U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q |
Mark One
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 2008
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 No. 000-52169
Silica Resources Corporation (Name of small business issuer in its charter) | |
Nevada | 71-0090401 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
789 West Pender Street, Suite 1010 Vancouver, British Columbia, Canada V6C 1H2 (Address of principal executive offices) | |
(604) 630-2940 (Issuer’s telephone number) | |
1100 Hamilton Street, Suite 306 British Columbia, Canada V6B 2S2 (Address of prior principal executive offices if changed from last filing) | |
Securities registered pursuant to Section 12(b) of the Act: | Name of each exchange on which registered: |
None | |
Securities registered pursuant to Section 12(g) of the Act: | |
Common Stock, $0.001 | |
(Title of Class) |
Indicate by checkmark whether the issuer: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x No o
1
Indicate by check mark whether the registrant is a large accelerated filed, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
Large accelerated filer | o | Accelerated filer | o |
Non-accelerated filer | o | Smaller reporting company | x |
Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No x
Applicable Only to Issuer Involved in Bankruptcy Proceedings During the Preceding Five Years.
N/A
Indicate by checkmark whether the issuer has filed all documents and reports required to be filed by Section 12, 13 and 15(d) of the Securities Exchange Act of 1934 after the distribution of securities under a plan confirmed by a court.
Yes o No o
Applicable Only to Corporate Registrants
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the most practicable date:
Class | Outstanding as of November 11, 2008 | |
Common Stock, $0.001 | 72,755,800 |
2
SILICA RESOURCES CORPORATION
Form 10-Q
Part I. | FINANCIAL INFORMATION | F-1 |
Item 1. | Financial Statements | F-1 |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 4 |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 11 |
Item 4. | Controls and Procedures | 11 |
Part II. | OTHER INFORMATION | 12 |
Item 1. | Legal Proceedings | 12 |
Item 1A. | Risk Factors | 12 |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 12 |
Item 3. | Defaults Upon Senior Securities | 12 |
Item 4. | Submission of Matters to a Vote of Security Holders | 12 |
Item 5. | Other Information | 12 |
Item 6. | Exhibits | 13 |
Signatures | 13 |
3
Silica Resources Corporation
(An Exploration Stage Company)
FINANCIAL STATEMENTS
SEPTEMBER 30, 2008
(unaudited)
Index | |
Balance Sheets | F-2 |
Statements of Operations | F-3 |
Statements of Cash Flows | F-4 |
Statements of Stockholders Equity | F-5 |
Notes to the Financial Statements | F-6 |
F-1
Silica Resources Corporation
(An Exploration Stage Company)
Balance Sheets
September 30, 2008 $ (Unaudited) | March 31, 2008 $ (Audited) | |||||||
ASSETS | ||||||||
Current Assets | ||||||||
Cash | 17,519 | 148,254 | ||||||
Receivables (Note 3) | 6,048 | 3,057 | ||||||
23,567 | 151,311 | |||||||
Mineral properties (Note 4) | 8,796 | 24,144 | ||||||
Equipment, net of depreciation | 853 | 998 | ||||||
Total Assets | 33,216 | 176,453 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current Liabilities | ||||||||
Accounts payable and accrued liabilities (Note 6) | 57,317 | 48,619 | ||||||
Promissory notes (Notes 8 ) | 71,141 | - | ||||||
Due to related parties (Note 6) | 12,017 | 12,017 | ||||||
Total Liabilities | 140,475 | 60,636 | ||||||
Stockholders’ Equity (Deficit) | ||||||||
Capital stock (Note 5) Authorized: 2,000,000,000 common shares, $0.001 par value Issued and outstanding: 72,755,800 shares (March 31, 2008 – 100,800,000 shares) | 72,756 | 100,800 | ||||||
Warrants (Note 5) | 61,236 | 48,532 | ||||||
Additional paid in capital | 433,925 | 318,586 | ||||||
Deficit accumulated during the exploration stage | (675,176 | ) | (352,101 | ) | ||||
Total Stockholders’ Equity (Deficit) | (107,259 | ) | 115,817 | |||||
Total Liabilities and Stockholders’ Equity | 33,216 | 176,453 | ||||||
Contingency (Note 1)
Commitments (Note 7)
The accompanying notes are an integral part of these financial statements
F-2
Silica Resources Corporation
(An Exploration Stage Company)
Statements of Operations
(Unaudited)
For the Three Months Ended September 30, | For the Three Months Ended September 30, | For the Six Months Ended September 30, | For the Six Months Ended September 30, | Accumulated From October 7, 2005 (Date of Inception) to September 30, | ||||||||||||||||
2008 | 2007 | 2008 | 2007 | 2008 | ||||||||||||||||
$ | $ | $ | $ | $ | ||||||||||||||||
Expenses | ||||||||||||||||||||
Depreciation | 45 | 46 | 145 | 92 | 375 | |||||||||||||||
Interest | 845 | - | 1,141 | - | 1,141 | |||||||||||||||
Consulting (Note 6 and 7) | 83,823 | - | 136,730 | - | 199,529 | |||||||||||||||
Legal | 12,200 | 16,658 | 23,304 | 29,168 | 127,846 | |||||||||||||||
Management fees | - | 1,500 | - | 3,000 | 15,000 | |||||||||||||||
Mineral property exploration | 52,729 | - | 87,307 | - | 188,093 | |||||||||||||||
Office and administration | 16,716 | 3,717 | 45,061 | 3,917 | 87,060 | |||||||||||||||
Professional services | 14,040 | 4,269 | 14,040 | 10,051 | 49,377 | |||||||||||||||
Loss from operation | (180,398 | ) | (26,190 | ) | (307,728 | ) | (46,228 | ) | (668,421 | ) | ||||||||||
Other items: | ||||||||||||||||||||
Impairment of mineral properties | (15,348 | ) | - | (15,348 | ) | - | (15,348 | ) | ||||||||||||
Settlement of debt | - | - | - | - | 8,593 | |||||||||||||||
Net loss for the period | (195,746 | ) | (26,190 | ) | (323,076 | ) | (46,228 | ) | (675,176 | ) | ||||||||||
Basic and diluted loss per share | (0.00 | ) | (0.00 | ) | (0.00 | ) | (0.00 | ) | (0.01 | ) | ||||||||||
Weighted average number of shares outstanding – basic and diluted | 72,755,800 | 99,320,000 | 83,807,070 | 99,320,000 | 90,091,987 |
The accompanying notes are an integral part of these financial statements
F-3
Silica Resources Corporation
(An Exploration Stage Company)
Statements of Cash Flows
(unaudited)
For the Six months Ended September 30, | For the Six months Ended September 30, | Accumulated From October 7, 2005 (Date of Inception) to September 30, | ||||||||||
2008 | 2007 | 2008 | ||||||||||
$ | $ | $ | ||||||||||
Operating Activities | ||||||||||||
Net loss | (323,076 | ) | (46,228 | ) | (675,176 | ) | ||||||
Items not requiring the use of cash | ||||||||||||
Depreciation | 145 | 92 | 375 | |||||||||
Interest accrued | 1,141 | - | 1,141 | |||||||||
Mineral property costs | - | - | 300 | |||||||||
Impairment of mineral properties | 15,348 | - | 15,348 | |||||||||
Settlement of debt | - | - | (8,593 | ) | ||||||||
Changes in operating assets and liabilities | ||||||||||||
Receivables | (2,991 | ) | - | (6,048 | ) | |||||||
Accounts payable and accrued liabilities | 8,698 | 38,967 | 57,317 | |||||||||
Net Cash Used in Operating Activities | (300,375 | ) | (7,169 | ) | (615,336 | ) | ||||||
Investing Activities | ||||||||||||
Acquisition of mineral properties | - | - | (24,144 | ) | ||||||||
Acquisition of office equipment | - | - | (1,228 | ) | ||||||||
Net Cash Used in Investing Activities | - | - | (25,372 | ) | ||||||||
Financing Activities | ||||||||||||
Proceeds on sale of common stock | 100,000 | - | 567,617 | |||||||||
Due to related party | - | 7,018 | 20,610 | |||||||||
Promissory notes | 70,000 | - | 70,000 | |||||||||
Donated capital | - | - | - | |||||||||
Net Cash Provided by Financing Activities | 170,000 | 7,018 | 658,227 | |||||||||
Increase (Decrease) in Cash | (130,735 | ) | (151 | ) | 17,519 | |||||||
