurements”. The adoption of this statement is not expected to have a material effect on the Company's financial statements.
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. The objective of SFAS No. 157 is to increase consistency and comparability in fair value measurements and to expand disclosures about fair value measurements. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS No. 157 applies under other accounting pronouncements that require or permit fair value measurements and does not require any new fair value measurements. The provisions of SFAS No. 157 are effective for fair value measurements made in fiscal years beginning after November 15, 2007. The adoption of this statement is not expected to have a material effect on the Company's reported financial position or results of operations.
3. | Related Party Transactions |
| a) | During the six month period ended March 31, 2008, the Company recognized a total of $3,000 (2007 - $3,000) for donated services and rent at $500 per month. |
| b) | At March 31, 2008, the Company owes $2,113 to the director of the Company (September 30, 2007 - $12 owed by the director of the Company), which is unsecured, non-interest bearing and has no repayment terms. |
| c) | At March 31, 2008, the Company owes $6,585 (September 30, 2007 – $NIL) to two shareholders of the Company, which is unsecured, non-interest bearing and has no repayment terms. |
4. | Accrued Liabilities |
At March 31, 2008, accrued liabilities of $8,738 (2007 - $2,500) consists of professional fees. At September 30, 2007, accrued liabilities consists of accrued office rent.
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-KSB and our Current Reports on Form 8-K.
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION. |
OVERVIEW
We were incorporated on October 6, 2005 under the laws of the State of Nevada with the intention of acquiring mineral exploration projects. Our principal office is located at 3830 8th Street SW, Calgary, Alberta, Canada T2T 3A9. Our phone number is (403) 630-3830. Our facsimile number is (403) 229-3160.
PLAN OF OPERATION
The following discussion and analysis explains the major factors affecting our financial condition. We are a start-up exploration-stage company and have not yet generated or realized any revenues from our business operations. We must raise cash in order to implement our plan and stay in business.
Our current business plan is to acquire exploration stage resource properties or other projects our board of directors may determine are commercially viable. We currently have no property interests.
If we acquire exploration stage properties, we will have to engage qualified geologists to conduct the mineral exploration program under industry standards. We anticipate that they will be responsible for hiring personnel and for all appropriate worker-related costs and will bill us for their services. This work is applicable to assessment requirements for the claims.
We may also explore other business opportunities in other industries, including technology, biotechnology, communications and manufacturing, although we have no current plans to do so.
We are currently evaluating our options for acquiring exploration properties or other commercial opportunities, which will require us to raise additional capital beyond our working capital requirements. We are presently exploring opportunities to raise additional funding in the form of equity or debt. However, we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common stock to fund properties acquisitions or to pursue new business opportunities. We do not have any arrangements in place for any future equity financing.
We anticipate that we will incur the following expenses over the next 12 months:
| (1) | $15,000 in connection with due diligence and examination of new properties and business |
| opportunities depending on our ability to raise additional financing; and |
| (2) | $60,000 for operating and administrative expenses. |
We do not have any plans to purchase any significant equipment or change the number of our employees during the next 12 months. We may also pursue business opportunities in other industries or acquire other properties although we have no current plans or arrangements to do so.
9
RESULTS OF OPERATIONS
We did not earn any revenues during the three and six months ended March 31, 2008. We do not anticipate earning revenues until such time as we have entered into commercial production of any mineral properties we may acquire. We are presently in the exploration stage of our business and we can provide no assurance that we will acquire exploration stage resource properties, that we will discover commercially exploitable levels of mineral resources on such properties as we may acquire, or if such resources are discovered, that we will enter into commercial production of such mineral properties.
We incurred operating expenses in the amount of $20,143 for the three months ended March 31, 2008, which included general and administrative expenses of $3,943 and professional fees of $16,200. We incurred operating expenses in the amount of $15,418 for the same period ending March 31, 2007. The difference was primarily due to an increase in professional fees between 2007 and 2008.
We incurred operating expenses in the amount of $30,663 for the six months ended March 31, 2008, which included general and administrative expenses of $8,183 and professional fees of $22,480. We incurred operating expenses in the amount of $33,270 for the same period ending March 31, 2007. The difference was primarily due to a decrease in general and administrative costs between 2007 and 2008.
