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 period ended August 31, 2008
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______ to _______
COMMISSION FILE NUMBER: 0-32593
GENEVA RESOURCES, INC.
______________________
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
NEVADA 98-0441019
______ __________
(STATE OR OTHER JURISDICTION OF INCORPORATION I.R.S. EMPLOYER
OR ORGANIZATION) IDENTIFICATION NO.)
2533 N. CARSON STREET, SUITE 125
CARSON CITY, NEVADA 89706
_________________________
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(775) 348-9330
______________
(ISSUER'S TELEPHONE NUMBER)
SECURITIES REGISTERED PURSUANT TO SECTION NAME OF EACH EXCHANGE ON WHICH
12(B) OF THE ACT: REGISTERED:
NONE
____
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, $0.001PAR VALUE
_____________________________
(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[ ]
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 [ ] Accelerated filer [ ]
Non-accelerated filer [ ] 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 [ ] 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 [ ] No [ ]
APPLICABLE ONLY TO CORPORATE REGISTRANTS
Indicate the number of shares Outstanding as of October 10, 2008
outstanding of each of 10, 2008 the
issuer's classes of common stock, as of
the most practicable date:
Class
Common Stock, $0.001 par value 38,536,862
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
GENEVA RESOURCES, INC.
FORM 10-Q
Part I. FINANCIAL INFORMATION 1
Item 1. FINANCIAL STATEMENTS
Balance Sheets 2
Statements of Operations (unaudited) 3
Statements of Cash Flows (unaudited) 4
Notes to Financial Statements (unaudited) 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 13
Item 3. Quantitative and Qualitative Disclosures About Market Risk 21
Item 4. Controls and Procedures 21
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 22
Item 1A. Risk Factors 23
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 23
Item 3. Defaults Upon Senior Securities 23
Item 4 Submission of Matters to a Vote of Security Holders 23
Item 5. Other Information 23
Item 6. Exhibits 23
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GENEVA RESOURCES, INC.
(AN EXPLORATION STAGE COMPANY)
FINANCIAL STATEMENTS
AUGUST 31, 2008
(UNAUDITED)
1
GENEVA RESOURCES, INC.
(AN EXPLORATION STAGE COMPANY)
BALANCE SHEETS
August 31, May 31,
2008 2008
______________________________________________________________________________________________________________________________
(unaudited) (audited)
ASSETS
CURRENT ASSETS
Cash $ 1,604 $ 9,356
Other receivable 270,430 270,000
______________________________________________________________________________________________________________________________
TOTAL CURRENT ASSETS 272,034 279,356
Deposit on property 165,010 165,010
______________________________________________________________________________________________________________________________
TOTAL ASSETS $ 437,044 $ 444,366
==============================================================================================================================
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 151,671 $ 200,304
Due to related parties (Note 6) 30,000 30,000
Shareholder's loan and accrued interest (Note 7) 1,622,285 1,287,602
______________________________________________________________________________________________________________________________
1,803,956 1,517,906
______________________________________________________________________________________________________________________________
GOING CONCERN CONTINGENCY AND COMMITMENTS (Notes 1 and 8 )
STOCKHOLDERS' EQUITY (DEFICIT)
Capital stock (Note 4)
Authorized 200,000,000 shares of common stock, $0.001 par value,
Issued and outstanding
38,136,862 shares of common stock (May 31, 2008 - 38,136,862) 38,137 38,137
Additional paid-in capital 4,626,279 4,626,279
Private placement subscriptions 400,000 400,000
Deficit accumulated during the exploration stage (6,431,328) (6,137,956)
______________________________________________________________________________________________________________________________
TOTAL STOCKHOLDERS' DEFICIT (1,366,912) (1,073,540)
______________________________________________________________________________________________________________________________
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 437,044 $ 444,366
==============================================================================================================================
The accompanying notes are an integral part of these financial statements
2
GENEVA RESOURCES, INC.
(AN EXPLORATION STAGE COMPANY)
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three months Three months April 5, 2004
ended ended (inception) to
August 31, 2008 August 31, 2007 August 31, 2008
___________________________________________________________________________________________________________________________________
REVENUE $ - $ - $ 46,974
___________________________________________________________________________________________________________________________________
DIRECT COSTS - - 56,481
___________________________________________________________________________________________________________________________________
GROSS MARGIN (LOSS) - - (9,507)
___________________________________________________________________________________________________________________________________
GENERAL AND ADMINISTRATIVE EXPENSES
Office and general 7,130 18,026 134,055
Consulting fees 83,688 15,000 601,715
Marketing expenses - - 894,738
Management fees - 60,000 1,241,406
Mineral property expenditures (Note 3) 100,000 180,834 8,268,312
Professional fees 67,871 55,105 748,594
___________________________________________________________________________________________________________________________________
TOTAL GENERAL & ADMINISTRATION EXPENSES (258,689) (328,965) (11,888,820)
___________________________________________________________________________________________________________________________________
NET OPERATING LOSS (258,689) (328,965) (11,888,820)
OTHER INCOME(EXPENSE)
Net gain on settlements - - 5,590,784
Interest Expense (34,683) (12,148) (123,785)
___________________________________________________________________________________________________________________________________
TOTAL OTHER INCOME(EXPENSE) (34,683) (12,148) 5,466,999
___________________________________________________________________________________________________________________________________
NET LOSS $(293,372) $ (341,113) $ (6,431,328)
===================================================================================================================================
BASIC LOSS PER COMMON SHARE $ (0.01) $ (0.01)
===============================================================================================================
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC 38,136,862 41,200,000
===============================================================================================================
The accompanying notes are an integral part of these financial statements
3
GENEVA RESOURCES, INC.