Cash – Beginning of Period | 148,254 | 124 | - | |||||||||
Cash – End of Period | 17,519 | (27 | ) | 17,519 | ||||||||
Supplemental Disclosures: | ||||||||||||
Interest paid | - | - | - | |||||||||
Income taxes paid | - | - | - |
The accompanying notes are an integral part of these financial statements
F-4
Silica Resources Corporation
(An Exploration Stage Company)
Statement of Stockholders' Equity
October 7, 2005 (Date of Inception) to September 30, 2008
(“unaudited’)
Common Shares | Common | Deficit Accumulated during the | ||||||||||||||||||||||||||
Number | Par Value | Additional Paid-in Capital | Share Subscription | Warrants | Exploration Stage | Total | ||||||||||||||||||||||
$ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
Balance, October 7, 2005 | - | - | - | - | - | - | - | |||||||||||||||||||||
Capital stock issued for cash: | ||||||||||||||||||||||||||||
– February 2006 at $0.00005 per share | 60,000,000 | 60,000 | (57,000 | ) | - | - | - | 3,000 | ||||||||||||||||||||
– February 2006 at $0.0025 per share | 24,000,000 | 24,000 | 36,000 | - | - | - | 60,000 | |||||||||||||||||||||
– March 2006 at $0.0025 per share | 6,400,000 | 6,400 | 9,600 | - | - | - | 16,000 | |||||||||||||||||||||
Capital stock issued for mineral property: | ||||||||||||||||||||||||||||
– March 15, 2006 at $0.0025 per share (Note 4) | 120,000 | 120 | 180 | - | - | - | 300 | |||||||||||||||||||||
Capital stock subscription | - | - | - | (2,000 | ) | - | - | (2,000 | ) | |||||||||||||||||||
Net loss | - | - | - | - | - | (12,280 | ) | (12,280 | ) | |||||||||||||||||||
Balance, March 31, 2006 | 90,520,000 | 90,520 | (11,220 | ) | (2,000 | ) | - | (12,280 | ) | 65,020 | ||||||||||||||||||
Capital stock issued for cash: | ||||||||||||||||||||||||||||
– June 2006 at $0.0025 per share | 8,000,000 | 8,000 | 12,000 | - | - | - | 20,000 | |||||||||||||||||||||
– September 2006 at $0.0025 per share | 800,000 | 800 | 1,200 | - | - | - | 2,000 | |||||||||||||||||||||
Capital stock subscription | - | - | - | 2,000 | - | - | 2,000 | |||||||||||||||||||||
Net loss | - | - | - | - | - | (127,317 | ) | (127,317 | ) | |||||||||||||||||||
Balance, March 31, 2007 | 99,320,000 | 99,320 | 1,980 | - | - | (139,597 | ) | (38,297 | ) | |||||||||||||||||||
Capital stock issued for cash: | ||||||||||||||||||||||||||||
– November 2007 to January 2008 at $0.25 per share | 1,480,000 | 1,480 | 319,988 | - | 48,532 | - | 370,000 | |||||||||||||||||||||
Issue cost - legal | - | - | (3,382 | ) | - | - | - | (3,382 | ) | |||||||||||||||||||
Net loss | - | - | - | - | - | (212,504 | ) | (212,504 | ) | |||||||||||||||||||
Balance, March 31, 2008 | 100,800,000 | 100,800 | 318,586 | - | 48,532 | (352,101 | ) | 115,817 | ||||||||||||||||||||
Capital stock issued for cash: | ||||||||||||||||||||||||||||
– June 3, 2008 at $0.25 per share | 400,000 | 400 | 86,896 | - | 12,704 | - | 100,000 | |||||||||||||||||||||
Shares cancelled | (28,444,200 | ) | (28,444 | ) | 28,444 | - | - | - | - | |||||||||||||||||||
Net loss | - | - | (323,076 | ) | (323,076 | ) | ||||||||||||||||||||||
Balance, September 30, 2008 | 72,755,800 | 72,756 | 433,926 | - | 61,236 | (675,177 | ) | (107,259 | ) |
The accompanying notes are an integral part of these financial statements
F-5
Silica Resources Corporation
(An Exploration Stage Company)
Notes to the Financial Statements
September 30, 2008
("unaudited")
Note 1 | Nature of Operations and Basis of Presentation Silica Resources Corporation (the "Company") was incorporated in the State of Nevada on October 7, 2005, and is in the exploration stage. The Company has acquired a mineral property located in the Yukon Territory, Canada, as well as certain other properties in the United States and has not yet determined whether these properties contain reserves that are economically recoverable. The recoverability of costs incurred for acquisition and exploration of each property will be dependent upon the discovery of economically recoverable reserves, confirmation of the Company's interest in the underlying property, the ability of the Company to obtain necessary financing to satisfy the expenditure requirements under property agreement, completion of the development of the property and upon future profitable production of proceeds from the sale thereof. Going Concern These financial statements have been prepared on a going concern basis which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company has a working capital deficit of $116,908 as at September 30, 2008 and has incurred losses since inception resulting in an accumulated deficit of $675,176 as at September 30, 2008 ($352,101 – March 31, 2008) and further losses are anticipated in the development of its business raising doubt about the Company's ability to continue as a going concern. These financial statements do not include any adjustments to the amounts and classifications of assets and liabilities that might be necessary should the Company be unable to continue as a going concern. The ability to continue as a going concern is dependent upon the Company to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due, and ultimately generating profitable operations in the future. Management intends to finance operating costs over the next twelve months with existing cash on hand and loans from directors and private placement of common stock. Unaudited Interim Financial Statements The accompanying unaudited interim financial statements have been prepared in accordance with United States generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB of Regulation S-B. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. However, except as disclosed herein, there has been no material changes in the information disclosed in the notes to the financial statements for the year ended March 31, 2008 included in the Company's Form 10-KSB filed with the Securities and Exchange Commission. The interim unaudited financial statements should be read in conjunction with those financial statements included in the Form 10-KSB. In the opinion of Management, all adjustments considered necessary for a fair presentation, consisting solely of normal recurring adjustments, have been made. Operating results for the six months ended September 30, 2008 are not necessarily indicative of the results that may be expected for the year ending March 31, 2009. |
Note 2 | Summary of Significant Accounting Policies Basis of Presentation The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America and are presented in US dollars. The Company’s year-end is March 31. Mineral Properties The Company has adopted recommendations from the Emerging Issues Task Force (“EITF”) – EITF Abstract 04-2: “Whether Mineral Rights Are Tangible or Intangible Assets”. In accordance with the EITF, acquisition costs for mineral rights are accounted for as tangible assets and shown as a separate component of property, plant, and equipment. Costs relating to exploration and development are expensed as incurred until such time as economic reserves are quantified. To date, the Company has not established any proven reserves on any of its mineral properties. 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. |
F-6
Silica Resources Corporation
(An Exploration Stage Company)
Notes to the Financial Statements
September 30, 2008
("unaudited")
