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 June 30, 2010 |
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) | |
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
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.
Yes 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 August 15, 2010 | |
Common Stock, $0.001 | 72,755,800 |
2
SILICA RESOURCES CORPORATION
Form 10-Q
FINANCIAL INFORMATION | F-1 | |
Financial Statements | F-1 | |
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 4 | |
Quantitative and Qualitative Disclosures About Market Risk | 9 | |
Controls and Procedures | 9 | |
OTHER INFORMATION | 10 | |
Legal Proceedings | 10 | |
Risk Factors | 10 | |
Unregistered Sales of Equity Securities and Use of Proceeds | 10 | |
Defaults Upon Senior Securities | 10 | |
Removed and Reserved | 10 | |
Other Information | 10 | |
Exhibits | 10 | |
3
PART I
ITEM 1. FINANCIAL STATEMENTS
Silica Resources Corporation
(An Exploration Stage Company)
FINANCIAL STATEMENTS
JUNE 30, 2010
(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 Financial Statements | F–6 |
F-1
SILICA RESOURCES CORPORATION | ||||||||
(An Exploration Stage Company) | ||||||||
BALANCE SHEETS | ||||||||
June 30, 2010 | March 31, 2010 | |||||||
$ (Unaudited) | $ (Audited) | |||||||
ASSETS | ||||||||
Current Assets | ||||||||
Cash | 2,040 | 2,057 | ||||||
Receivables | - | 1,713 | ||||||
2,040 | 3,770 | |||||||
5,217 | 5,217 | |||||||
Total Assets | 7,257 | 8,987 | ||||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
Current Liabilities | ||||||||
Accounts payable and accrued liabilities | 240,796 | 217,873 | ||||||
Promissory notes (Note 5) | 238,987 | 232,810 | ||||||
Due to related parties (Note 4) | 113,017 | 98,017 | ||||||
Total Liabilities | 592,800 | 548,700 | ||||||
Stockholders’ Deficit | ||||||||
Capital stock (Note 3) | 72,756 | 72,756 | ||||||
Authorized: 2,000,000,000 common shares, $0.001 par value | ||||||||
Issued and outstanding: 72,755,800 shares | ||||||||
(March 31, 2010 – 72,755,800 shares) | ||||||||
Warrants (Note 3) | - | 12,703 | ||||||
Additional paid in capital | 495,162 | 482,459 | ||||||
Deficit accumulated during the exploration stage | (1,153,461 | ) | (1,107,631 | ) | ||||
Total Stockholders’ Deficit | (585,543 | ) | (539,713 | ) | ||||
Total Liabilities and Stockholders’ Deficit | 7,257 | 8,987 |
F-2
SILICA RESOURCES CORPORATION | ||||||||||||
(An Exploration Stage Company) | ||||||||||||
STATEMENT OF OPERATIONS (Unaudited) | ||||||||||||
Accumulated | ||||||||||||
For the | For the | From | ||||||||||
three months | three months | October 7, 2005 | ||||||||||
Ended | Ended | (Date of Inception) | ||||||||||
June 30, | June 30, | to March 31, | ||||||||||
2010 | 2009 | 2010 | ||||||||||
$ | $ | $ | ||||||||||
Expenses | ||||||||||||
Consulting | 25,791 | 20,573 | 383,142 | |||||||||
Depreciation | - | 38 | 1,228 | |||||||||
Interest | 4,480 | 1,968 | 25,788 | |||||||||
Impairment of properties | - | 3,580 | 18,927 | |||||||||
Legal | 5,000 | 4,739 | 164,898 | |||||||||
Management fees | - | - | 15,000 | |||||||||
Mineral property exploration | - | - | 307,095 | |||||||||
Office and administration | 10,559 | 9,294 | 154,647 | |||||||||
Professional services | - | 16,000 | 91,328 | |||||||||
Loss from operations | (45,830 | ) | (56,192 | ) | (1,162,054 | ) | ||||||
Other items: | ||||||||||||
Settlement of debt | - | - | 8,593 | |||||||||
Net loss | (45,830 | ) | (56,192 | ) | (1,153,461 | ) | ||||||
Basic and diluted loss per share | (0.00 | ) | (0.00 | ) | ||||||||
