SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
x QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2008
o TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE
EXCHANGE ACT
Commission File Number: 0-52518
formerly Sunrise Mining Corporation
Exact name of small business issuer as specified in its charter
NEVADA | 20-8051714 | |
(State or other jurisdiction of | I.R.S. Employer | |
incorporation or organization) | Identification No. |
1108 West Valley Blvd, STE 6-399
Alhambra, CA 91803
(Address of principal executive offices)
(626) 407-2618
Issuer's telephone number
Check whether the registrant (1) filed all documents and reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes o No x
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes o No o
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 81,282,273 shares as of July 31, 2008.
Transitional Small Business Disclosure Format (Check one): Yes o No x
2
SUNRISE HOLDINGS LIMITED
INDEX
Consolidated Balance Sheets as of June 30, 2008 and September 30, 2007 (unaudited) | 4 | |
Consolidated Statements of Expenses for the three months and nine months ended June 30, 2008 and 2007, and from October 25, 2005 (inception) to June 30, 2008 (unaudited) | 5 | |
Consolidated Statements of Cash Flows for the nine months ended June 30, 2008 and 2007, and from October 25, 2005 (inception) to June 30, 2008 (unaudited) | 6 | |
Notes to the Consolidated Financial Statements (unaudited) | 7 | |
Item 2: Management's Discussion and Analysis or Plan of Operations | 9 | |
Item 3: Controls and Procedures | 10 | |
11 | ||
11 | ||
11 | ||
11 | ||
11 | ||
11 | ||
12 |
3
PART I. FINANCIAL INFORMATION
ITEM 1. UNAUDITED FINANCIAL STATEMENTS
SUNRISE HOLDINGS LIMITED
(formerly Sunrise Mining Corporation)
(an Exploration Stage Company)
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2008 AND SEPTEMBER 30, 2007
(Unaudited)
June 30, 2008 | September 30, 2007 | |||||||
ASSETS: | ||||||||
Current assets: | ||||||||
Cash | $ | 2,411,122 | $ | - | ||||
Prepaid expenses | 1,200 | - | ||||||
Note receivable | 500,000 | |||||||
Total current assets | 2,912,322 | - | ||||||
Intangible assets | 949 | 3,795 | ||||||
Interest receivable | 6,710 | - | ||||||
TOTAL ASSETS | $ | 2,919,981 | $ | 3,795 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT): | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 8,964 | $ | 36,607 | ||||
Advances from company officers | 788 | 60,728 | ||||||
Total Current Liabilities | 9,752 | 97,335 | ||||||
Stockholders' Equity (Deficit): | ||||||||
Preferred Stock, $.001par value; 10,000,000 shares authorized, | ||||||||
10,000,000 shares issued and outstanding | 10,000 | 10,000 | ||||||
Common Stock, $.001 par value; 190,000,000 shares authorized, | ||||||||
81,282,273 and 5,785,090 shares issued and outstanding at June 30, 2008 and September 30, 2007, respectively | 81,282 | 5,785 | ||||||
Additional paid-in capital | 3,002,724 | 29,679 | ||||||
Deficit accumulated during the exploration stage | (183,777 | ) | (139,004 | ) | ||||
Total Stockholders' Equity (Deficit) | 2,910,229 | (93,540 | ) | |||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | $ | 2,919,981 | $ | 3,795 |
The accompanying notes are an integral part of these financial statements.