Note 2 | Summary of Significant Accounting Policies - continued Use of Estimates and Assumptions The preparation of financial statements in conformity with 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 period. Actual results could differ from those estimates. Foreign Currency Translation In accordance with SFAS No. 52, "Foreign Currency Translation", foreign denominated monetary assets and liabilities are translated into their United States dollar equivalents using foreign exchange rates which prevailed at the balance sheet date. Non monetary assets and liabilities are recorded at the exchange rates prevailing at the transaction date. Revenue and expenses are translated at average rates of exchange during the year. Exchange gains or losses resulting from foreign currency transactions are included in results of operations. Financial Instruments In accordance with the requirements of SFAS No. 107, "Disclosures about Fair Value of Financial Instruments," the Company has determined the estimated fair value of financial instruments using available market information and appropriate valuation methodologies. The carrying values of cash, receivables, accounts payable approximate their fair values due to the short-term maturity of these instruments. The fair value of the amounts due to a related parties is not determinable as they have no specific repayment terms. Environmental Costs Environmental expenditures that relate to current operations are expensed or capitalized as appropriate. Expenditures that relate to an existing condition caused by past operations, and which do not contribute to current or future revenue generation, are expensed. Liabilities are recorded when environmental assessments and/or remedial efforts are probable, and the cost can be reasonably estimated. Generally, the timing of these accruals coincides with the earlier of completion of a feasibility study or the Company's commitments to plan of action based on the then known facts. Various federal and state mining laws and regulations require the Company to reclaim the surface areas and restore underground water quality for its mine projects to the pre-existing mine area average quality after the completion of mining. In August 2001, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 143, “Accounting for Asset Retirement Obligations,” which established a uniform methodology for accounting for estimated reclamation and abandonment costs. In March 2005, the FASB issued Interpretation 47 (“FIN 47”), “Accounting for Conditional Asset Retirement Obligations”—an interpretation of FASB No. 143. FIN 47 clarifies that the term “conditional asset retirement obligation” as used in SFAS No. 143 refers to a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement are conditional on a future event that may or may not be within the control of the entity. The obligation to perform the asset retirement activity is unconditional even though uncertainty exists about the timing and/or method of settlement. FIN 47 requires a liability to be recognized for the fair value of a conditional asset retirement obligation if the fair value of the liability can be reasonably estimated. Loss per Share The Company computes loss per share in accordance with SFAS No. 128, "Earnings per Share" which requires presentation of both basic and diluted earnings per share on the face of the statement of operations. Basic loss per share is computed by dividing net loss available to common shareholders by the weighted average number of outstanding common shares during the period. Diluted loss per share gives effect to all potentially dilutive common shares outstanding during the period including stock options and warrants, using the treasury method, and preferred stock, using the if-converted method. Dilutive loss per share excludes all potential common shares if their effect is anti-dilutive. As the effects of conversion of dilutive securities is anti-dilutive, basic loss per share is equal to diluted loss per share. |
F-7
Silica Resources Corporation
(An Exploration Stage Company)
Notes to the Financial Statements
September 30, 2008
("unaudited")
Note 2 | Summary of Significant Accounting Policies - continued Stock-based Compensation The Company has adopted the requirements of SFAS No. 123R for the period ending on March 31, 2006. SFAS No. 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on the grant date fair value of the award. Under SFAS No. 123R, the Company must determine the appropriate fair value model to be used for valuing share-based payments and the amortization method for compensation cost. As at September 30, 2008, the Company has not granted any stock options and, therefore has not recognized any stock based compensation expense. Recent Accounting Pronouncements In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles”. The Statement identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with GAAP in the United States. It is not expected that this Statement will result in a change in current practice. However, it provides for transition provisions in the unusual circumstance that the application of the provisions of this Statement results in a change in practice. This standard is not expected to have a significant effect on the Company’s reported financial position or results of operations. |
Note 3 | Receivables The Company had Goods and Services Tax receivable of $6,048 at September 30, 2008 (September 30, 2007 – nil). |
Note 4 | Mineral Properties Canada Sydney Creek – By a placer lease acquisition agreement (“Agreement”) dated March 15, 2006, the Company acquired from an unrelated party (the “Vendor”) a 100% undivided right, title and interest in and to a lease of the mineral property, known as "Sydney Creek Property", located in the Whitehorse Mining District of the Yukon Territory, Canada. The purchase price was paid by the issuance of 120,000 post-forward split common shares of the Company’s capital stock for a total cost of $300. The term of the lease was one year, renewable for two additional periods of one year each, if the Company incurs the qualifying property expenditures required under the lease. During the fiscal year ended March 31, 2007, the Company incurred the required expenditures and renewed the term of the lease for an additional year. During the quarter ended June 30, 2008, the claims expired and certain of the claims of interest are being restaked. Ash-Wel Claims – On May 25, 2008, the Company signed an Assigning Agreement to acquire a 100% undivided right, title and interest in and to four claims totalling 3,377 acres in a property known as the Ash-Wel claims in the Wells Lake area, 20 miles west of Princeton, B.C., Canada in the Similkameen mining division. Pursuant to the assigning agreement, the Company agreed to pay all new staking and claims maintenance costs incurred for the property, assume the obligations for a $100,000 work program by September 1, 2009, pay $20,000 to the vendors of the property on September 1, 2009, and facilitate a founding shareholder of the Company to sell an aggregate of 300,000 common shares to the vendors at a purchase price of U.S. $0.001 per share. |
F-8
Silica Resources Corporation
(An Exploration Stage Company)
Notes to the Financial Statements
September 30, 2008
("unaudited")
Note 4 | Mineral Properties - continued United States Mineral Property Acquisition Agreement On January 31, 2008, the Company entered a Mineral Property Acquisition Agreement (“Agreement”) with Major Ventures LLC, Elk Creek Corporation and Balbach Colorado Inc. (collectively, the “Vendors”). The Vendors granted to the Company the sole and exclusive option to acquire a 100% undivided legal, beneficial and registerable interest in and to the following unencumbered mineral property interests (collectively, the “Property”): |