Weighted average number of shares outstanding – basic and diluted | 72,755,800 | 72,755,800 |
F-3
SILICA RESOURCES CORPORATION | ||||||||||||
(An Exploration Stage Company) | ||||||||||||
STATEMENT OF CASH FLOWS | ||||||||||||
(Unaudited) | ||||||||||||
Accumulated | ||||||||||||
For the | For the | From | ||||||||||
Three Months | Three Months | October 7, 2005 | ||||||||||
Ended | Ended | (Date of Inception) | ||||||||||
June 30, | June 30, | to June 30, | ||||||||||
2010 | 2009 | 2010 | ||||||||||
$ | $ | $ | ||||||||||
Operating Activities | ||||||||||||
Net loss | (45,830 | ) | (56,192 | ) | (1,153,461 | ) | ||||||
Items not requiring the use of cash | ||||||||||||
Depreciation | - | 39 | 1,228 | |||||||||
Interest accrued | 4,177 | 1,763 | 25,445 | |||||||||
Mineral property costs | - | 3,580 | 300 | |||||||||
Consulting fees accrued | 15,000 | - | 75,000 | |||||||||
Impairment of mineral properties | - | - | 18,927 | |||||||||
Settlement of debt | - | - | (8,593 | ) | ||||||||
Changes in operating assets and liabilities | ||||||||||||
Receivables | 1,713 | (1,593 | ) | - | ||||||||
Accounts payable and accrued liabilities | 22,923 | 9,349 | 249,389 | |||||||||
Net Cash Used in Operating Activities | (2,017 | ) | (43,054 | ) | (791,765 | ) | ||||||
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 | - | 567,618 | ||||||||||
Advances from related party | - | 13,444 | 38,017 | |||||||||
Promissory notes (Note 5) | 2,000 | 41,156 | 213,542 | |||||||||
Net Cash Provided by Financing Activities | 2,000 | 54,600 | 819,177 | |||||||||
Increase (Decrease) in Cash | (17 | ) | 11,546 | 2,040 | ||||||||
Cash – Beginning | 2,057 | 2,159 | - | |||||||||
Cash – End | 2,040 | 13,705 | 2,040 | |||||||||
Supplemental Disclosures: | ||||||||||||
Interest paid | - | - | - | |||||||||
Income taxes paid | - | - | - |
F-4
SILICA RESOURCES CORPORATION |
(An Exploration Stage Company) | ||||||||||||||||||||||||||||
STATEMENT OF STOCKHOLDERS’ DEFICIT (Unaudited) | ||||||||||||||||||||||||||||
COMMON STOCK | Warrants | Deficit Accumulated during the Exploration Stage | ||||||||||||||||||||||||||
Number | Additional Paid-in Capital | Common Share Subscription | ||||||||||||||||||||||||||
Par Value | ||||||||||||||||||||||||||||
Total | ||||||||||||||||||||||||||||
$ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
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 2006 at $0.0025 per share | 120,000 | 120 | 180 | - | - | - | 300 | |||||||||||||||||||||
Capital Subscription | - | - | - | (2,000 | ) | - | - | (2,000 | ) | |||||||||||||||||||
Net loss for the year | - | - | - | - | - | (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 Subscription | - | - | - | 2,000 | - | - | 2,000 | |||||||||||||||||||||
�� | ||||||||||||||||||||||||||||
Net loss for the year | - | - | - | - | - | (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 for the year | - | - | - | - | - | (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 | 86,897 | - | 12,703 | - | 100,000 | |||||||||||||||||||||
Shares Cancelled | (28,444,200 | ) | (28,444 | ) | 28,444 | - | - | - | - | |||||||||||||||||||
Net loss for the year | - | - | - | - | - | (531,394 | ) | (531,394 | ) | |||||||||||||||||||
Balance, March 31, 2009 | 72,755,800 | 72,756 | 433,927 | - | 61,235 | (883,495 | ) | (315,577 | ) | |||||||||||||||||||
1,480,000 warrants expired | 48,532 | (48,532 | ) | - | ||||||||||||||||||||||||
Net loss for the year | - | - | - | - | - | (224,136 | ) | (224,136 | ) | |||||||||||||||||||