(AN EXPLORATION STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three months Three months April 5, 2004
ended ended (inception) to
August 31, 2008 August 31, 2007 August 31, 2008
___________________________________________________________________________________________________________________________________
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) for the period $ (293,372) $ (341,113) $ (6,431,328)
Adjustments to reconcile net loss to net cash used in operating activities:
Non-cash mineral property expenditures (recoveries) - - 7,415,000
Non-cash net gain on settlement - - (5,490,784)
Stock-based compensation - - 1,354,171
Changes in operating assets and liabilities:
Other receivable (430) - (430)
Property deposits - - (100,010)
Accrued interest on shareholder's loan 34,683 12,148 123,785
Due to related parties - (60,000) 116,500
Accounts payable and accrued liabilities (48,633) (37,248) 942,033
___________________________________________________________________________________________________________________________________
(307,752) (426,213) (2,071,063)
___________________________________________________________________________________________________________________________________
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds on sale and subscriptions of common stock - 400,000 574,167
Proceeds from shareholder advances 300,000 125,000 1,498,500
___________________________________________________________________________________________________________________________________
NET CASH PROVIDED BY FINANCING ACTIVITIES 300,000 525,000 2,072,667
___________________________________________________________________________________________________________________________________
NET INCREASE (DECREASE) IN CASH (7,752) 98,787 1,604
CASH, BEGINNING 9,356 5,749 -
___________________________________________________________________________________________________________________________________
CASH, ENDING $ 1,604 $ 104,536 $ 1,604
===================================================================================================================================
SUPPLEMENTAL CASH FLOW INFORMATION AND NONCASH INVESTING AND FINANCING ACTIVITIES
Shares issued for settlement of liability $ - $ - $ 1,096,078
===================================================================================================================================
Shares issued as deposit on mineral property purchase option $ - $ - $ 65,000
===================================================================================================================================
Other receivable due in shares $ - $ $ 270,000
-
========================================================================== ================== ================== ==================
The accompanying notes are an integral part of these financial statements
4
GENEVA RESOURCES, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2008 (UNAUDITED)
________________________________________________________________________________
NOTE 1 - NATURE OF OPERATIONS AND BASIS OF PRESENTATION
________________________________________________________________________________
The Company was incorporated in the State of Nevada on April 5, 2004. The
Company was initially formed to engage in the business of reclaiming and
stabilizing land in preparation for construction in the United States of
America. On November 27, 2006, the Company filed Articles of Merger with the
Secretary of State of Nevada in order to effectuate a merger whereby the Company
(as Revelstoke Industries, Inc.) would merge with its wholly-owned subsidiary,
Geneva Gold Corp. This merger became effective as of December 1, 2006 and the
Company changed its name to Geneva Gold Corp. On March 1, 2007, the Company
(Geneva Gold Corp.) merged with its wholly-owned subsidiary, Geneva Resources,
Inc., pursuant to Articles of Merger that the Company filed with the Nevada
Secretary of State. This merger became effective March 1, 2007 and the Company
changed its name to Geneva Resources, Inc.
During 2007, the Company entered the business of exploration of precious metals
with a focus on the exploration and development of gold deposits in North
America and Internationally. During this period the Company entered into Option
Agreements to obtain mineral leases in Canada, Panama, Peru and Nigeria.
The Company has a fiscal year of May 31. On May 5, 2006, the Company completed a
forward stock split by the issuance of 42 new shares for each 1 outstanding
share of the Company's common stock. On October 13, 2006, the Company completed
a forward stock split by the issuance of 4 new shares for each 1 outstanding
share of the Company's stock.
GOING CONCERN
To date the Company has generated minimal revenues from its business operations
and has incurred operating losses since inception of $6,431,328. As at August
31, 2008, the Company has a working capital deficit of $1,531,922. The Company
requires additional funding to meet its ongoing obligations and to fund
anticipated operating losses. The ability of the Company to continue as a going
concern is dependant on raising capital to fund its initial business plan and
ultimately to attain profitable operations. Accordingly, these factors raise
substantial doubt as to the Company's ability to continue as a going concern.
The Company intends to continue to fund its mineral exploration business by way
of private placements and advances from related parties as may be required.
UNAUDITED FINANCIAL STATEMENTS
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for financial information and with
the instructions to Form 10-Q. They do not include all information and footnotes
required by United States generally accepted accounting principles for complete
financial statements. However, except as disclosed herein, there have been no
material changes in the information disclosed in the notes to the financial
statements for the year ended May 31, 2008 included in the Company's Annual
Report on Form 10-KSB filed with the Securities and Exchange Commission. The
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 three
months ended August 31, 2008, are not necessarily indicative of the results that
may be expected for the year ending May 31, 2009.
COMPARATIVE FIGURES
Certain comparative figures have been reclassified in order to conform to the
current year's financial statement presentation.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
________________________________________________________________________________
BASIS OF PRESENTATION
These financial statements are presented in United States dollars and have been
prepared in accordance with generally accepted accounting principles in the
United States of America.
USE OF ESTIMATES AND ASSUMPTIONS
Preparation of the financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain 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 expenses during the period. Accordingly, actual results
could differ from those estimates.
5
GENEVA RESOURCES, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2008 (UNAUDITED)
________________________________________________________________________________
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
________________________________________________________________________________
MINERAL PROPERTY EXPENDITURES
The Company is primarily engaged in the acquisition, exploration and development
of mineral properties.
Mineral property acquisition costs are capitalized in accordance with EITF 04-2
when management has determined that probable future benefits consisting of a
contribution to future cash inflows have been identified and adequate financial
resources are available or are expected to be available as required to meet the
terms of property acquisition and budgeted exploration and development
expenditures. Mineral property acquisition costs are expensed as incurred if the
criteria for capitalization are not met. In the event that mineral property
acquisition costs are paid with Company shares, those shares are recorded at the
estimated fair value at the time the shares are due in accordance with the terms
of the property agreements.
Mineral property exploration costs are expensed as incurred.
When it has been determined that a mineral property can be economically
developed as a result of establishing proven and probable reserves and pre
feasibility, the costs incurred to develop such property are capitalized.
Estimated future removal and site restoration costs, when determinable are
provided over the life of proven reserves on a units-of-production basis. Costs,
which include production equipment removal and environmental remediation, are
estimated each period by management based on current regulations, actual
expenses incurred, and technology and industry standards. Any charge is included
in exploration expense or the provision for depletion and depreciation during
the period and the actual restoration expenditures are charged to the
accumulated provision amounts as incurred.
As of the date of these financial statements, the Company has incurred only
property option payments and exploration costs which have been expensed.
To date the Company has not established any proven or probable reserves on its
mineral properties.
ASSET RETIREMENT OBLIGATIONS
The Company has adopted the provisions of SFAS No. 143 "Accounting for Asset
Retirement Obligations," which establishes standards for the initial measurement
and subsequent accounting for obligations associated with the sale, abandonment
or other disposal of long-lived tangible assets arising from the acquisition,
construction or development and for normal operations of such assets. The
adoption of this standard has had no effect on the Company's financial position
or results of operations. As of August 31, 2008, any potential costs relating to
the ultimate disposition of the Company's mineral property interests are not yet
determinable.
INCOME TAXES
The Company follows the liability method of accounting for income taxes. Under
this method, deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
balances. Deferred tax assets and liabilities are measured using enacted or
substantially enacted tax rates expected to apply to the taxable income in the
years in which those differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the date of enactment or
substantive enactment. As at August 31, 2008, the Company had net operating loss
carryforwards, however, due to the uncertainty of realization, the Company has
provided a full valuation allowance for the deferred tax assets resulting from
these loss carryforwards. Deferred income taxes are reported for timing
differences between items of income or expense reported in the financial
statements and those reported for income tax purposes in accordance with SFAS
No. 109, "Accounting for Income Taxes," which requires the use of the
asset/liability method of accounting for income taxes. Deferred income taxes and
tax benefits are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases, and for tax loss and credit
carry-forwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The Company
provides for deferred taxes for the estimated future tax effects attributable to
temporary differences and carry-forwards when realization is more likely than
not.
6
GENEVA RESOURCES, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2008 (UNAUDITED)
________________________________________________________________________________
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
________________________________________________________________________________
NET INCOME (LOSS) PER SHARE
The Company computes income (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 income
(loss) per share is computed by dividing net income (loss) available to common
shareholders by the weighted average number of outstanding common shares during
the period. Diluted income (loss) per share gives effect to all dilutive
potential common shares outstanding during the period. Dilutive loss per share
excludes all potential common shares if their effect is anti-dilutive.