(i) | the Elkhorn property located in Beaverhead County, Montana, and comprising approximately 1,777 acres; |
(ii) | the Ramey Creek property located in Custer County, Idaho, and comprising approximately 393 acres; and |
(iii) | the Roaring River property located in Elmore County, Idaho, and comprising approximately 2,707 acres; |
In order to exercise its Option, the Company was obligated to provide the following consideration to the Vendors in the following manner: Affiliate Share Transfer: the Company caused a founding shareholder of the Company to sell an aggregate of 2,000,000 restricted and control and issued and outstanding common shares to the Vendors at a purchase price of U.S. $0.001 per share; and Maintenance Payments: the Company will pay to the Vendors behalf, all underlying option, regulatory and governmental payments and assessment work required to keep the mineral property interests in good standing. During the year ended March 31, 2008, the Company paid $85,000 to Major Ventures LLC, of which $4,900 for geologists’ fees spent on the acquired properties were recorded as acquisition of mineral properties, and the remaining was administration expenditures which were expensed as exploration and development in mineral property costs. During the year ended March 31, 2008, $19,244 legal fees related to the acquisition of the properties were capitalized as acquisition costs of mineral properties. On March 27, 2008 the Company completed the acquisition requirements under the Agreement and exercised the Option thereby acquired an undivided 100% legal, beneficial and registerable interest in and to the mineral property interests comprising the Property. As of August 31, 2008, the Company has decided to allow the leases on the Roaring River and Ramey Creek properties to lapse without renewal. The Company has impaired lapsed mineral properties by $15,347 during the quarter ended September 30, 2008 on the basis of net acres abandoned. |
F-9
Silica Resources Corporation
(An Exploration Stage Company)
Notes to the Financial Statements
September 30, 2008
("unaudited")
Note 5 | Capital Stock On June 3, 2008, the Company issued to private placement subscribers an aggregate of 400,000 units of securities at a price of $0.25 per unit with each unit comprised of one common share and one share purchase warrant entitling the purchaser to purchase one common share at $0.35 per share for a two year term from the date of issue for gross proceeds of $100,000. No issuance costs were paid in connection with the transaction. The fair value of the warrants of $12,704 was estimated using the Black-Scholes option pricing model with an expected life of 2 years, a risk free interest rate of 3.55%, a dividend yield of 0%, and an expected volatility of 40%. On June 11, 2008, an aggregate of 28,444,200 common shares of the Company held by a former officer and director of the Company were cancelled and returned to treasury for no consideration as part of restructuring the Company. No value was attributed to the transaction on the basis of prior negotiations. At September 30, 2008, there were no outstanding stock options. Stock Purchase Warrants Warrant transactions and the number of warrants outstanding at September 30, 2008 are summarized as follows: |
Six month period ended September 30, 2008 | Year ended March 31, 2008 | |||||||||||||||||||||||
Number of Shares | Weighted Average Exercise Price per Share | Weighted Average Life in Years | Number of Shares | Weighted Average Exercise Price per Share | Weighted Average Life in Years | |||||||||||||||||||
Balance Beginning of Period | 1,480,000 | 0.35 | 1.68 | - | - | - | ||||||||||||||||||
Granted in the Period | 400,000 | 0.35 | 2.00 | 1,480,000 | .0.35 | 2.00 | ||||||||||||||||||
Exercised in the Period | - | - | - | - | - | - | ||||||||||||||||||
Expired in the Period | - | - | - | - | - | - | ||||||||||||||||||
Balance End of Period | 1,880,000 | 0.35 | 1.28 | 1,480,000 | 0.35 | 1.68 |
Note 6 | Related Party Transactions As at September 30, 2008, the Company owed $12,017 (September 30, 2007 - $Nil) for expense reimbursements to a Company with a director in common. As at September 30, 2008, accounts payable and accrued liabilities included $12,500 (September 30, 2007 - $Nil) in fees for mineral property exploration services rendered and $2,229 (September 30, 2007 - $Nil) in related expenses to a director and officer of the Company. The Company paid this director and officer an aggregate of $30,000 and $3,750 for mineral property exploration services and reimbursed expenses respectively during the six months ended September 30, 2008. The above transactions have been in the normal course of operations and, in management’s opinion, undertaken with the same terms and conditions as transactions with unrelated parties. |
Note 7 | Commitments On February 1, 2008, the Company signed a consulting and professional services agreement to provide geological, exploration and consulting services for a daily fee of $600. The Agreement commences on February 1, 2008 to January 31, 2009 and to renew on a yearly basis. On February 1, 2008, the Company signed a consulting and professional services agreement with a director of the Company to provide geological, exploration and consulting services for a daily fee of $500 with a minimum of 10 days per month. The Agreement commences on February 1, 2008 to January 31, 2009 and to renew on a yearly basis. |
Note 8 | Promissory Notes On May 27, 2008, the Company signed a promissory note due on August 26, 2008 in the amount of $50,000, unsecured with annual interest of 7%. Interest of $1,141 was accrued during the period ended September 30, 2008. The note was not repaid on its due date. The Company continues to accrue interest at 7% per annum. On September 12, 2008, the Company issued a promissory note in the amount of $20,000, unsecured, due and payable with accumulated interest within 190 days and bears interest of 8% per annum. |
F-10
FORWARD LOOKING STATEMENTS
Statements made in this Form 10-Q that are not historical or current facts are "forward-looking statements" made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933 (the "Act") and Section 21E of the Securities Exchange Act of 1934. These statements often can be identified by the use of terms such as "may," "will," "expect," "believe," "anticipate," "estimate," "approximate" or "continue," or the negative thereof. We intend that such forward-looking statements be subject to the safe harbors for such statements. We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Any forward-looking statements represent management's best judgment as to what may occur in the future. However, forward-looking statements are subject to risks, uncertainties and important factors beyond our control that could cause actual results and events to differ materially from historical results of operations and events and those presently anticipated or projected. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION
GENERAL
Silica Resources Corporation was incorporated under the laws of the State of Nevada in October 7, 2005. We are engaged in the business of acquisition, exploration and development of mineral properties in the United States and Canada. We also plan to locate and acquire other precious or industrial mineral properties. As of the date of this Quarterly Report, our main focus is the identification, acquisition, exploration and development of mineral properties, which has resulted in the acquisition of our interest in the properties discussed below.