Balance, March 31, 2010 | 72,755,800 | 72,756 | 482,459 | - | 12,703 | (1,107,631 | ) | (539,713 | ) | |||||||||||||||||||
400,000 warrants expired | 12,703 | (12,703 | ) | - | ||||||||||||||||||||||||
Net loss for the period | - | - | - | - | - | (45,830 | ) | (45,830 | ) | |||||||||||||||||||
Balance, June 30, 2010 | 72,755,800 | 72,756 | 495,162 | - | - | (1,153,461 | ) | (585,543 | ) |
F-5
SILICA RESOURCES CORPORATION
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2010
(Unaudited)
1. | BASIS OF PRESENTATION AND NATURE OF OPERATIONS |
The unaudited financial information furnished herein reflects all adjustments which, in the opinion of management, are necessary to fairly state the Company’s financial position and the results of its operations for the periods presented. These first quarter financial statements should be read in conjunction with the Company’s financial statements and notes thereto included in the Company’s Form 10-K. The Company assumes that the users of the interim financial information herein have read, or have access to, the audited financial statements for the preceding fiscal year, and that the adequacy of additional disclosure needed for a fair presentation may be determined in that context. Accordingly, footnote disclosure, which would substantially duplicate the disclosure contained in the Co mpany’s financial statements for the fiscal year ended March 31, 2010, has been omitted. The results of operations for the three month period ended June 30, 2010 are not necessarily indicative of results for the entire year ending March 31, 2011. The information included in this Form 10-Q should be read in conjunction with information included in the Company’s Form 10-K for the year ended March 31, 2010 filed on June 29, 2010 with the U.S. Securities and Exchange Commission.
We evaluated events occurring between the end of our fiscal quarter June 30, 2010 to the date of filing.
Recent accounting pronouncements with future effective dates are not expected to have an impact on the Company’s financial statements.
2. | MINERAL PROPERTIES |
Elkhorn property
The Company owns a 100% interest in the Elkhorn property located in Beaverhead County, Montana with a carrying value of $5,217.
3. | CAPITAL STOCK |
At June 30, 2010, there were no outstanding stock options.
Stock Purchase Warrants
Warrant transactions and the number of warrants outstanding at June 30, 2010 are summarized as follows:
Year ended March 31, 2010 | Three months ended June 30, 2010 | |||||||||||||||||||||||
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 | 1,880,000 | $ | 0.35 | 0.79 | 400,000 | $ | 0.35 | 0.18 | ||||||||||||||||
Expired | (1,480,000 | ) | 0.35 | - | (400,000 | ) | $ | 0.35 | - | |||||||||||||||
Balance, End | 400,000 | $ | 0.35 | 0.18 | - | - | - |
4. | RELATED PARTY TRANSACTIONS |
As at June 30, 2010, the Company owed $12,017 (2010 - $12,017) for expense reimbursements to a company with a director in common.
F-6
SILICA RESOURCES CORPORATION
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2010
(Unaudited)
4. | RELATED PARTY TRANSACTIONS - continued |
As at June 30, 2010, the Company owed $101,000 (2010 - $86,000) in fees to an officer and director for mineral property exploration services rendered. The Company paid this director and officer an aggregate of $Nil (June 30, 2009 - $1,556) for reimbursed expenses during the three months ended June 30, 2010.
The above transactions have been recorded at exchange amount which is the amount of consideration established and agreed to by the related parties.