FOREIGN CURRENCY TRANSLATION
The financial statements are presented in United States dollars. In accordance
with SFAS No. 52, "Foreign Currency Translation", foreign denominated monetary
assets and liabilities are translated to their United States dollar equivalents
using foreign exchange rates which prevailed at the balance sheet date. Revenue
and expenses are translated at average rates of exchange during the period.
Related translation adjustments are reported as a separate component of
stockholders' equity, whereas gains or losses resulting from foreign currency
transactions are included in results of operations. To August 31, 2008, the
Company has not recorded any translation adjustments into stockholders' equity.
STOCK-BASED COMPENSATION
On June 1, 2006, the Company adopted the fair value recognition provisions of
Financial Accounting Standards Board ("FASB") Statement No. 123(R), SHARE-BASED
PAYMENT, ("SFAS 123(R)"). The Company adopted SFAS 123(R) using the
modified-prospective-transition method. Under this method, compensation cost
recognized for the year ended May 31, 2007 includes: a) compensation cost for
all share-based payments granted prior to, but not yet vested as of May 31,
2006, based on the grant-date fair value estimated in accordance with the
original provisions of SFAS 123, and b) compensation cost for all share-based
payments granted subsequent to May 31, 2006, based on the grant-date fair value
estimated in accordance with the provisions of SFAS 123(R). In addition,
deferred stock compensation related to non-vested options is required to be
eliminated against additional paid-in capital upon adoption of SFAS 123(R). The
results for the prior periods were not restated.
The Company accounts for equity instruments issued in exchange for the receipt
of goods or services from other than employees in accordance with SFAS No.
123(R) and the conclusions reached by the Emerging Issues Task Force ("EITF") in
Issue No. 96-18. Costs are measured at the estimated fair market value of the
consideration received or the estimated fair value of the equity instruments
issued, whichever is more reliably measurable. The value of equity instruments
issued for consideration other than employee services is determined on the
earliest of a performance commitment or completion of performance by the
provider of goods or services as defined by EITF 96-18.
FAIR VALUE OF FINANCIAL INSTRUMENTS
In accordance with the requirements of SFAS No. 107, the Company has determined
the estimated fair value of financial instruments using available market
information and appropriate valuation methodologies. The fair value of financial
instruments classified as current assets or liabilities approximate their
carrying value due to the short-term maturity of the instruments.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In May 2008, the FASB issued SFAS No. 163, ACCOUNTING FOR FINANCIAL GUARANTEE
INSURANCE CONTRACTS ("SFAS 163"). SFAS 163 clarifies how SFAS 60, ACCOUNTING AND
REPORTING BY INSURANCE ENTERPRISES applies to financial guarantee insurance
contracts issued by insurance enterprises, including the recognition and
measurement of premium revenue and claim liabilities. It also requires expanded
disclosures about financial guarantee insurance contracts. SFAS 163 is effective
for the Company's interim period commencing June 1, 2009, except for disclosures
about an insurance enterprise's risk-management activities, which are effective
for the Company's interim period commencing June 1, 2008. Management does not
expect the adoption of SFAS 163 to have a material impact on the Company's
financial position, cash flows and results of operations.
In March 2008, the FASB issued SFAS No. 161, DISCLOSURES ABOUT DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES ("SFAS 161"). SFAS 161 is intended to improve
financial reporting about derivative instruments and hedging activities by
requiring enhanced disclosures to enable investors to better understand their
effects on an entity's financial position, financial performance, and cash
flows. SFAS 161 achieves these improvements by requiring disclosure of the fair
values of derivative instruments and their gains and losses in a tabular format.
It also provides more information about an entity's liquidity by requiring
disclosure of derivative features that are credit risk-related. Finally, it
requires cross-referencing within footnotes to enable financial statement users
to locate important information about derivative instruments. SFAS 161 will be
effective for
7
GENEVA RESOURCES, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2008 (UNAUDITED)
________________________________________________________________________________
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
________________________________________________________________________________
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (CONTINUED)
financial statements issued for fiscal years and interim periods beginning after
November 15, 2008, will be adopted by the Company beginning in the first quarter
of 2009. The Company has determined that the adoption of SFAS 161 during the
period did not have any material impact on the Company's results of operations
or financial position
In December 2007, the FASB issued SFAS No. 160, NONCONTROLLING INTEREST IN
CONSOLIDATED FINANCIAL STATEMENTS, AN AMENDMENT OF ARB NO. 51 ("SFAS No. 160"),
which will change the accounting and reporting for minority interests, which
will be recharacterized as noncontrolling interests and classified as a
component of equity within the consolidated balance sheets. SFAS No. 160 is
effective as of the beginning of an entity's first fiscal year beginning on or
after December 15, 2008. Earlier adoption is prohibited. Management has not
determined the effect that adopting this statement would have on the Company's
financial position or results of operations.
In December 2007, the FASB issued SFAS No. 141 (Revised 2007), BUSINESS
COMBINATIONS ("SFAS No. 141R"). SFAS No. 141R will change the accounting for
business combinations. Under SFAS No. 141R, an acquiring entity will be required
to recognize all the assets acquired and liabilities assumed in a transaction at
the acquisition-date fair value with limited exceptions. SFAS No. 141R will
change the accounting treatment and disclosure for certain specific items in a
business combination. SFAS No. 141R applies prospectively to business
combinations for which the acquisition date is on or after the beginning of the
entity's first annual reporting period beginning on or after December 15, 2008.
Accordingly, any business combinations completed by the Company prior to June 1,
2009 will be recorded and disclosed following existing GAAP. Management has not
determined the effect that adopting this statement would have on the Company's
financial position or results of operations.
In February 2007, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 159, THE FAIR VALUE OPTION FOR FINANCIAL
ASSETS AND FINANCIAL LIABILITIES - INCLUDING AN AMENDMENT OF FASB STATEMENT NO.
115 ("SFAS No. 159"). This statement permits entities to choose to measure many
financial instruments and certain other items at fair value. The objective is to
improve financial reporting by providing entities with the opportunity to
mitigate volatility in reported earnings cause by measuring related assets and
liabilities differently without having to apply complex hedge accounting
provisions. This Statement is expected to expand the use of fair value
measurement, which is consistent with the Board's long-term measurement
objectives for accounting for financial instruments. This statement is effective
as of the beginning of the Company's first fiscal year that begins after
November 15, 2007, although earlier adoption is permitted. The Company has
determined that the adoption of SFAS 159 during the period did not have any
material impact on the Company's results of operations or financial position.
In September 2006, FASB issued SFAS No. 157, FAIR VALUE MEASURE" ("SFAS No.
157"). This Statement defines fair value, establishes a framework for measuring
fair value in generally accepted accounting principles (GAAP), expands
disclosures about fair value measurements, and applies under other accounting
pronouncements that require or permit fair value measurements. SFAS No. 157 does
not require any new fair value measurements. However, the FASB anticipates that
for some entities, the application of SFAS No. 157 will change current practice.