Our shares of common stock trade on the Over-the-Counter Bulletin Board under the symbol “SRCN”.
Please note that throughout this Quarterly Report, and unless otherwise noted, the words "we", "our", "us”, "the Company", “the Corporation”, “Silica”, or "Silica Resources Corporation" refers to Silica Resources Corporation.
CURRENT BUSINESS OPERATIONS
We are a resource exploration company currently engaged in the exploration and development of properties that we believe may contain valuable minerals for the purpose of discovering commercially viable mineral deposits. Our foundational group of assets consists of the properties located in Montana and Idaho as more fully described below. We have entered into an agreement with Major Ventures LLC, Elk Creek Corporation and Balbach Colorado Inc. (collectively, the "Vendors") to earn a 100% interest in the properties. Since we are an exploration stage company, there is no assurance that a commercially viable mineral deposit exists on the property covered by the prospect lease, and a great deal of further exploration will be required before a final evaluation as to the economic and legal feasibility for our future exploration is determined. We have no known reserves of any type of mineral. To date, we have not discovered an economically viable mineral deposit on the property, and there is no assurance that we will discover one.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION - continued
MINERAL PROPERTIES
The location of our mineral properties is summarized as follows:
Location | Acreage |
Elkhorn Property, Beaverhead County, Montana | 1,777 acres |
Ash-Wel Property, Wells Lake, Princeton, British Columbia | 3,377 acres |
Sydney Creek Property, Yukon Territory, Canada | partial restaking completed |
Mineral Property Acquisition Agreement – Montana and Idaho, USA
On January 31, 2008, we entered into a mineral property acquisition agreement (the "Agreement"), with Major Ventures LLC, Elk Creek Corporation and Balbach Colorado Inc. (collectively, the "Vendors"). Effective March 27, 2008, we completed the terms and conditions of the Agreement.
In accordance with the terms and conditions of the Agreement, the Vendors granted to us the sole and exclusive option (the "Option") to acquire a 100% undivided legal, beneficial and registerable interest in and to the following unencumbered mineral property interests (collectively, the "Property"): (i) the Elkhorn property located in Beaverhead County, Montana, and comprising approximately 1,777 acres; (ii) the Ramey Creek property located in Custer County, Idaho, and comprising approximately 393 acres; and (iii) the Roaring River property located in Elmore County, Idaho, and comprising approximately 2,707 acres.
In order to exercise the Option, we were obligated to provide the following consideration to the Vendors in the following manner: (i) we caused one of our certain existing founding shareholders to sell an aggregate of 2,000,000 of our post-Forward Stock Split restricted and control and issued and outstanding common shares from the holdings of such shareholder (each an "Affiliate Share") to the order and direction of the Vendors at a purchase price of U.S. $0.0001 per Affiliate Share, as follows: (a) 1,000,000 Affiliates Shares to Balbach Colorado Inc, (b) 600,000 Affiliate Shares to Elk Creek Corporation, and (c) 400,000 Affiliate Shares to Major Ventures LLC; and (ii) we have paid to or on the Vendors’ behalf, all underlying option, regulatory and governmental payments and assessment work required to keep the mineral property interests comprising the Property and any underlying option agreements respecting any of the mineral property interests comprising the Property in good standing.
On March 27, 2008, we completed the acquisition requirements under the Agreement and exercised the Option and thereby acquired an undivided 100% legal, beneficial and registerable interest in and to the mineral property interests comprising the Property. During fiscal year ended March 31, 2008, we paid an aggregate of $85,000 to the Vendors, of which $4,900 for geologists’ fees spent were recorded as acquisition of mineral property, and the remaining was administration expenditures which were expenses as exploration and development in mineral property costs.
As of August 31, 2008, for geological, regulatory, and exploration development related reasons we have ceased exploration of some properties, and as at the date indicated above, decided to allow the leases on the Roaring River and Ramey Creek properties to lapse without renewal. The lease on the Elkhorn property remains in good standing. As of September 30, 2008, exploration conducted on the Company’s Elkhorn property in Montana has lead to concurrent exploratory drilling initiatives taking place beginning in the third fiscal quarter of this year.
Elkhorn Property Claims – Montana, USA
The Elkhorn Property is comprised of 86 staked MO Lode mining claims on approximately 1,777 acres within the Elkhorn Mining District in Beaverhead County, Montana. There are some patented mining claims within the area of interest.
Current exploration efforts involve surface mapping and sampling of previously mined areas. Geochemical sampling indicates low molybdenum values in the veins of the upper block. Samples of sediment washed out of the 1,000 level adit yield higher molybdenum values. Efforts this spring have focused on preparing and filing plans with the local Forest Service District Ranger for permitting of surface drilling operations.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION - continued
MINERAL PROPERTIES - continued
Two diamond drill holes have been drilled in the month of October, 2008 that have targeted the molybdenum mineralization previously noted in the 1,000 level adit to ascertain distribution and depth of mineralization. Directional drilling at angles of 70-75 degrees for each hole was drilled to a distance of 1,000 lineal feet to a vertical depth exceeding 600 feet, below that level previously noted in the 1,000 level adit. Both holes were collared at an elevation of 8,200 feet. Assay results for the drilling are pending. Surface sampling will also continue to identify future drill sites in order to help establish the full parameters of the mineralized zone. Drilling site selection was conducted in conjunction with the US Forest Service and required government authorities.