5. | PROMISSORY NOTES |
On May 27, 2008, the Company signed a promissory note, with a company that is a significant shareholder, due on August 26, 2008 in the amount of $50,000, unsecured with annual interest of 7%. The outstanding amount also included accrued interest of $7,326 (2010 - $6,453) as at June 30, 2010. The note was not repaid on its due date. The note is due on demand and continues to accrue interest at its originally stated terms
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. The outstanding amount also included accrued interest of $2,880 (2010 - $2,481) as at June 30, 2010. The note was not repaid on its due date. The note is due on demand and continues to accrue interest at its originally stated terms.
On November 20, 2008, the Company issued a promissory note in the amount of $4,000, unsecured, due and payable with accumulated interest within 6 months and bears interest of 10% per annum with a significant shareholder of the Company. The outstanding amount also included accrued interest of $689 (2010 - $574) as at June 30, 2010. The note was not repaid on its due date. The note is due on demand and continues to accrue interest at its originally stated terms. Two further unsecured notes with annual interest at 10% were issued by the Company to this shareholder on September 18, 2009 and November 13, 2009 in the amounts of $650 and $4,100 respectively, each for a one year term from the date of issue. The outstanding amount also included accrued int erest of $361 (2010 - $243) as at June 30, 2010. In addition, two further unsecured notes denominated in CDN$ with annual interest at 10% were issued by the Company to this shareholder on June 3, 2009 and February 3, 2010 in the amounts of $984 (CDN$1,000) and $9,809 (CDN$10,000) respectively, each for a one year term from the date of issue. The outstanding amount also included accrued interest of $437 (2010 - $159) as at June 30, 2010. A further unsecured note with annual interest at 10% was issued by the Company to this shareholder on January 18, 2010 in the amount of $7,300, for a one year term from the date of issue. The outstanding amount also included accrued interest of $330 (2010 - $146) as at June 30, 2010.
On December 3, 2008, the Company issued a promissory note to a company that is a significant shareholder, due June 4, 2009 in the amount of $75,000, unsecured with annual interest of 8% compounding monthly. The note was not repaid on its due date. On June 16, 2009, the Company issued a second promissory note to this shareholder in the amount of $40,000. The note was due on December 16, 2009, is unsecured, and bears interest at 8% per annum compounded monthly. The note was not repaid on its due date. The outstanding amount also included accrued interest of $13,416 (2010 - $10,887) as at June 30, 2010. The notes are due on demand and continue to accrue interest at their originally stated terms.
6. | SUBSEQUENT EVENTS |
On July 6, 2010, the Company issued a promissory note in the amount of $7,000 ($2,000 received on May 19, 2010 and $5,000 on July 6, 2010) to a company that is a significant shareholder. The note is due on demand and accrues interest at 10% per annum.
F-7
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, unc ertainties 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 are quoted on Pink OTC Markets 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.
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 assets consist of certain rights to the exploration properties located in Montana as more fully described below. We 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.
MINERAL PROPERTIES
The location of our mineral properties is summarized as follows:
Location | Approximate Acreage |
Elkhorn Property, Beaverhead County, Montana | 920 acres |
Mineral Property Acquisition Agreement/Elkhorn Property
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 prope rty located in Elmore County, Idaho, and comprising approximately 2,707 acres.
4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION - continued
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 controlled 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 pro perty 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, we have decided to allow the leases on the Roaring River and Ramey Creek properties to lapse without renewal due to difficulties with environmental policies that were not conducive to long term exploration initiatives. We have thus impaired lapsed mineral properties by $15,347 during fiscal year ended March 31, 2009.
Effective on June 30, 2009, we decided to renew fifty (50) of the eighty-six (86) total claims based on identification of exploratory and geological work indicating core claims and to allow the remaining thirty-six (36) claims comprising the property to lapse without renewal. Management has analyzed the market conditions and rising price for molybdenum and believes that such factors increase the potential value of these claims as an exploration target. We have thus impaired lapsed mineral properties by $3,580 during fiscal year ended March 31, 2010 on the basis of net acres abandoned. The renewed lease on the Elkhorn property remains in good standing and is paid through August 2010.
As of the date of this Quarterly Report, the Elkhorn Property is comprised of 50 staked MO Lode mining claims on approximately 920 acres within the Elkhorn Mining District in Beaverhead County, Montana.