We incurred a net loss in the amount of $20,143 for the three months ended March 31, 2008, and a net loss in the amount of $30,663 for the six months ended March 31, 2008. We incurred net losses of $15,418 and $33,270 for the same periods, respectfully, ending March 31, 2007. Our losses were attributable to general and administrative expenses and professional fees.
LIQUIDITY AND CAPITAL RESOURCES
There is limited financial information about our company upon which to base an evaluation of our performance. We are an exploration stage company and have not generated any revenues from operations.
Our continued existence and plans for future growth depend on our ability to obtain the capital necessary to operate by the sale of equity shares. We will need to raise additional capital to fund normal operating costs and acquisition efforts. If we are note able to generate sufficient revenues and cash flows or obtain additional or alternative funding, we will be unable to continue as a going concern. Our recurring losses and negative cash flow from operations raise substantial doubt about our ability to continue as a going concern.
As at March 31, 2008, we had current assets of $1,375 and current liabilities of $37,430, resulting in a working capital deficit of $36,055. As at September 30, 2007, we had current assets of $2,605 and current liabilities of $10,997, resulting in a working capital deficit of $8,392. The decrease in our working capital during this period is primarily a result of increases in accounts payable, accrued liabilities, and amounts due to related parties. Due to our working capital deficit and lack of operating revenue, we anticipate we will require additional financing to be able to continue as a going concern. We do not currently have any commitments for financing and we cannot assure you we will raise additional capital on acceptable terms, if at all.
For the six months ended March 31, 2008, our net cash used in operating activities was $8,791, our net cash used in investing activities was $NIL, our net cash provided by financing activities was $8,698, and we had cash of $1,375 at the end of the period. For the six months ended March 31, 2007, our net cash used in operating activities was $19,699, our net cash used in investing activities was $NIL, our net cash provided by financing activities was $NIL, and we had cash of $17,337 at the end of the period.
We have an accumulated deficit of $131,055.
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.
CRITICAL ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally accepted accounting principles requires our management to make estimates and assumptions that affect the reported amount 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. Our management routinely makes judgments and estimates about the effects of matters that are inherently uncertain.
We have identified certain accounting policies, described below, that are most important to the portrayal of our current financial condition and results of operations. Our significant accounting policies are disclosed in Note 2 to the audited financial statements included in this Quarterly Report.
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. The Company regularly evaluates estimates and assumptions related to donated services and deferred income tax asset valuation allowances. 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.
Mineral Property Costs
The Company has been in the exploration stage since its inception on October 6, 2005 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 exploration costs are expensed as incurred. 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.
Mineral property exploration costs are expensed as incurred.
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. Because option payments do not meet the definition of tangible property under EITF 04-2, all option payments are expensed as incurred.
When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves and pre feasibility, the costs incurred to develop such property are capitalized.
Estimated future removal and site restoration costs, when determinable are provided over the life of proven reserves on a units-of-production basis. Costs, which include production equipment removal and environmental remediation, are estimated each period by management based on current regulations, actual expenses incurred, and technology
and industry standards. Any charge is included in exploration expense or the provision for depletion and depreciation during the period and the actual restoration expenditures are charged to the accumulated provision amounts as incurred.
As of the date of these financial statements, the Company has incurred only acquisition and exploration costs which have been expensed.
To date the Company has not established any proven or probable reserves on its mineral properties.
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.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 2008, the Financial Accounting Standards Board (“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 Company is currently evaluating the impact of SFAS No. 161 on its financial statements, and the adoption of this statement is not expected to have a material effect on the Company’s financial statements.
In December 2007, the Financial Accounting Standards Board (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 February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an Amendment of FASB Statement No. 115”. This statement permits entities to choose to
measure many financial instruments and certain other items at fair value. Most of the provisions of SFAS No. 159 apply only to entities that elect the fair value option. However, the amendment to SFAS No. 115 “Accounting for Certain Investments in Debt and Equity Securities” applies to all entities with available-for-sale and trading securities. SFAS No. 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provision of SFAS No. 157, “Fair Value Measurements”. The adoption of this statement is not expected to have a material effect on the Company's financial statements.