SUNRISE HOLDINGS LIMITED
(formerly Sunrise Mining Corporation)
(an Exploration Stage Company)
CONSOLIDATED STATEMENTS OF EXPENSES
FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2008 AND 2007 AND THE PERIOD
FROM OCTOBER 25, 2005 (INCEPTION) THROUGH JUNE 30, 2008
(Unaudited)
October 25, 2005 | ||||||||||||||||||||
Three Months Ended | Nine Months Ended | (Inception) to | ||||||||||||||||||
June 30, | June 30, | June 30, | ||||||||||||||||||
2008 | 2007 | 2008 | 2007 | 2008 | ||||||||||||||||
Expenses: | ||||||||||||||||||||
Exploration costs | - | - | 19,407 | 37,956 | ||||||||||||||||
General and administrative expenses | 5,185 | 24,764 | 61,367 | 49,860 | 162,415 | |||||||||||||||
Total Operating Expenses | 5,185 | 24,764 | 61,367 | 69,267 | 200,371 | |||||||||||||||
Net operating loss | (5,185 | ) | (24,764 | ) | (61,3697 | ) | (69,267 | ) | (200,371 | ) | ||||||||||
Operating Income (Expense) | ||||||||||||||||||||
Interest income | 8,474 | - | 19,010 | - | 19,010 | |||||||||||||||
Gain on extinguishment of accounts payable | 5,669 | - | 5,669 | - | 5,669 | |||||||||||||||
Interest expense | - | - | (8,085 | ) | - | (8,085 | ) | |||||||||||||
Total Other Income and Expense | 14,143 | - | 16,594 | - | 16,594 | |||||||||||||||
Net Income (Loss) | $ | 8,958 | $ | (24,764 | ) | $ | (44,773 | ) | $ | (69,267 | ) | $ | (183,777 | ) | ||||||
Net Income (Loss) per Common Share - Basic and Diluted | $ | 0.00 | $ | (0.25 | ) | $ | (0.00 | ) | $ | (0.69 | ) | |||||||||
Per Share Information: | ||||||||||||||||||||
Weighted Average Number of Common Stock | ||||||||||||||||||||
Shares Outstanding - Basic and Diluted | 81,280,113 | 100,000 | 81,280,113 | 100,000 |
See the accompanying summary of accounting policies and notes to the financial statements.
5
SUNRISE HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(formerly Sunrise Mining Corporation)
(an Exploration Stage Company)
FOR THE NINE MONTHS ENDED JUNE 30, 2008 AND 2007 AND THE PERIOD
FROM OCTOBER 25, 2005 (INCEPTION) THROUGH JUNE 30, 2008
October 25, 2005 | ||||||||||||
For Nine Months Ended | (Inception) to | |||||||||||
June 30, | June 30, | |||||||||||
2008 | 2007 | 2008 | ||||||||||
Cash Flows from Operating Activities: | ||||||||||||
Net Loss | $ | (44,773 | ) | $ | (44,504 | ) | $ | (183,777 | ) | |||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||
Stocks issued for services | 40,000 | - | 40,000 | |||||||||
Deprecation | 2,846 | - | 2,846 | |||||||||
Gain on extinguishment of accounts payable | 5,669 | - | 5,669 | |||||||||
Imputed interest on shareholder advance | 2,711 | 2,711 | ||||||||||
(Increase) in prepaid expenses | (1,200 | ) | - | (1,200 | ) | |||||||
Increase (decrease) in accounts payable | (27,481 | ) | 11,500 | 9,126 | ||||||||
Net Cash Flows Used by Operations | (22,228 | ) | (33,004 | ) | (124,625 | ) | ||||||
Cash Flows from Investing Activities: | ||||||||||||
Purchase of assets | - | - | (3,795 | ) | ||||||||
Purchase of senior security note | (500,000 | ) | (500,000 | ) | ||||||||
Interest receivable | (6,710 | ) | (6,710 | ) | ||||||||
Net Cash Flows Used for Investing Activities | (506,710 | ) | - | (510,505 | ) | |||||||
Cash Flows from Financing Activities: | ||||||||||||
Stocks issued for cash | 3,000,000 | - | 3,045,464 | |||||||||
Repayment for advance from company officer | (62,101 | ) | - | (62,101 | ) | |||||||
Advance from company officer | 2,161 | 33,004 | 62,889 | |||||||||
Net Cash Flows Provided by Financing Activities | 2,940,060 | 33,004 | 3,046,252 | |||||||||
Net Increase in Cash | 2,411,122 | - | 2,411,122 | |||||||||
Cash and cash equivalents - Beginning of period | - | - | - | |||||||||
Cash and cash equivalents - End of period | $ | 2,411,122 | $ | - | $ | 2,411,122 | ||||||
SUPPLEMENTARY INFORMATION | ||||||||||||
Interest Paid | $ | - | $ | - | $ | - | ||||||
Taxes Paid | $ | - | $ | - | $ | - |
See the accompany summary of accounting policies and notes to the financial statements.
6
SUNRISE HOLDINGS LIMITED
(formerly Sunrise Mining Corporation)
(an Exploration Stage Company)
(Unaudited)
Note 1 - Basis of Presentation
The accompanying unaudited interim consolidated financial statements of Sunrise Holdings Limited (formerly Sunrise Mining Corporation) have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with Sunrise's audited 2007 annual financial statements and notes thereto filed with the SEC on form 10-KSB. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the result of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements, which would substantially duplicate the disclosure required in Sunrise's 2007 annual financial statements have been omitted.