PROPOSED FUTURE BUSINESS OPERATIONS
Our current strategy is to complete further acquisition of additional mineral opportunities which fall within the criteria of providing a geological basis for development of mining initiatives that can provide revenue potential and production cash flows and create expanding reserves. Our emphasis during the past fiscal year was on exploration objectives targeting molybdenum. We are also considering further options for acquisitions and development mandates that may or may not be molybdenum related. We anticipate that our ongoing efforts, subject to adequate funding being available, will continue to be focused on successfully concluding negotiations for additional interests in mineral properties. We plan to build a strategic base of exploration properties with mineral production capability.
Our ability to continue to complete planned exploration activities and expand acquisitions and explore mining opportunities is dependent on adequate capital resources being available and further sources of debt and equity being obtained. See “Plan of Operation”.
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 three month period ended June 30, 2010 and June30, 2009, 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.
5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION - continued
The following table sets forth selected financial information for the periods indicated.
Three Month Period Ended June 30, | For the Period From October 7, 2005 (inception) to June 30, | |||||||||||
2010 | 2009 | 2010 | ||||||||||
Expenses | ||||||||||||
Depreciation | $ | -0- | $ | 38 | $ | 1,228 | ||||||
Interest | 4,480 | 1,968 | 25,788 | |||||||||
Consulting | 25,791 | 20,573 | 383,142 | |||||||||
Impairment of properties | -0- | 3,580 | 18,927 | |||||||||
Legal | 5,000 | 4,739 | 164,898 | |||||||||
Management fees | -0- | -0- | 15,000 | |||||||||
Mineral property exploration | -0- | -0- | 307,095 | |||||||||
Office and administration | 10,559 | 9,294 | 154,647 | |||||||||
Professional services | -0- | 16,000 | 91,328 | |||||||||
Loss from operation | $ | (45,830 | ) | $ | (56,192 | ) | $ | (1,162,054 | ) | |||
Settlement of debt | -0- | -0- | 8,593 | |||||||||
Net Loss | $ | (45,830 | ) | $ | (56,192 | ) | $ | (1,153,461 | ) |
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.
Three Month Period Ended June 30, 2010 Compared to Three Month Period Ended June 30, 2009.
Our net loss for the three month period ended June 30, 2010 was ($45,830) compared to a net loss of ($56,192) during the three month period ended June 30, 2009 (a decrease of $10,362). During the three month periods ended June 30, 2010 and June 30, 2009, we did not generate any revenue.
During the three month period ended June 30, 2010, we incurred expenses of $45,830 compared to $56,192 incurred during the three month period ended June 30, 2009 (a decrease of $10,362). This resulted in a loss from operations during the three month period ended June 30, 2010 of ($45,830) as compared with the loss from operations during the three month period ended June 30, 2009 of ($56,192). These expenses incurred during the three month period ended June 30, 2010 consisted of: (i) depreciation of $-0- (2009: $38); (ii) interest of $4,480 (2009: $1,968); (iii) consulting of $25,791 (2009: $20,573); (iv) impairment of properties of $-0- (2009: $3,580); (v) legal of $5,000 (2009: $4,739); (vi) office and administration of $10,559 (2009: $9,294); and (viii) professional services of $-0- (2009:$16,000).
Expenses incurred during the three month period ended June 30, 2010 compared to the three month period ended June 30, 2009 decreased primarily due to the decrease in professional services and impairment of properties. General and administrative expenses generally include corporate overhead, financial and administrative contracted services, marketing, interest, and consulting and professional services costs.
The weighted average number of shares outstanding was 72,755,800 for the three month period ended June 30, 2010 compared to 72,755,800 for the three month period ended June 30, 2009.
Three Month Period Ended June 30, 2010
As at the three month period ended June 30, 2010, our current assets were $2,040 and our current liabilities were $592,800, which resulted in a working capital deficit of $590,760. As at the three month period ended June 30, 2010, current assets were comprised of $2,040 in cash. As at the three month period ended June 30, 2010, current liabilities were comprised of: (i) $240,796 in accounts payable and accrued liabilities; (ii) $238,987 in promissory notes; and (iii) $113,017 due to related parties.