Assignment Agreement – Ash-Wel Claims, British Columbia, Canada
On May 25, 2008, we entered into an assignment agreement (the “Assignment Agreement”) with Larry Sostad and Andrew Sostad (collectively, “Sostad”) and West Peak Ventures of Canada Ltd. (“West Peak”) relating to the acquisition of a 100% undivided right, title and interest in and to four claims totaling 3,377 acres in a property klnown as the Ash-Wel claims in the Wells Lake area, Princeton, British Columbia, Canada in the Similkameen Mining Division (the “Ash-Wel Claims”). The Assignment Agreement relates to that certain letter agreement dated May 25, 2007 between West Peak and Sostad pertaining to the Ash-Wel Claims. In accordance with the terms and provisions of the Assignment Agreement, we agreed to: (i) pay all new staking and claims maintenance costs incurred for the Ash-Wel Claims property; (ii) assume the obligations for a $100,000 work programs by June 1, 2009; (iii) pay $20,000 to the vendors of the Ash-Wel Claims property on June 1, 2009; and (iv) facilitate the sale of an aggregate of 300,000 shares of our common stock held of record by one of our founding shareholders to the vendors at a purchase price of $0.001 per share.
Placer Lease Acquisition Agreement – Sydney Creek Claims, Yukon Territories, Canada
On March 15, 2006, we entered into a Placer Lease Acquisition Agreement with Karl Gruber (the “Prospect Lease”) whereby we purchased a 100% interest in an unpatented lease to prospect a five mile portion of Sidney Creek located approximately one mile downstream of Iron Creek, in the Whitehorse Mining Division of the Yukon Territory, Canada. The term of the lease was for one-year renewable for two additional one-year periods if we incur the qualifying property expenditures required under the Prospect Lease. As of the date of this Quarterly Report, we have incurred the required expenditures and have re-staked a portion of the property.
During the quarter ended June 30, 2008, the claims expired and certain of the claims of interest are being restaked.
RESULTS OF OPERATION
We are an exploration stage company and have not generated any revenue to date. We have incurred recurring losses to date. Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation. We expect we will require additional capital to meet our long term operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities.
The summarized financial data set forth in the table below is derived from and should be read in conjunction with our unaudited financial statements for the six month period ended September 30, 2008 and September 30, 2007, including the notes to those financial statements which are included in this Quarterly Report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward looking statements. Our audited financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.
The following table sets forth selected financial information for the periods indicated.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION - continued
RESULTS OF OPERATION
Six Month Period Ended September 30, 2008 and 30, 2007 | For the Period from October 7, 2005 (inception) to September 30, 2008 | |||||||||||
2008 | 2007 | |||||||||||
Expenses | ||||||||||||
Depreciation and Amortization | $ | 145 | $ | 92 | $ | 375 | ||||||
Interest | 1,141 | -0- | 1,141 | |||||||||
Consulting | 136,730 | -0- | 199,529 | |||||||||
Legal | 23,304 | 29,168 | 127,846 | |||||||||
Management fees | -0- | 3,000 | 15,000 | |||||||||
Mineral property exploration | 87,307 | -0- | 188,093 | |||||||||
Office and administration | 45,061 | 3,917 | 87,060 | |||||||||
Professional services | 14,040 | 10,051 | 49,377 | |||||||||
Loss from operation | $ | (307,728 | ) | $ | (46,228 | ) | $ | (668,421 | ) | |||
Impairment of mineral properties | (15,348 | ) | -0- | (15,348 | ) | |||||||
Settlement of debt | -0- | -0- | 8,593 | |||||||||
Net Loss | $ | (323,076 | ) | $ | (46,228 | ) | $ | (675,176 | ) |
We have incurred recurring losses to date. Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation.
We expect we will require additional capital to meet our long term operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities.
Six Month Period Ended September 30, 2008 Compared to Six Month Period Ended September 30, 2007.
Our net loss for the six month period ended September 30, 2008 was ($323,076) compared to a net loss of ($46,228) during the six month period ended September 30, 2007 (an increase of $276,848). During the six month periods ended September 30, 2008 and September 30, 2007, we did not generate any revenue.
During the six month period ended September 30, 2008, we incurred expenses of $307,728 compared to $46,228 incurred during the six month period ended September 30, 2007 (an increase of $261,500). This resulted in a loss from operations during the six month period ended September 30, 2008 of ($307,728) and a loss from operations during the six month period ended September 30, 2007 of ($46,228). These expenses incurred during the six month period ended September 30, 2008 consisted of: (i) depreciation of $145 (2007: $92); (ii) interest of $1,141 (2007: $-0-); (iii) consulting of $136,730 (2007: $-0-); (iv) legal of $23,304 (2007: $29,168); (v) management fees of $-0- (2007: $3,000); (vi) mineral property expenses of $87,307 (2007: $-0-); (vii) office and administration of $45,061 (2007: $3,917); and professional services of $14,040 (2007:$10,051).
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION - continued
RESULTS OF OPERATION - continued
Expenses incurred during the six month period ended September 30, 2008 compared to the six month period ended September 30, 2007 increased primarily due to the increase in mineral property exploration costs, consulting fees and office and administration pertaining to our property acquisitions and services performed relating to the increased scale and scope of business operations of our interests. General and administrative expenses generally include corporate overhead, financial and administrative contracted services, marketing, and consulting costs.
Loss from operations of ($307,728) during the six month period ended September 30, 2008 was increased by the recording of ($15,348) as impairment of mineral properties resulting in a net loss of ($323,076).
Our net loss during the six month period ended September 30, 2008 was ($323,076) compared to a net loss of ($46,228) incurred during the six month period ended September 30, 2007. The weighted average number of shares outstanding was 83,807,070 for the six month period ended September 30, 2008 compared to 99,320,000 for the six month period ended September 30, 2007.
Three Month Period Ended September 30, 2008 Compared to Three Month Period Ended September 30, 2007.
Our net loss for the three month period ended September 30, 2008 was ($195,746) compared to a net loss of ($26,190) during the three month period ended September 30, 2007 (an increase of $169,556). During the three month periods ended September 30, 2008 and September 30, 2007, we did not generate any revenue.
During the three month period ended September 30, 2008, we incurred expenses of $180,398 compared to $26,190 incurred during the six month period ended September 30, 2007 (an increase of $154,208). This resulted in a loss from operations during the three month period ended September 30, 2008 of ($180,398) and a loss from operations during the three month period ended September 30, 2007 of ($26,190). These expenses incurred during the three month period ended September 30, 2008 consisted of: (i) depreciation of $45 (2007: $46); (ii) interest of $845 (2007: $-0-); (iii) consulting of $83,823 (2007: $-0-); (iv) legal of $12,200 (2007: $16,658); (v) management fees of $-0- (2007: $1,500); (vi) mineral property expenses of $52,729 (2007: $-0-); (vii) office and administration of $16,716 (2007: $3,717); and professional services of $14,040 (2007:$4,269).
Expenses incurred during the three month period ended September 30, 2008 compared to the three month period ended September 30, 2007 increased primarily due to the increase in mineral property exploration costs, consulting fees and office and administration pertaining to our property acquisitions and services performed relating to the increased scale and scope of business operations of our interests.