SFAS No. 157 is effective for financial statements issued for fiscal years
beginning after November 15, 2007, which for the Company is the fiscal year
beginning June 1, 2008. The Company is currently evaluating the impact of
adopting SFAS No. 157 but does not expect that it will have a significant effect
on its financial position or results of operations.
NOTE 3 -MINERAL EXPLORATION PROPERTIES
________________________________________________________________________________
(A) VILCORO GOLD PROPERTY
On February 23, 2007, the Company entered into a Property Option Agreement with
St. Elias Mines Ltd., ("St. Elias") a publicly traded company on the TSX-V
exchange, to acquire not less than an undivided 66% legal, beneficial and
registerable interest in certain mining leases in Peru comprised of
approximately 600 hectares in Peru.
8
GENEVA RESOURCES, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2008 (UNAUDITED)
________________________________________________________________________________
On December 1, 2007, the Company entered into an extension agreement with St.
Elias (the "December Extension Agreement". The December Extension Agreement (i)
acknowledges that in accordance with the terms and provisions of the Property
Option Agreement, the Company must incur and pay exploration expenditures of not
less than $500,000 prior to January 17, 2008, and (ii) provides an extension
until March 31, 2008 to incur and pay such Exploration Expenditures. On June 4,
2008, an indefinite extension was granted by St. Elias to pay such Exploration
Expenditures, based on the Operator's work on schedule.
Under the terms of the Property Option Agreement, and in order to exercise its
Option to acquire the properties, the Company is required to make the following
non-refundable cash payments to St. Elias totaling $350,000 in the following
manner:
1. Payment of $50,000 in cash (paid).
2. The second payment of $100,000 cash and 50,000 shares of the Company's
common stock are due on or before the twelve-month anniversary of the
signing of the Property Option Agreement (paid).
3. The third payment of $200,000 cash is due on or before the
twenty-fourth-month anniversary of the signing of the Property Option
Agreement.
The Company is also required to incur costs totaling $2,500,000 as follows:
1. expenditures of $500,000 are to be incurred on or before the twelve
month anniversary (subsequently indefinitely extended as described
above) of the signing of the Property Option Agreement. ($561,000 was
incurred from the inception of the agreement till August 31, 2008)
2. expenditures of $750,000 are to be incurred on or before the twenty-
fourth- month anniversary of the signing of the Property Option
Agreement; and
3. expenditures of $1,250,000 are to be incurred on or before the thirty-
sixth- month anniversary of the signing of the Property Option
Agreement.
Also under the terms of the Property Option Agreement, St. Elias will be the
operator of the properties and will receive an 8% operator fee on all
exploration expenditures. Once the Company exercises the Option, the Company
agrees to pay 100% of all ongoing exploration, development and production costs
until commercial production and the Company has the right to receive 100% of any
cash flow from commercial production of the properties until it has recouped its
production costs, after which the cash flow will be allocated 66% to the Company
and 34% to St. Elias.
(B) SAN JUAN PROPERTY
On November 16, 2006, the Company entered into a Property Option Agreement with
Petaquilla Minerals Ltd ("Petaquilla"). Petaquilla therein granted the Company
the sole and exclusive option to acquire up to a 70% undivided interest in and
to five exploration concessions situated in the Republic of Panama owned and
controlled by Petaquilla's wholly-owned subsidiary.
During 2007, certain disputes arose between the Company and Petaquilla which
were resolved during 2008 by way of a settlement agreement (the "Settlement"),
mutual release and the ultimate termination of the original option agreement.
Pursuant to the terms of the Settlement: (i) Petaquilla shall issue 100,000
shares of its common stock to the Company, subject to pooling and release in
four equal monthly tranches commencing no later than December 31, 2008 and
certain other conditions, (ii) the 4,000,000 shares of the restricted common
stock previously issued by the Company to Petaquilla shall be returned to the
Company; and (iii) the $100,000 previously paid by the Company in order to
exercise the initial portion of the Option shall be returned to the Company.
As of May 31, 2008, the Company had received $100,000 and the return of the
4,000,000 restricted shares of the Company's common stock with an estimated fair
value of $5,440,000. In addition, the Company recorded the 100,000 common shares
of Petaquilla, with an estimated fair value of $270,000, as accounts receivable
as of May 31, 2008. The total proceeds of $5,810,000 was included in amounts
recorded as gain on settlements during 2008.
NOTE 4 - STOCKHOLDERS' EQUITY
________________________________________________________________________________
The Company's capitalization is 200,000,000 common shares with a par value of
$0.001 per share. On January 12, 2007, shareholders consented to increase the
authorized share capital of the Company from 50,000,000 shares of common stock
to 200,000,000 shares of common stock with the same par value of $0.001 per
share.
9
GENEVA RESOURCES, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2008 (UNAUDITED)
________________________________________________________________________________
On May 1, 2006, a majority of shareholders and the directors of the Company
approved a special resolution to undertake a forward stock split of the common
stock of the Company on a 42 new shares for 1 old share basis whereby 16,400,000
common shares were issued pro-rata to shareholders of the Company as of the
record date on May 1, 2006.
On September 27, 2006, four founding shareholders returned 30,000,000 of their
restricted founders' shares, previously issued at prices ranging from $0.0004 -
$0.00225 per share, to treasury and the shares were subsequently cancelled by
the Company. The shares were returned to treasury for no consideration to the
founding shareholders.
On October 13, 2006, a majority of the Board of Directors approved by way of a
stock dividend to undertake a forward stock split of the common stock of the
Company on a 4 new shares for 1 old share basis whereby 27,900,000 common shares
were issued pro-rata to shareholders of the Company as of October 13, 2006.
All references in these financial statements to number of common shares, price
per share and weighted average number of common shares outstanding prior to the
42:1 forward split and the 4:1 forward split have been adjusted to reflect these
stock splits on a retroactive basis, unless otherwise noted.
On December 1, 2006, the Company issued 4,000,000 common shares valued at
$7,400,000 in connection with the San Juan Property Option Agreement
In August 2007, the Company received $400,000 towards a planned private
placement of Units to be offered at $1.00 per unit with each unit consisting of
one common share and one warrant to acquire an additional common share,
exercisable at $1.50 for twelve months. On February 29, 2008, the Company
changed the terms of the planned private placement of Units now to be offered at
$1.00 per unit with each unit consisting of one common share only. The 400,000
shares were issued on September 9, 2008.
On October 15, 2007, the Company issued 10,000 common shares with a fair value
of $15,000 as a finder's fee payment in connection with the Vilcoro Gold
Property Option Agreement.
On January 31, 2008, the Company issued 50,000 common shares to St. Elias Mines
Ltd. with a fair value of $65,000 in connection with the Vilcoro Gold Property
Option Agreement (Refer Note 3).
On March 14, 2008, the Company returned to treasury the 4,000,000 common shares
with a fair value of $5,440,000 in connection with the settlement with
Petaquilla (Refer to Note 3).
On May 29, 2008, the Company issued 86,500 common shares at $1.25 per share
totaling $108,125, in settlement of $86,500 in debt owed by the Company to the
president of the Company (Refer Note 6), resulting in a $21,625 loss on the debt
settlement.