As at the three month period ended June 30, 2010, our total assets were $7,257 comprised of: (i) current assets of $2,040; and (ii) valuation of mineral exploration properties of $5,217. The slight decrease in total assets during the three month period ended June 30, 2010 from fiscal year ended March 31, 2010 was primarily due to the decrease in accounts receivable.
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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 three month period ended June 30, 2010, our total liabilities were $592,800 comprised entirely of current liabilities. The increase in liabilities during the three month period ended June 30, 2010 from fiscal year ended March 31, 2010 was primarily due to the increase in accounts payable, amounts due to related parties and promissory notes to fund operations. See “Material Commitments.”
Stockholders’ deficit increased from ($539,713) for fiscal year ended March 31, 2010 to ($585,543) for the three month period ended June 30, 2010.
Cash Flows from Operating Activities
We have not generated positive cash flows from operating activities. For the three month period ended June 30, 2010, net cash flows used in operating activities was ($2,017) consisting primarily of a net loss of ($45,830). For the three month period ended June 30, 2009, net cash flows used in operating activities was ($43,054) consisting primarily of a net loss of ($56,192). During the three month period ended June 30, 2010, net cash flows used in operating activities was adjusted by items not requiring the use of cash for interest accrued in the amount of $4,177 (2009: $1,763), and consulting fees accrued of $15,000 (2009: $-0-). Net cash flows used in operating activities was further changed by $1,713 (2009: ($1,593)) for receivables and $22,923 (2009: $9,349) for accounts payable and accrued liabilities.
Cash Flows from Investing Activities
For the three month periods ended June 30, 2010 and June 30, 2009, net cash flows used in investing activities was $-0-.
Cash Flows from Financing Activities
We have financed our operations primarily from either debt related advances or the issuance of equity and other debt instruments. For the three month period ended June 30, 2010, net cash flows provided from financing activities was $2,000 compared to $54,600 for the three month period ended June 30, 2009. Cash flows from financing activities for the three month period ended June 30, 2010 consisted of $2,000 in promissory notes compared to cash flows from financing activities for the three month period ended June 30, 2009 of $13,444 in advances from related party and $41,156 in promissory notes.
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) mineral property exploration; (ii) possible exploratory drilling initiatives on current 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 or negate our business operations.
We will have to raise additional funding in order to conduct any such work programs outlined above and budgeted expenditures relating to the Elkhorn Property as well as ongoing general and administrative expenses and those required costs related to the Property relating to the Agreement. We will also have to settle existing payables and extinguish existing debts.
We estimate that our total expenditures over the next twelve months could be approximately $750,000 to $900,000. Possible future acquisition targets remain unbudgeted in the estimate of expenditures.
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, and to pay for our general and administrative expenses for the next 12 months.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION - continued
PLAN OF OPERATION AND FUNDING- continued
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 believe that debt financing will not be an alternative for us as we do not have tangible assets to secure any debt financing. We anticipate that additional funding will be in the form of equity financing from the sale of our common stock. 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 contemplated debt securities to fund our plan of operations. In the absence of such financing, we will not be able to continue exploration o f our prospects 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 prospects. If we do not continue to obtain financing, we will be forced to abandon our exploration prospects and our plan of operations will fail.
We may consider entering into a joint venture arrangement to provide the required funding to develop our current or future properties under consideration by management. We have undertaken preliminary efforts to locate a joint venture participant for our Elkhorn property. 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 prospect claims. If we entered into a joint venture arrangement, we would likely have to assign a percentage of our interest in our prospect lease to the joint venture participant.
MATERIAL COMMITMENTS
As of the date of this Quarterly Report, and other than our continuing obligations under the 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, and therefore the note continues to accrue interest at the rate of 7% per annum and is due upon demand. The outstanding amount due and owing also includes accrued interest of $7,326 as at June 30, 2010.