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. The objective of SFAS No. 157 is to increase consistency and comparability in fair value measurements and to expand disclosures about fair value measurements. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS No. 157 applies under other accounting pronouncements that require or permit fair value measurements and does not require any new fair value measurements. The provisions of SFAS No. 157 are effective for fair value measurements made in fiscal years beginning after November 15, 2007. The adoption of this statement is not expected to have a material effect on the Company's future reported financial position or results of operations.
RISKS AND UNCERTAINTIES
An investment in our common stock involves a high degree of risk. Readers should carefully consider the risks and uncertainties described below before deciding whether to invest in shares of our common stock.
We currently have no business operations or assets. Consequently, our operations are subject to a variety of unknown risks related to acquisitions of assets or an operating business. Our failure to successfully address the risks and uncertainties described below would have a material adverse effect on our business, financial condition and/or results of operations, and the trading price of our common stock may decline and investors may lose all or part of their investment. We cannot assure you that we will successfully address these risks or other unknown risks that may affect our business.
RISKS RELATED TO OUR FINANCIAL CONDITION AND BUSINESS MODEL
Since we have not yet selected a target business with which to complete a business or asset acquisition, we are unable to currently ascertain the merits or risks of the business in which we may ultimately operate.
There is no current basis for our stockholders to evaluate the possible merits or risks of the target business or assets which we may ultimately acquire. To the extent we complete an acquisition of a financially unstable company or an entity or assets in its development stage, we may be affected by numerous risks inherent in the business operations of those entities or assets. Although our management will endeavor to evaluate the risks inherent in a target business or assets, we cannot assure you that we will properly ascertain or assess all of the significant risk factors.
We may issue shares of our capital stock or debt securities to complete an acquisition which would reduce the equity interest of our stockholders and could likely cause a change in control of our ownership.
We may issue a substantial number of additional shares of our common stock to complete a business or asset acquisition. The issuance of additional shares of our common stock:
| • | may significantly reduce the equity interest of our officers and directors; |
| • | could likely cause a change in control if a substantial number of our shares of common stock are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and may also result in the resignation or removal of our present officers and directors; and |
| • | may adversely affect prevailing market prices for our common stock. |
Similarly, if we issue debt securities, it could result in:
| • | default and foreclosure on our assets if our operating income and other resources after a business combination were insufficient to pay our debt obligations; |
| • | acceleration of our obligations to repay the indebtedness even if we have made all principal and interest payments when due if the debt security contains covenants that require the maintenance of certain financial ratios or reserves and any such covenant is breached without a waiver or renegotiation of that covenant; |
| • | our immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand; and |
| • | our inability to obtain additional financing, if necessary, if the debt security contains covenants restricting our ability to obtain additional financing while such security is outstanding. |
Because of the significant competition for acquisition opportunities, we may not be able to consummate an attractive acquisition.
We expect to encounter intense competition from other entities having a business objective similar to ours, including leveraged buyout funds, hedge funds and operating businesses competing for acquisitions. Many of these entities are well established and have extensive experience in identifying and effecting acquisition opportunities directly or through affiliates. Many of these competitors possess greater technical, human and other resources than we do.
If we do not obtain additional financing, our business will fail.
As of March 31, 2008, we had cash in the amount of $1,375 and a working capital deficit of $36,055. We currently do not have any operations and we have no revenue from operations. Our business plan calls for expenses in connection with the acquisition of exploration stage mineral properties or another business opportunity. We will require additional financing to provide funds for anticipated operating overhead, professional fees and regulatory filing fees. We will need to obtain additional financing to complete our planned programs and to sustain our business operations. If our acquisition plans are successful, we will require additional funds. We plan to raise additional funds through private placements of our common stock to finance our working capital requirements, however we currently do not have any arrangements for financing and we may not be able to obtain financing when required. Obtaining additional financing is subject to a number of factors, including the market conditions business opportunities. These factors may make the timing, amount, terms or conditions of additional financing unavailable to us.