Loss from operations of ($180,398) during the three month period ended September 30, 2008 was increased by the recording of ($15,348) as impairment of mineral properties resulting in a net loss of ($195,746).
Our net loss during the three month period ended September 30, 2008 was ($195,746) compared to a net loss of ($26,190) incurred during the three month period ended September 30, 2007. The weighted average number of shares outstanding was 72,755,800 for the three month period ended September 30, 2008 compared to 99,320,000 for the three month period ended September 30, 2007.
LIQUIDITY AND CAPITAL RESOURCES
Six Month Period Ended September 30, 2008
As at the six month period ended September 30, 2008, our current assets were $23,567 and our current liabilities were $140,475, which resulted in a working capital deficit of $116,908. As at the six month period ended September 30, 2008, current assets were comprised of: (i) $17,519 in cash; and (ii) $6,048 in receivables. As at the six month period ended September 30, 2008, current liabilities were comprised of: (i) $57,317 in accounts payable and accrued liabilities; (ii) $71,141 in promissory notes; and (iii) $12,017 due to related party.
As at the six month period ended September 30, 2008, our total assets were $33,216 comprised of: (i) current assets of $23,567; (ii) valuation of mining properties of $8,796; and (iii) equipment, net of depreciation, of $853. The decrease in total assets during the six month period ended September 30, 2008 from fiscal year ended March 31, 2008 was primarily due to the decrease in cash and the impairment of mineral properties.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION - continued
LIQUIDITY AND CAPITAL RESOURCES - continued
As at the six month period ended September 30, 2008, our total liabilities were $140,475 comprised entirely of current liabilities. The increase in liabilities during the six month period ended September 30, 2008 from fiscal year ended March 31, 2008 was primarily due to the recording of promissory notes in the amount of $71,141. See “ – Material Commitments.”
Stockholders’ equity (deficit) decreased from $115,817 for fiscal year ended March 31, 2008 to ($107,259) for the six month period ended September 30, 2008.
Cash Flows from Operating Activities
We have not generated positive cash flows from operating activities. For the six month period ended September 30, 2008, net cash flows used in operating activities was ($300,375) consisting primarily of a net loss of ($323,076). For the six month period ended September 30, 2007, net cash flows used in operating activities was ($7,169) consisting primarily of a net loss of ($46,228). During the six month period ended September 30, 2008, net cash flows used in operating activities was adjusted by items not requiring the use of cash for depreciation in the amount of $145 (2007: $92), interest accrued in the amount of $1,141 (2007: $-0-), and impairment of mineral properties in the amount of $15,348 (2007: $-0-). Net cash flows used in operating activities was further changed by ($2,991) (2007: $-0-) for receivables and $8,698 (2007: $38,967) for accounts payable and accrued liabilities.
Cash Flows from Investing Activities
For the six month periods ended September 30, 2008 and September 30, 2007, net cash flows used in investing activities was $-0-.
Cash Flows from Financing Activities
We have financed our operations primarily from either advancements or the issuance of equity and debt instruments. For the six month period ended September 30, 2008, net cash flows provided from financing activities was $170,000 compared to $7,018 for the six month period ended September 30, 2007. Cash flows from financing activities for the six month period ended September 30, 2008 consisted of: (i) $100,000 (2007: $-0-) in proceeds from sale of common stock; (ii) $-0- (2007: $7,018) due to related party; and (iii) $70,000 in promissory note (2007: $-0-).
We expect that working capital requirements will continue to be funded through a combination of our existing funds and further issuances of securities and debt instruments. Our working capital requirements are expected to increase in line with the growth of our business.
PLAN OF OPERATION AND FUNDING
Existing working capital, further advances and debt instruments, and anticipated cash flow are expected to be adequate to fund our operations over the next six months. We have no lines of credit or other bank financing arrangements. Generally, we have financed operations to date through the proceeds of the private placement of equity and debt instruments. In connection with our business plan, management anticipates additional increases in operating expenses and capital expenditures relating to: (i) our exploration properties; (ii) possible drilling initiatives on current properties and future properties; and (iii) future property acquisitions. We intend to finance these expenses with further issuances of securities, and debt issuances. Thereafter, we expect we will need to raise additional capital and generate revenues to meet long-term operating requirements. Additional issuances of equity or convertible debt securities will result in dilution to our current shareholders. Further, such securities might have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to take advantage of prospective new business endeavors or opportunities, which could significantly and materially restrict our business operations.
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION - continued
Plan of Operations
Our plan of operations for the next twelve months is to continue our exploration objectives, subject to our obtaining the funding necessary including:
· | the continued exploration of our Sydney Creek Property Placer Property as re-staked. Phase one of this exploration consists of reconnaissance geomorphology to assess the amount of placer material involved and a detailed placer pit testing program to define targets for further work, |
· | the continued work programs relating to the ongoing exploration and assessment of our Elkhorn property for molybdenum and other metals including assay of core samples, further mapping, geological assessment, and future possible drilling initiatives, |
· | identification of further potential exploration acquisitions, |
· | ongoing general and administrative expenses |
Estimated total expenditures over the next twelve months depend on the availability of investment capital and economic conditions conducive to fund our exploration intitiatives.
Advances and further private placements are expected to be adequate to fund our operations over the next six months. However, we will require financing to enable us to complete our exploration programs, to pay for our general and administrative expenses for the next 12 months, and to conduct due diligence related to new property acquisitions under assessment.
During the twelve month period following the date of this Quarterly Report, we anticipate that we will not generate any revenue. Accordingly, we anticipate that we will be required to obtain financing in order to complete our plan of operations during the next twelve months. We anticipate that additional funding will be in the form of equity financing from the sale of our common stock or debt instruments. However, we do not have any financing arranged and we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common stock or sale of debt instruments to fund our plan of operations. In the absence of such financing, we will not be able to continue our exploration initiatives and our business plan will fail. Even if we are successful in obtaining equity financing to fund our exploration programs, there is no assurance that we will obtain the funding necessary to pursue any advanced exploration of our claim groups in Canada and the United States. If we do not continue to obtain financing, we will be forced to abandon such claims and our plan of operations will fail.
We may consider entering into a joint venture arrangement to provide the required funding to develop the prospect lease or other properties under consideration by management. We have not undertaken any efforts to locate a joint venture participant relating to our exploration prospects. Even if we determined to pursue a joint venture participant, there is no assurance that any third party would enter into a joint venture agreement with us in order to fund exploration of our exploration prospects. If we entered into a joint venture arrangement, we would likely have to assign a percentage of our interest in our claims to the joint venture participant.