Note 2 - Share Capital
During the quarter ended March 31, 2008, the Company completed a private placement of its Common Stock. The offering was done for a total of 75,000,000 units at a price of $0.04 per unit for total proceeds of $3,000,000. Each unit is comprised of one share of the Company's Common Stock and one share purchase warrant. Each whole share purchase warrant entitles the holder to purchase one additional share of the Company's Common Stock at a price of $0.10 per share for a period of three years from the date of issuance. The relative fair value of the common stock was $1,928,618 and the relative fair value of the warrants was $1,071,382. No underwriters were used in connection with this private placement and no commissions were incurred in connection with this private placement.
The fair value of the stock was estimated using current market rates and the fair value of the warrants granted with the private placement was computed using the Black-Scholes option-pricing model. Variables used in the option-pricing model include (1) risk free rate at the date of grant (2.69%), (2) expected warrant life of 3 years, (3) expected volatility of 183.33%, and (4) zero expected dividends.
Included among the purchasers in the now closed transaction was Xuguang Sun, the Chief Executive Officer and President of the Company, who individually invested $1,500,000; the other $1,500,000 was from two accredited investors who are non-affiliates of the Company.
This private placement was completed pursuant to the provisions of Regulation S promulgated under the Securities Act of 1933. The Company did not engage in a distribution of this offering in the United States. All three investors were not U.S. Persons (as that term is defined in Regulation S under the Securities Act of 1933), and the shares were issued in an offshore transaction relying on Regulation S and/or Section 4(2) of the Securities Act of 1933.
During the nine months ended June 30, 2008, the Company issued 97,183 shares of its restricted common stocks valued at $11,500 to pay for services rendered by a consultant in Mongolia during previous years. These shares were valued at the closing price on the date of issuance.
Note 3 - Related Party Transactions
During the nine months ended June 30, 2008, the Company completed a private placement of its Common Stock. The offering was done for a total of 75,000,000 units at a price of $0.04 per unit for total proceeds of $3,000,000. Each unit is comprised of one share of the Company's Common Stock and one share purchase warrant. Each whole share purchase warrant entitles the holder to purchase one additional share of the Company's Common Stock at a price of $0.10 per share for a period of three years from the date of issuance. Xuguang Sun, the Chief Executive Officer and President of the Company, who individually invested $1,500,000 in the transaction.
As of June 30, 2008, the Company paid Mr. Xuguang Sun and Mr. Shaojun Sun, directors and officers of the Company, $62,101 for advances previously made to the Company by them for the spin-off of Sunrise Mining Corporation by Magnum and other costs incurred by the Company and its wholly owned subsidiary Oriental Magnum Inc. These advances were unsecured, non-interest bearing and have no fixed terms of repayment. Imputed interest at a rate of 8% in the amount of $2,711 was recorded as an addition to additional paid in capital.
As of June 30, 2008, an officer of the Company advanced $788 to the Company. These advances are unsecured, non-interest bearing and have no fixed terms of repayment.
Note 4 – Convertible Note Payable to Related Party
On October 22, 2007, Sunrise Mining Corporation entered into a purchase agreement with Xuguang Sun, Chief Executive Officer and President of the Company, for the placement of an aggregate of $200,000 in principal amount of a Convertible Promissory Note. The Convertible Promissory Note accrues interest at a rate of 8% per annum and it is payable upon demand or upon the conversion of this Note as provided therein. The principal amount and accrued interest of this Note may be converted into the Common Stock of the Company at any time at the option of the holder of this Note, upon written notice to the Company, at the rate of $0.10 (U.S.) per share, subject to adjustment in the event of stock-splits, stock dividends, reorganizations, or other similar events to prevent dilution. Upon conversion, any fractional shares otherwise issuable upon conversion shall be paid in cash by the Company. The Common Stock issuable upon conversion shall be entitled to piggy-back registration rights in the event that the Company files a registration statement under the Securities Act of 1933. The Company evaluated the conversion feature related to this note and determined no benefit related to the conversion feature.
On February 19, 2008, Sunrise paid the note holder, the principal amount of $200,000 for the convertible note payable and $5,374 for accrued interest.
Note 5 - Change of Company Name
On March 27, 2008, Sunrise amended its article of incorporation to change its name from “Sunrise Mining Corporation” to “Sunrise Holdings Limited” because the operations of the Company will be more diversified and expanded in the future and therefore a new corporate name is appropriate.