On May 29, 2008, the Company issued 790,362 common shares at $1.25 per share
totaling $987,953, in settlement of $790,362 in debt owed by the Company to a
supplier of the Company, resulting in a $197,591 loss on the debt settlement.
NOTE 5 - STOCK OPTION PLAN
________________________________________________________________________________
On May 9, 2007, the Board of Directors of the Company ratified, approved and
adopted a Stock Option Plan for the Company in the amount of 5,000,000 shares
with an exercisable period up to 10 years. In the event an optionee ceases to be
employed by or to provide services to the Company for reasons other than cause,
any Stock Option that is vested and held by such optionee maybe exercisable
within up to ninety calendar days after the effective date that his position
ceases. No Stock Option granted under the Stock Option Plan is transferable. Any
Stock Option held by an optionee at the time of his death may be exercised by
his estate within one year of his death or such longer period as the Board of
Directors may determine. On May 9, 2007, the Board of Directors of the Company
ratified and approved under the Company's existing Stock Option Plan the
issuance of 1,500,000 shares for ten years at $1.00 per share.
On May 9, 2007, the Company granted 1,500,000 stock options to officers,
directors and consultants of the Company at $1.00 per share. The term of these
options are ten years. The total fair value of these options at the date of
grant was $965,671, and was estimated using the Black-Scholes option pricing
model with an expected life of 10 years, a risk free interest rate of 4.49%, a
dividend yield of 0% and expected volatility of 164% and has been recorded as a
stock based compensation expense in the year ended May 31, 2007.
10
GENEVA RESOURCES, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2008 (UNAUDITED)
________________________________________________________________________________
On April 28, 2008, the Company granted 350,000 stock options to a director of
the Company at $1.20 per share. The term of these options are ten years. The
total fair value of these options at the date of grant was $388,500 and was
estimated using the Black-Scholes option pricing model with an expected life of
10 years, a risk free interest rate of 3.86%, a dividend yield of 0% and
expected volatility of 126% and has been recorded as a stock based compensation
expense in the year ended May 31, 2008.
A summary of the Company's stock options as of August 31, 2008, and changes
during the period then ended is presented below:
Number of Options Weighted average exercise Weighted average remaining
Price per share Contractual life (in years)
______________________________________________________________________________________________________________________________
OUTSTANDING AT MAY 31, 2007 1,500,000 1.00 9.94
Granted during the period 350,000 1.20 -
Exercised during the year - - -
______________________________________________________________________________________________________________________________
OUTSTANDING AT MAY 31, 2008 1,850,000 1.04 9.12
Granted during the period - - -
Exercised during the period - - -
______________________________________________________________________________________________________________________________
OUTSTANDING AT AUGUST 31, 2008 1,850,000 $1.04 8.87
==============================================================================================================================
NOTE 6 - RELATED PARTY TRANSACTIONS
________________________________________________________________________________
MANAGEMENT FEES
During the period ended August 31, 2008, the Company incurred no management fees
to officers and directors (August 31, 2007 - $60,000).
The above transactions have been in the normal course of operations and, in
management's opinion, undertaken with similar terms and conditions as
transactions with unrelated parties.
NOTE 7 - SHAREHOLDER'S LOAN
________________________________________________________________________________
On November 14, 2006, a significant shareholder of the Company advanced $100,000
on behalf of the Company regarding a previous property option agreement.
Additional advances of $303,500 and $795,000 were received during the years
ended May 31, 2007 and May 31, 2008, respectively. During the period ended
August 31, 2008, an additional $300,000 was advanced by the same shareholder
under the same terms and conditions. These amounts are unsecured, bear interest
at 10% per annum, and have no set terms of repayment. The total amount
outstanding as of August 31, 2008 including accrued interest is $1,622,285 (May
31, 2008 - $1,287,602).
NOTE 8 - CONTINGENCY
________________________________________________________________________________
During July 2007, the Company terminated the President's employment for cause.
The President has since made certain false allegations against the Company, as
specifically described in the body of the Company's February 29, 2008 filing on
Form 10-QSB. Although the Company refutes these allegations and believes
termination was justified, it is possible that the Company may be exposed to a
loss contingency. However, the amount of such loss, if any, cannot be reasonably
estimated at this time and accordingly, no amount has been recorded to date.
NOTE 9 - INCOME TAXES
________________________________________________________________________________
The Company has adopted the FASB No. 109 for reporting purposes. As of August
31, 2008, the Company had net operating loss carry forwards of approximately
$5,077,000 that may be available to reduce future years' taxable income through
2028. Future tax benefits which may arise as a result of these losses have not
been recognized in these financial statements, as their realization is
determined not likely to occur and accordingly, the Company has recorded a
valuation allowance for the deferred tax asset relating to these tax loss
carryforwards.
11
GENEVA RESOURCES, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2008 (UNAUDITED)
________________________________________________________________________________
NOTE 10 - SUBSEQUENT EVENTS
________________________________________________________________________________
During the year ended May 31, 2008, the Company received an aggregate of
$400,000 towards a private placement offering of 400,000 Units at $1.00 per Unit
with each Unit consisting of one common share of the Company's common stock.
Subsequent to the period on September 9, 2008, 400,000 shares of our restricted
common stock were issued in connection with this private placement.
12
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.
AVAILABLE INFORMATION
Geneva Resources, Inc. files annual, quarterly, current reports, proxy
statements, and other information with the Securities and Exchange Commission
(the "Commission"). You may read and copy documents referred to in this
Quarterly Report on Form 10-Q that have been filed with the Commission at the
Commission's Public Reference Room, 450 Fifth Street, N.W., Washington, D.C. You
may obtain information on the operation of the Public Reference Room by calling
the Commission at 1-800-SEC-0330. You can also obtain copies of our Commission
filings by going to the Commission's website at http://www.sec.gov.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
GENERAL
Geneva Resources, Inc. was incorporated under the laws of the State of Nevada on
April 5, 2004 under the name "Revelstoke Industries, Inc." for the purpose of
reclaiming and stabilizing land in preparation for construction in Canada.
Effective November 27, 2006, we changed our name to "Geneva Gold Corp.".
Subsequently, effective March 1, 2007, we changed our name to "Geneva Resources,
Inc.".
CURRENT BUSINESS OPERATIONS
We are currently engaged in the business of exploration of precious metals with
a focus on the exploration and development of gold deposits in North America and
internationally. As of the date of this Quarterly Report, our mineral interests
consist mainly of option agreements on exploration stage properties as discussed
below. We have not established any proven or probable reserves on our mineral
property interests.
13
MINERAL PROPERTIES
VILCORO GOLD PROPERTY
On January 22, 2007, we entered into a letter of intent with St. Elias Mines
Ltd. ("St Elias"), pursuant to which St. Elias proposed to grant to us an option
to acquire not less than an undivided 66% legal, beneficial and registerable
interest in certain mining leases in Peru including St. Elias' option to earn a
95% interest in the Vilcoro Gold Property project comprised of approximately 600
hectares in Peru (collectively, the "Vilcoro Properties").
On February 23, 2007, we entered into a formal property option agreement (the
"Vilcoro Option Agreement") with St. Elias pursuant to which St. Elias granted
to us an option to acquire not less than the undivided 66% legal, beneficial and
registerable interest in the Vilcoro Properties (the "Vilcoro Option").