MATERIAL COMMITMENTS
As of the date of this Quarterly Report, and other than our obligations to be incurred under the Agreement and the Assignment Agreement, we do not have any material commitments other than as described below:
Promissory Notes
On May 27, 2008, we issued a promissory in the principal amount of $50,000 due on August 26, 2008. The note is unsecured and bears interest at the rate of 7%. The promissory note was not paid on August 26, 2008, therefore, the note continues to accrue interest at the rate of 7% per annum.
On September 12, 2008, we signed a promissory note with a company in the principal amount of $20,000 due within 190 days from the date of issuance. The promissory note is unsecured and bears interest at the rate of 8% per annum.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION - continued
PURCHASE OF SIGNIFICANT EQUIPMENT
We do not intend to purchase any significant equipment during the next twelve months.
OFF-BALANCE SHEET ARRANGEMENTS
As of the date of this Quarterly Report, we do not have any 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 investors.
GOING CONCERN
The independent auditors' report accompanying our March 31, 2008 and March 31, 2007 financial statements contains an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. The financial statements have been prepared "assuming that we will continue as a going concern," which contemplates that we will realize our assets and satisfy our liabilities and commitments in the ordinary course of business.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Market risk represents the risk of loss that may impact our financial position, results of operations or cash flows due to adverse change in foreign currency and interest rates.
Exchange Rate
Our reporting currency is United States Dollars (“USD”). In the event we acquire any properties outside of the United States, the fluctuation of exchange rates may have positive or negative impacts on our results of operations. However, since all of our properties are currently located within the United States, any potential revenue and expenses will be denominated in U.S. Dollar, and the net income effect of appreciation and devaluation of the currency against the US Dollar would be limited to our costs of acquisition of property.
Interest Rate
Interest rates in the United States are generally controlled. Any potential future loans will relate mainly to acquisition of properties and will be mainly short-term. However our debt may be likely to rise in connection with expansion and if interest rates were to rise at the same time, this could have a significant impact on our operating and financing activities. We have not entered into derivative contracts to hedge existing risks for speculative purposes.
ITEM 4. CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, including our president (also our principal executive officer) and our secretary, treasurer and chief financial officer (also our principal financial and accounting officer) to allow for timely decisions regarding required disclosure.
As of September 30, 2008, the end of our third quarter covered by this report, we carried out an evaluation, under the supervision and with the participation of our president (also our principal executive officer and our principal financial and accounting officer), of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our president (also our principal executive officer and chief financial officer also our principal financial and accounting officer) concluded that our disclosure controls and procedures were effective in providing reasonable assurance in the reliability of our financial reports as of the end of the period covered by this quarterly report.
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ITEM 4. CONTROLS AND PROCEDURES - continued
Inherent limitations on effectiveness of controls
Internal control over financial reporting has inherent limitations which include but is not limited to the use of independent professionals for advice and guidance, interpretation of existing and/or changing rules and principles, segregation of management duties, scale of organization, and personnel factors. Internal control over financial reporting is a process which involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements on a timely basis, however these inherent limitations are known features of the financial reporting process and it is possible to design into the process safeguards to reduce, though not eliminate, this risk. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Changes in Internal Control over Financial Reporting
There have been no significant changes in our internal controls over financial reporting that occurred during the quarter ended September 30, 2008 that have materially or are reasonably likely to materially affect, our internal controls over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Management is not aware of any legal proceedings contemplated by any governmental authority or any other party involving us or our properties. As of the date of this Quarterly Report, no director, officer or affiliate is (i) a party adverse to us in any legal proceeding, or (ii) has an adverse interest to us in any legal proceedings. Management is not aware of any other legal proceedings pending or that have been threatened against us or our properties.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
June 2008 Private Placement Offering
Effective June 2008, we completed a private placement offering (the “Private Placement”) with one non-United States resident (the “Investor”). In accordance with the terms and provisions of the Private Placement, we issued to the Investor an aggregate of 400,000 units at a per unit price of $0.25 (the “Unit”) in our capital for aggregate proceeds of $100,000. Each Unit was comprised of one share of restricted common stock and one-share purchase warrant (the “Warrant”) entitling the Investor to purchase one share of common stock at $0.35. Each Warrant is exercisable for a period of two years from the date of issuance.
Return of Shares
On approximately June 11, 2008, three of our former officers/directors returned an aggregate of 28,444,200 shares of our restricted common stock with no consideration paid to the shareholders. The shares were cancelled and returned to our treasury.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
No report required.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No report required.
ITEM 5. OTHER INFORMATION
RESIGNATION OF CHIEF FINANCIAL OFFICER/APPOINTMENT OF CHIEF FINANCIAL OFFICER
Effective on October 17, 2008, our Board of Directors accepted the resignation of Lee Borschowa as one of our directors effective October 17, 2008. Therefore, as of the date of this Quarterly Report, our Board of Directors is comprised of Gerry Jardine, Richard W. Thomssen, and Paul D. Brock.
Effective on June 11, 2008, our Board of Directors: (i) accepted the resignation of Robert Skelly as Secretary/Treasurer/Chief Financial Officer/Principal Accounting Officer and director; (ii) accepted the resignation of Karl Gruber as a director; and (iii) accepted the consent of Gerry Jardine, one of our current officers and director, to act as our Secretary/Treasurer/Chief Financial Officer and Principal Accounting Officer.
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ITEM 5. OTHER INFORMATION - - continued
RESIGNATION OF CHIEF FINANCIAL OFFICER/APPOINTMENT OF CHIEF FINANCIAL OFFICER - continued
Gerry Jardine. Effective January 31, 2008, our Board of Directors appointed Mr. Jardine to act as our President, Chief Executive Officer. Mr. Jardine was President/CEO and a director of New Pacific Ventures from 2001 to 2006. From 1999 to 2004, he was the Secretary/Treasurer and a director of Prefco Enterprises Inc., a public Canadian construction/development company. From 1989 to 2003, Mr. Jardine was President/CEO and a director of Truax Venture Corporation, a Canadian public exploration company. Additionally, from 1996 to 2003, Mr. Jardine was the President of Amcan Fiscal Consultants Inc., a private consulting company. From 1986 to 1997, Mr. Jardine was the President/CEO, and a director of PowerTech Industries Inc., a Canadian public company involved in the manufacture and sales of HVAC equipment. Mr. Jardine also currently acts as a director of Valcent Products Inc., and Canadian public company specializing in green space growing technologies. Over the past 23 years, Mr. Jardine has also served as a director to more than half a dozen other companies, mainly operating in resource industries.
ITEM 6. EXHIBITS
Exhibits:
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SILICA RESOURCES CORPORATION | |||
Dated: November 14, 2008 | By: | /s/ Gerry Jardine | |
Gerry Jardine, President and | |||
Chief Executive Officer | |||
Dated: November 14, 2008 | By: | /s/ Gerry Jardine | |
Gerry Jardine, Chief Financial Officer | |||
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