Note 6 - Formation of New Subsidiary in British Virgin Island
On February 5, 2008, Sunrise incorporated a new wholly owned subsidiary named “eFuture International Limited” in British Virgin Island. The Company intends to conduct its business through this new subsidiary.
Note 7 - Termination of Khul Morit Property
Sunrise has decided to abandon and terminate its mining rights in its Khul Morit undeveloped mining properties (Mongolia license number 6283) located in Mongolia. A western mining company that the Company had been talking to decided not to proceed with a joint-venture project with us regarding the Khul Morit property after they reviewed our previously exploration data and visited the Khul Morit property in April 2008. Also, after further evaluation of available exploration testing results, the Company has determined that the substantial costs of additional exploratory drilling and geological testing and evaluation would not be desirable for the Company.
7
Note 8 - Purchase of 15% secured convertible note from SJ Electronics.
Effective May 30, 2008, eFuture International Limited, a wholly owned subsidiary of the Company, executed a purchase agreement and purchased a convertible secured promissory note in the principal amount of $500,000 (U.S.) from SJ Electronics, Inc., whose primary business activities are the manufacture of electronic cable products and assembling on wire harnesses by its five subsidiaries in the People's Republic of China and sales of those products to oversea markets. The promissory note is due May 29, 2009, and is convertible into the common stock, $.001 par value per share, of SJ Electronics, Inc. (OTC-BB symbol SJEL) at the option of the Company at $1.30 per share.
The Note pays 15% interest (accruing monthly) at maturity, and is convertible into shares of the common stock, par value $.001 per share of SJ Electronics, Inc. at a conversion price equal to $1.30 per share (the “Conversion Price”). In the event of a conversion, accrued interest shall be automatically converted into common stock. In addition, SJ Electronics, Inc. has the right to prepay the entire outstanding principal due under the Note upon certain conditions, if no event of default has occurred or is continuing.
The Conversion Price is subject to adjustment for certain events, including dividends, distributions or splits of common stock, or in the event of a consolidation, merger or reorganization. In addition, the Conversion Price is also subject to adjustment in the event that the pre-tax net income (the “Actual Income”) for the year ending December 31, 2008, shall be less than $10,000,000 (the “2008 Projected Income”). In such event, the Conversion Price shall be reduced, if applicable, by a pro-rata percentage equal to the percentage of the shortfall in the actual income from the 2008 Projected Income; provided, that such adjustment shall not reduce the Conversion Price to a price lower than $0.65 per share.
SJ Electronics, Inc.’s obligations under the Purchase Agreement and the Note are secured by certain accounts receivable of SJ Electronics, Inc., and by a guaranty of Yu-Ping Agatha Shen, its Chairman, and the pledge of 10,000,000 shares of Common Stock owned by Ms. Shen, pursuant to a Pledge and Security Agreement, dated May 15, 2008. In addition, SJ Electronics, Inc. entered into a Lockbox Agreement which provides that it shall direct its account debtors to pay funds owed to it to an account maintained for the ratable benefit of the investors, which funds shall be withdrawn from this account as set forth therein.
Under the purchase agreement, SJ Electronics, Inc. is obligated to file a registration statement (the “Registration Statement”) with the U.S. Securities and Exchange Commission to register the resale of the common stock issuable upon conversion of the Note. SJ Electronics, Inc. is obligated to use its best efforts to cause the Registration Statement to be filed no later than 45 days after the closing date and to insure that the Registration Statement remains in effect until all of the shares of common stock issuable upon conversion of the Note have been sold. In the event of a default of SJ Electronics, Inc.’s registration obligations under the purchase agreement, including its agreement to file the Registration Statement with the Commission no later than 45 days after the closing date, or if the Registration Statement is not declared effective within 180 days after the closing date, it is required to pay to the Company, as partial liquidated damages, for each month that the registration statement has not been filed or declared effective, as the case may be, a cash amount equal to 1% of the liquidated value of the Note, not to exceed an aggregate of 10% of the principal amount of the Note at the time outstanding.
8
Item 2. Management's Discussion and Analysis of Financial Condition or Results of Operations
Forward-looking Information
This quarterly report contains forward-looking statements. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. These statements relate to future events or to our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential" or "continue" or the negative of such terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially. There are a number of factors that could cause our actual results to differ materially from those indicated by such forward-looking statements.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Moreover, we do not assume responsibility for the accuracy and completeness of such forward-looking statements. We are under no duty to update any of the forward-looking statements after the date of this report to conform such statements to actual results.