We may be unable to continue as a going concern.
As discussed in Note 1 to the financial statements, we have not generated any revenue or profitable operations since inception and will need equity financing to begin realizing upon its business plan. We have a working capital deficit. These factors raise substantial doubt about our ability to continue as a going concern. We are in the process of seeking sufficient financing to implement our business strategy. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our independent auditors have stated in previous audit reports that there is substantial doubt concerning our ability to continue as a going concern.
We have incurred a net loss of $131,055 for the period from October 6, 2005 (date of inception) to March 31, 2008, and have no revenues from operations. We estimate that we will be required to raise at least $100,000 in the next three months to satisfy our planned acquisition activities and for general working capital requirements for general administrative and other expenses. Our future is dependent upon our ability to obtain financing and upon future profitable operations from our acquisitions. These factors raise substantial doubt that we will be able to continue as a going concern.
RISKS RELATED TO THE MINERAL EXPLORATION BUSINESS
We currently have no property interests. We are in the process of reviewing other business opportunities, including the acquisition of other mineral exploration properties. Should we decide to pursue the acquisition of mineral exploration properties we may be affected by numerous risks.
Because of the unique difficulties and uncertainties inherent in the mineral exploration business, we face a high risk of business failure.
Potential investors should be aware of the difficulties normally encountered by new mineral exploration companies and the high rate of failure of such enterprises. The likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays encountered in connection with the exploration of the mineral properties that we plan to undertake. These potential problems include, but are not limited to, unanticipated problems relating to exploration, and additional costs and expenses that may exceed current estimates. The expenditures to be made by us in the exploration of the 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.
Because of the inherent dangers involved in mineral exploration, there is a risk that we may incur liability or damages as we conduct our business.
The search for valuable minerals involves numerous hazards. As a result, we may become subject to liability for such hazards, including pollution, cave-ins and other hazards against which we cannot insure or against which we may elect not to insure. At the present time we have no coverage to insure against these hazards. The payment of such liabilities may have a material adverse effect on our financial position.
ITEM 3. | CONTROLS AND PROCEDURES. |
Disclosure Control and Procedure
At the end of the period covered by this report on Form 10-QSB for the quarter ended March 31, 2008, an evaluation was carried out under the supervision of and with the participation of the Company's management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operations of the Company's disclosure controls and procedures (as defined in Rule 13a - 15(e) and Rule 15d - 15(e) under the Exchange Act). Based on that evaluation the CEO and the CFO have concluded that the Company's disclosure controls and procedures were not adequately designed and effective in ensuring that: (i) information required to be disclosed by the Company in reports that it files or submits to the Securities and Exchange Commission under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in applicable rules and forms and (ii) material information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow for accurate and timely decisions regarding required disclosure.
Management has determined that the Company’s lack of capital adversely affected its ability to gather material information for its SEC reports and to prepare financial statements in a timely manner. Management determined that the Company’s disclosure controls and procedures were not adequately designed and were not effective because the Company was unable to timely meet its SEC filing requirements, including this Quarterly Report. Management intends to address the Company’s working capital deficit through capital raising efforts and intends to implement a plan to improve its administrative efficiency and timely preparation of SEC reports in order to maintain a timely SEC filing schedule.
Changes in Internal Control 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 Company’s 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 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 |
3.1 | Articles of Incorporation(1) |
3.2 | Bylaws(1) |
31.1 | Certification of Chief Executive Officer as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
31.2 | Certification of Chief Financial Officer as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
32.1 | Certification of Chief Executive Officer as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
32.2 | Certification of Chief Financial Officer as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| (1) | Filed with the SEC as an exhibit to our Registration Statement on Form SB-2 originally filed on December 15, 2006, as amended. |
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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| PLAZA RESOURCES INC. |
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| By: |
/s/ James MacPherson |
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| James MacPherson |
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| President |
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| (Principal Executive Officer) |
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| Date: | July 31, 2008 |
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| By: | /s/ Gavin Roy |
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| Gavin Roy |
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| Secretary and Treasurer |
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| (Principal Financial and Accounting Officer) |
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| Date: | July 31, 2008 |
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