On September 12, 2008, we issued a promissory note 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. The note was not repaid at the end of term and continues to accrue interest at originally stated rate of interest. The outstanding amount due and owing also includes accrued interest of $2,880 as at June 30, 2010. The note is due on demand and continues to accrue interest at its originally stated terms.
On November 20, 2008, we issued a promissory note in the principal amount of $4,000 due within six months from the date of issuance. The promissory note is unsecured and bears interest at the rate of 10% per annum. The note was not repaid at the end of term and continues to accrue interest at originally stated rate of interest. The outstanding amount due and owing also includes accrued interest of $689 as at June 30, 2010. Moreover, two further unsecured notes with annual interest at 10% were issued by us to this creditor on September 18, 2009 and November 13, 2009 in the amount of $650 and $4,100, respectively. Each of these notes is for a one year term from the date of issuance. The outstanding amount also includes accrued interest of $361 as at June 30, 2010. In addition, two further unsecured notes with annual interest at 10% were issued by us to this creditor on June 3, 209 and February 3, 2010 in the amounts of $984 (CDN$1,000) and $9,809 (CDN$10,000), respectively. Each of these notes is for a one year term from the date of issuance. The outstanding amount also includes accrued interest of $437 as at June 30, 2010. Lastly, a further unsecured note with annual interest at 10% was issued by us to this creditor on January 18, 2010 in the amount of $7,300. This note is for a one year term from the date of issuance. The outstanding amount also includes accrued interest of $330 as at June 30, 2010.
On December 3, 2008, we issued a promissory note to one of our significant shareholders in the principal amount of $75,000 due on June 4, 2009. The note is unsecured with interest at the annual rate of 8%, compounded monthly. During fiscal years ended March 31, 2010 and March 31, 2009, interest of $6,353 and $1,956, respectively, was accrued. On June 16, 2009, we issued a second promissory note to this shareholder in the amount of $40,000. The note was due on December 16, 2009, is unsecured, and bears interest at 8% per annum compounded monthly. The outstanding amount also includes accrued interest of $13,416 as at June 30, 2010. These notes were not repaid on their due dates and continue to accrue interest at originally stated terms
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.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION - continued
GOING CONCERN
The independent auditors' report accompanying our March 31, 2010 and March 31, 2009 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 current property interests are 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 mineral properties.
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
EVALUATION OF DISCLOSURE 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 June 30, 2010, 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. Effectiveness of disclosure controls was primarily a function of our current scale and scope of operations which are relatively non-complex with a limited volume of trans actions and capital resources.
Changes in Internal Control over Financial Reporting
There have been no significant changes in our internal controls over financial reporting that occurred during the three month period ended June 30, 2010 that have materially or are reasonably likely to materially affect, our internal controls over financial reporting.
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 pos sible 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.
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ITEM 4. CONTROLS AND PROCEDURES - continued
AUDIT COMMITTEE
Our Board of Directors has not established an audit committee. The respective role of an audit committee has been conducted by our Board of Directors. We are contemplating establishment of an audit committee during fiscal year 2010. When established, the audit committee's primary function will be to provide advice with respect our financial matters and to assist our Board of Directors in fulfilling its oversight responsibilities regarding finance, accounting, and legal compliance. The audit committee's primary duties and responsibilities will be to: (i) serve as an independent and objective party to monitor our financial reporting process and internal control system; (ii) review and appraise the audit efforts of our independent accountants; (iii) evaluate our quarterly financial performance as well as its compliance with law s and regulations; (iv) oversee management's establishment and enforcement of financial policies and business practices; and (v) provide an open avenue of communication among the independent accountants, management and our Board of Directors.
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
No report required.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
No report required.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Removed and Reserved.
ITEM 5. OTHER INFORMATION
No report required.
ITEM 6. EXHIBITS
Exhibits:
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: August 15, 2010 | By: | /s/ Gerry Jardine | |
Gerry Jardine, President and | |||
Chief Executive Officer |
Dated: August 15, 2010 | By: | /s/ Gerry Jardine | |
Gerry Jardine, Chief Financial Officer |
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