On December 1, 2007, we entered into an extension agreement with St. Elias (the
"December 2007 Extension Agreement"). The December 2007 Extension Agreement
acknowledged that in accordance with the terms and provisions of the Vilcoro
Option Agreement, we must incur and pay exploration expenditures of not less
than $500,000 prior to January 17, 2008 (the "Exploration Expenditures"), and
provided us an extension until March 31, 2008 to incur and pay such Exploration
Expenditures.
On March 28, 2008, we entered into a second extension agreement with St. Elias
(the "March 2008 Extension Agreement"), which provided us with an extension
until June 30, 2008 to incur and pay such Exploration Expenditures.
On June 4, 2008, we entered into a third extension with St. Elias (the "June
2008 Extension Agreement"), which provides us with an indefinite extension to
pay such Exploration Expenditures based on the Operator's work schedule.
Under the terms of the Vilcoro Option Agreement and in order to exercise the
Vilcoro Option, we are required to make the following non-refundable cash
payments to St. Elias aggregating $350,000 as follows: (i) $50,000 within five
business days from the execution of the Vilcoro Option Agreement, which as of
the date of this Quarterly Report, has been paid; (ii) $100,000 due on or before
the 12-month anniversary of execution of the Vilcoro Option Agreement (which has
been paid); and (iii) $200,000 due on or before the 24-month anniversary of
execution of the Vilcoro Option Agreement. See "Material Commitments."
In accordance with the terms and provisions of the Vilcoro Option Agreement, we
are further required to: (i) issue to St. Elias 50,000 shares of our restricted
common stock on or before the 12-month anniversary of execution of the Vilcoro
Option Agreement (which as of the date of this Quarterly Report have been
issued); and (ii) incur costs totaling $2,5000,000 as follows: (a) expenditures
of $500,000 are to be incurred on or before the 12-month anniversary of
execution of the Vilcoro Option Agreement of which $561,000 has been advanced
from inception of the agreement till the date of this Quarterly Report (which
date has been subsequently extended indefinitely based on the June 2008
Extension Agreement); (b) second expenditure of $750,000 is to be incurred on or
14
before the 24-month anniversary of execution of the Vilcoro Option Agreement;
and (iii) third expenditure of $1,250,000 is to be incurred on or before the
36-month anniversary of execution of the Vilcoro Option Agreement.
Under further terms of the Vilcoro Option Agreement: (i) St. Elias will be the
operator (the "Operator") of the Vilcoro Properties and will receive an 8%
operator fee on all exploration expenditures; (ii) once we exercise the Vilcoro
Option, we agree to pay 100% of all on-going exploration, development and
production costs until commercial production (the "Production Costs"); and (iii)
we have the right to receive 100% of any cash flow from commercial production of
the Vilcoro Properties until we have recouped the Production Costs after which
the cash flow will be allocated 66% to us and 34% to St. Elias.
PHASE I EXPLORATION PROGRAM. As of the date of this Quarterly Report, we are
engaged in our Phase I exploration program. The Vilcoro Property comprises
approximately 1,600 hectares and lies along the game geological belt of Tertiary
rocks that host deposits in northern Peru, such as Newmont's Yanacocha Mine and
Barrick's Pierina deposit. Management believes that the Vilcoro Property is
favorably located adjacent to the claim block that covers the Lagunas Norte mine
recently put into production by Barrick Gold in the Alto Chicama mining district
of central Peru.
A total of 256 channel samples and 28 check samples have been collected from
outcrops, trenches and underground workings, which sample preparation and
analytical work was undertaken at ALS Chemex SA Laboratory (an ISO-certified
facility) in Lima Peru, using standard industry practice fire assay with an
atomic absorption finish. Most of the channel samples were three to five meters
long. This work has defined two mineralized trends referred to as the Main Trend
and the South Trend. Six individual mineralized zones (Zones 1 through 6) have
been identified within the Main Trend and three individual mineralized zones
(Zones A through C) have been identified within the South Trend. The South Trend
lies approximately 200 meters to the south of the Main Trend and comprises an
east-west alignment (parallel to the Main Trend) of mineralized hydrobreccia
occurrences in three zones. On approximately April 9, 2008, we received a
technical report (the "Technical Report") in accordance with the provisions of
National Instrument 43-101 of the Canadian Securities Administrators on the
Vilcoro Properties. The Technical Report is authored by John A. Brophy, P.Geo.,
who has thirty-two years of continuous geological experience on exploring for a
variety of commodities including gold, copper, zinc, lead, uranium and silver.
Management is pleased with the evidence of disseminated mineralization on the
Vilcoro Properties with average ore grades of 0.8 g/t, and is continuing
fieldwork at Vilcoro Properties with emphasis on additional trenching between
the individual zones on the Main Trend. The Technical Report is available on our
website at WWW.GENEVARESOURCESINC.COM.
SAN JUAN PROPERTY
On approximately November 16, 2006, we entered into a property option agreement
(the "Petaquilla Option Agreement") with Petaquilla Minerals Ltd.
("Petaquilla"). In accordance with the terms and provisions of the Petaquilla
Option Agreement, Petaquilla granted to us the sole and exclusive option (the
"Option") to acquire up to a 70% undivided interest in and to five exploration
15
concessions situated in the Republic of Panama (the "San Juan Property"), which
are owned and controlled by Petaquilla's wholly-owned Panamanian subsidiary.
During 2007, certain disputes arose between the Company and Petaquilla which
were resolved during 2008 by way of a settlement agreement (the "Settlement"),
mutual release and the ultimate termination of the original option agreement.
Pursuant to the terms of the Settlement: (i) Petaquilla shall issue 100,000
shares of its common stock to the Company, subject to pooling and release in
four equal monthly tranches commencing no later than December 31, 2008 and
certain other conditions, (ii) the 4,000,000 shares of the restricted common
stock previously issued by the Company to Petaquilla shall be returned to the
Company; and (iii) the $100,000 previously paid by the Company in order to
exercise the initial portion of the Option shall be returned to the Company.
As of May 31, 2008, the Company had received $100,000 and the return of the
4,000,000 restricted shares of the Company's common stock with an estimated fair
value of $5,440,000. In addition, the Company recorded the 100,000 common shares
of Petaquilla, with an estimated fair value of $270,000, as accounts receivable
as of May 31, 2008. The total proceeds of $5,810,000 was included in amounts
recorded as gain on settlements during 2008.
RESULTS OF OPERATION
THREE MONTH PERIOD ENDED AUGUST 31, 2008 COMPARED TO THREE MONTH PERIOD ENDED
AUGUST 31, 2007.
The summarized consolidated financial data set forth in the tables below and
discussed in this section should be read in conjunction with our consolidated
financial statements and related notes for the three month period ended August
31, 2008 and August 31, 2007, which financial statements are included elsewhere
in this Quarterly Report.