The following discussion should be read along with our financial statements as of June 30, 2008, which are included in another section of this document and with our Form 10-KSB as of September 30, 2007 which contains a more detailed discussion of our plan. This discussion contains forward-looking statements about our expectations for our business and financial needs. These expectations are subject to a variety of uncertainties and risks that may cause actual results to vary significantly from our expectations. The cautionary statements made in our Report on Form 10-KSB should be read as applying to all forward-looking statements in any part of this report.
General
The following discussion and analysis summarizes the results of operations of Sunrise Holdings Limited, Inc. (the "Sunrise" or "we") for the quarterly ended June 30, 2008.
Sunrise is holding company that currently has one subsidiary named “eFuture International Limited”. Currently, Sunrise is working on to identify and develop some projects in China. At present, the Company has no current operating income.
Results of Operations
Comparison of the three months ended June 30, 2008 and 2007
For the three month period ended June 30, 2008 compared to the three month period ended June 30, 2007, Sunrise had a net income of $8,958 compared to a net los of $24,764, respectively. This decrease was mainly due to a decrease in professional fees.
No mining exploration cost during the three month period ended June 30, 2008 and the comparable period in 2007 because there was no exploration activity going on during those periods.
General and administrative expenses decreased 79.06% to $5,185 during the three month period ended June 30, 2008 as compared to $24,764 for the comparable period in 2007. This decrease was mainly due to a decrease in professional fees.
Comparison of the nine months ended June 30, 2008 and 2007
For the nine month period ended June 30, 2008 compared to the nine month period ended June 30, 2007, Sunrise had a net loss of $44,773 and $69,267, respectively, a decrease of approximately 35.40%. This decrease was mainly due to a no exploration cost was incurred during the nine month period ended June 30, 2008.
9
Mining exploration costs were $0 during the nine month period ended June 30, 2008, as compared to $19,407 in the comparable period in 2007 because there was no exploration activity going on for the nine months ended June 30, 2008.
General and administrative expenses increased 23.08% to $61,367 during the nine month period ended June 30, 2008 as compared to $49,860 for the comparable period in 2007. This increase was mainly due to an increase in professional fees and stock-based compensation.
Liquidity and Capital Resources
At June 30, 2008, Sunrise had current assets of $2,912,322, working capital surplus of $2,902,570, and had $22,228 of net cash used by operations during the nine month period ended June 30, 2008.
One current director and officer of the Company, has advanced $788 to pay for costs incurred by the Company during the quarter ended June 30, 2008.
Management is currently looking for more capital to complete our corporate objectives. In addition, we may engage in joint activities with other companies. Sunrise cannot predict the extent to which its liquidity and capital resources will be diminished prior to the consummation of a business acquisition or whether its capital will be further depleted by its operating losses. Sunrise has some discussions concerning potential business cooperation or combination with other companies but no final agreement has been reached yet.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company is subject to certain market risks, including changes in interest rates and currency exchange rates. The Company does not undertake any specific actions to limit those exposures.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company's Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of June 30, 2008, have concluded that, as of June 30, 2008 (the "Evaluation Date"), the Company's disclosure controls and procedures were not effective to ensure the timely collection, evaluation, and disclosure of information relating to the Company that would potentially be subject to disclosure under the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated under that Act.
10
PART II - OTHER INFORMATION
Item 1 Legal Proceedings
N/A
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
During the quarter ended June 30, 2008, the Company issued 97,183 shares of its restricted common stocks valued at $11,500 to pay for services rendered by a consultant in Mongolia during previous years. These shares were issued according to the average price of $0.118333 per share.
Item 3 Defaults Upon Senior Securities
N/A
Item 4 Submission of Matters to a Vote of Security Holders
N/A
Item 5 Other Information
N/A
Item 6 Exhibits
Exhibit Number, Name and/or Identification of Exhibit
31.1 | Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
31.2 | Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
32.1 | Certification of the Chief Executive Officer pursuant to U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
32.2 | Certification of the Chief Financial Officer pursuant to U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
11
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.
August 1, 2008 | Sunrise Holdings Limited | |
By: | /s/ Xuguang Sun | |
Xuguang Sun, Chief Executive Officer and President |
12