16
___________________________________________________________________________________________________________________________
THREE MONTH PERIOD ENDED THREE MONTH PERIOD ENDED APRIL 5, 2004 (INCEPTION)
AUGUST 31, 2008 AUGUST 31, 2007 TO AUGUST 31, 2008
(UNAUDITED) (UNAUDITED) (UNAUDITED)
___________________________________________________________________________________________________________________________
REVENUE -0- -0- $ 46,974
___________________________________________________________________________________________________________________________
DIRECT COSTS -0- -0- 56,481
___________________________________________________________________________________________________________________________
GROSS MARGIN (LOSS) -0- -0- (9,507)
___________________________________________________________________________________________________________________________
GENERAL AND ADMINISTRATIVE EXPENSES
___________________________________________________________________________________________________________________________
Office and general 7,130 18,026 134,055
___________________________________________________________________________________________________________________________
Consulting fees 83,688 15,000 601,715
___________________________________________________________________________________________________________________________
Marketing expenses -0- -0- 894,738
___________________________________________________________________________________________________________________________
Management fees -0- 60,000 1,241,406
___________________________________________________________________________________________________________________________
Mineral property expenditures 100,000 180,834 8,268,312
___________________________________________________________________________________________________________________________
Professional fees 67,871 55,105 748,594
___________________________________________________________________________________________________________________________
NET OPERATING LOSS ($258,689) ($328,965) (11,888,820)
___________________________________________________________________________________________________________________________
OTHER INCOME(EXPENSE)
___________________________________________________________________________________________________________________________
INTEREST EXPENSE (34,683) (12,148) (123,785)
___________________________________________________________________________________________________________________________
Net gain on settlements -0- -0- 5,590,784
___________________________________________________________________________________________________________________________
TOTAL OTHER INCOME(EXPENSE) (34,683) (12,148) 5,466,999
___________________________________________________________________________________________________________________________
NET INCOME (LOSS) ($293,372) ($341,113) ($6,431,328)
___________________________________________________________________________________________________________________________
Our net loss during the three month period ended August 31, 2008 was
approximately ($293,370) compared to a net loss of ($341,110) for the three
month period ended August 31, 2007 (a decrease of $47,740).
During the three month periods ended August 31, 2008 and August 31, 2007,
respectively, we did not generate any revenue. During the three month period
ended August 31, 2008, we incurred general and administrative expenses in the
aggregate amount of $293,372 compared to $341,113 incurred during the three
month period ended August 31, 2007 (a decrease of $47,741). The operating
expenses incurred during the three month period ended August 31, 2008 consisted
of: (i) office and general of $7,130 (2007: $18,026); (ii) consulting fees of
$83,688 (2007: $15,000); (iii) management fees of $-0- (2007: $60,000); (iv)
mineral property expenditures of $100,000 (2007: $180,834); and (v) professional
fees of $67,871 (2007: $55,105); and interest expenses of $34,683 (2007:
$12,148. The decrease in expenses incurred during the three month period ended
August 31, 2008 compared to the three month period ended August 31, 2007
resulted primarily from a decrease in management fees and a decrease in mineral
property expenditures based upon the current status of the scale and scope of
exploratory and acquisition programs.
The decrease in net loss during the three month period ended August 31, 2008
compared to the three month period ended August 31, 2007 is attributable
primarily to the decrease in management fees and mineral property expenditures.
Management fees and mineral property expenditures incurred during the three
month period ended August 31, 2008 decreased due to the decrease in acquisition
and development of our mineral properties and related contracted services.
General and administrative expenses generally include corporate overhead,
financial and administrative contracted services, marketing and consulting
costs.
17
Our net loss during the three month period ended August 31, 2008 was ($293,372)
or ($0.01) per share compared to a net loss of ($341,113) or ($0.01) per share
for the three month period ended August 31, 2007. The weighted average number of
shares outstanding was 38,136,862 at August 31, 2008 compared to 41,200,000 at
August 31, 2007.
LIQUIDITY AND CAPITAL RESOURCES
THREE MONTH PERIOD ENDED AUGUST 31, 2008
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.
As at period ended August 31, 2008, our current assets were $272,034 and our
current liabilities were $1,803,956, resulting in a working capital deficit of
$1,531,922. As at period ended August 31, 2008, our total assets were $437,044
compared to total assets of $444,366 as at fiscal year ended May 31, 2008. Total
assets as at period ended August 31, 2008 consisted of: (i) $1,604 in cash; (ii)
$270,430 in other receivable; and (iii) $165,010 in deposit on property. As at
period ended August 31, 2008, our current liabilities were $1,803,956 compared
to current liabilities of $1,517,906 as at May 31, 2008. Our current liabilities
consisted of: (i) $151,671 in accounts payable and accrued liabilities; (ii)
$1,622,285 in shareholder's loan and accrued interest; and (iii) $30,000 due to
related parties. The increase in current liabilities was primarily due to the
increase in shareholder's loan and accounts payable and accrued liabilities
relating to the scale and scope of business activity.
Stockholders' deficit increased from ($1,073,540) as at May 31, 2008 to
($1,366,912) as at August 31, 2008.
We have not generated positive cash flows from operating activities. For the
three month period ended August 31, 2008, net cash flow used in operating
activities was ($307,752) compared to net cash flow used in operating activities
of ($426,213) for the three month period ended August 31, 2007. Net cash flow
used in operating activities during the three month period ended August 31, 2008
consisted primarily of a net loss of ($293,372) changed by ($430) in other
receivable, ($48,633) in accounts payable and accrued liabilities and $34,683 in
accrued interest on shareholder's loan.
During the three month period ended August 31, 2008, net cash flow provided by
financing activities was $300,000 compared to net cash flow from financing
activities of $525,000 for the three month period ended August 31, 2007. Net
cash flow provided from financing activities during the three month period ended
August 31, 2008 pertained primarily to $300,000 received as proceeds from
shareholder loans.
18
PLAN OF OPERATION
Existing working capital, further advances and possible debt instruments,
anticipated warrant exercises, further private placements, 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 securities. In connection with our business
plan, management anticipates that administrative expenses will decrease as a
percentage of revenue as our revenue increases over the next twelve months.
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.
During fiscal year ended May 31, 2008, we received $400,000 towards a planned
private placement of units to be offered at $1.00 per unit. Each unit was to
consist of one share of our restricted common stock and one warrant to acquire
an additional share of common stock at an exercise price of $1.50 for twelve
months (the "Units(s)"). During February 2008, we revised the terms of the
private placement of Units, which are now to be offered at $1.00 per unit
consisting of one share of restricted common stock. The private placement
offering is under Regulation S of the Securities Act.
As of the date of this Quarterly Report, we have issued 400,000 shares of our
restricted common stock in connection with this private placement offering.
The report of the independent registered public accounting firm that accompanies
our fiscal year end May 31, 2008 and May 31, 2007 audited 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.
MATERIAL COMMITMENTS
As of the date of this Quarterly Report and other than as disclosed below, we do
not have any material commitments for fiscal year
2008/2009.
VILCORO OPTION AGREEMENT
Under the terms of the Vilcoro Option Agreement and in order to exercise the
Vilcoro Option, we are required to make the following non-refundable cash
payments to St. Elias aggregating $350,000 as follows: (i) $50,000 within five
business days from the execution of the Vilcoro Option Agreement which, as of
the date of this Quarterly Report, has been paid; (ii) $100,000 cash and 50,000
19
shares of the Company's common stock are due on or before the 12-month
anniversary of execution of the Vilcoro Option Agreement; and (iii) $200,000 due
on or before the 24-month anniversary of execution of the Vilcoro Option
Agreement. In accordance with further terms and provisions of the Vilcoro Option
Agreement, we are further required to incur costs totaling $2,500,000 as
follows: (a) expenditure of $500,000 to be incurred on or before the 12-month
anniversary of execution of the Vilcoro Option Agreement, (b) second expenditure
of $750,000 to be incurred on or before the 24-month anniversary of execution of
the Vilcoro Option Agreement; and (iii) third expenditure of $1,250,000 to be
incurred on or before the 36-month anniversary of execution of the Vilcoro
Option Agreement.
On December 1, 2007, we entered into the December 2007 Extension Agreement. The
December 2007 Extension Agreement acknowledges that in accordance with the terms
and provisions of the Vilcoro Option Agreement, we must incur and pay
exploration expenditures of not less than $500,000 prior to January 17, 2008
(the "Exploration Expenditures"), and provides us an extension until March 31,
2008 to incur and pay such Exploration Expenditures. As of the date of this
Quarterly Report since inception of this agreement, we have incurred $561,000.
On March 28, 2008, we entered into the March 2008 Extension Agreement. The March
2008 Extension Agreement acknowledges that in accordance with the terms and
provisions of the December 2007 Extension Agreement, we must incur and pay the
Exploration Expenditures prior to March 31, 2008, and provides us an extension
until June 30, 2008 to incur and pay such Exploration Expenditures.
On June 4, 2008, we entered into the June 2008 Extension Agreement, which
provides us with an indefinite extension to pay such Exploration Expenditures
based on the Operator's work schedule.
SHAREHOLDER LOAN
On November 14, 2006, one of our shareholders advanced to Petaquilla an
aggregate of $100,000 on our behalf. Additional advances of $303,500 and
$795,000 were received during fiscal years ended May 31, 2007 and May 31, 2008,
respectively. During the three month period ended August 31, 2008, an additional
$300,000 was advanced by the same shareholder under the same terms and
conditions. These amounts are unsecured, accrue interest at 10% per annum and
have no established terms of repayment. As at August 31, 2008, we owe an
aggregate of $1,622,285 in principal and accrued interest.
BADNER GROUP LLC
Effective April 4, 2008, we entered into a twelve-month engagement letter of
agreement (the "Agreement") with Badner Group LLC ("Badner"). In accordance with
the terms and provisions of the Agreement: (i) Badner shall provide to us
general consulting and public relations services and, more specifically,
relating to business development and affairs in Peru relative to our interest in
developing and expanding our business in Peru and acquiring mining properties;
and (ii) we pay to Badner a monthly fee of $15,000.
20
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.
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"). Since we have acquired properties outside of the United States,
the fluctuation of exchange rates may have positive or negative impacts on our
results of operations. However, any potential revenue and expenses will be
denominated in U.S. Dollars, and the net income effect of appreciation and
devaluation of the currency against the U.S. 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
An evaluation was conducted under the supervision and with the participation of
our management, including Marcus Johnson, our President/Chief Executive Officer
("CEO") and D. Bruce Horton, our Chief Financial Officer ("CFO"), of the
effectiveness of the design and operation of our disclosure controls and
procedures as of August 31, 2008. Based on that evaluation, Messrs. Johnson and
Horton concluded that our disclosure controls and procedures were effective as
of such date to ensure that information required to be disclosed in the reports
that we file or submit under the Exchange Act, is recorded, processed,
summarized and reported within the time periods specified in SEC rules and
forms. Such officers also confirmed that there was no change in our internal
control over financial reporting during the six-month period ended August 31,
2008 that has materially affected, or is reasonably likely to materially affect,
our internal control over financial reporting.
21
We maintain "disclosure controls and procedures," as such term is defined in
Rule 13a-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act"),
that are designed to ensure that information required to be disclosed in our
Exchange Act reports is recorded, processed, summarized and reported within the
time periods specified in the Securities and Exchange Commission rules and
forms, and that such information is accumulated and communicated to our
management, including our Chief Executive Officer and Chief Financial Officer,
as appropriate, to allow timely decisions regarding required disclosure. We
conducted an evaluation (the "Evaluation"), under the supervision and with the
participation of our Chief Executive Officer and Chief Financial Officer of the
effectiveness of the design and operation of our disclosure controls and
procedures ("Disclosure Controls") as of the end of the period covered by this
report pursuant to Rule 13a-15 of the Exchange Act. The evaluation of our
disclosure controls and procedures included a review of the disclosure controls'
and procedures' objectives, design, implementation and the effect of the
controls and procedures on the information generated for use in this report. In
the course of our evaluation, we sought to identify data errors, control
problems or acts of fraud and to confirm the appropriate corrective actions, if
any, including process improvements, were being undertaken. Our Chief Executive
Officer and our Chief Financial Officer concluded that, as of the end of the
period covered by this report, our disclosure controls and procedures were
effective and were operating at the reasonable assurance level.
There was no change in our internal control over financial reporting that
occurred during the six months ended August 31, 2008 that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
AUDIT COMMITTEE
The Board of Directors has established an audit committee. The members of the
audit committee are Mr. Marcus Johnson and Mr. Steven Jewett. One of the two
members of the audit committee are "independent" within the meaning of Rule
10A-3 under the Exchange Act. The audit committee was organized on April 25,
2006 and operates under a written charter adopted by our Board of Directors.
The audit committee has reviewed and discussed with management our unaudited
financial statements as of and for the three month period ended August 31, 2008.
Based on the reviews and discussions referred to above, the audit committee has
recommended to the Board of Directors that the unaudited financial statements
referred to above be included in our Quarterly Report on Form 10-Q for the three
month period ended August 31, 2008 filed with the Securities and Exchange
Commission.
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.
However, during July 2007, we terminated the employment of Stacey Kivel, our
then President, for cause. Subsequently, Ms. Kivel has made certain false
allegations against us. Although we refute her allegations and believe
22
termination was justified, it is possible that we may be exposed to a loss
contingency, which cannot be reasonably estimated at this time. 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 1A. RISK FACTORS
No report required.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES
No report required.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
No report required.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE TO SECURITY HOLDERS
No report required.
ITEM 5. OTHER INFORMATION
No report required.
ITEM 6. EXHIBITS
The following exhibits are filed with this Quarterly Report on Form 10-Q:
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
31.1 Certification of the registrant's Principal Executive Officer
under the Exchange Act Rules 13a-14(a) or 15d-14(a) as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act 2002.
31.2 Certification of the registrant's Principal Financial Officer
under the Exchange Act Rules 13a-14(a) or 15d-14(a) as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act 2002.
32.1 Certification of the registrant's Principal Executive Officer
and Principal Financial Officer under 18 U.S.C. Section 1350 as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act 2002.
23
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.
GENEVA RESOURCES, INC.
Dated: October 10, 2008 By: /s/ MARCUS JOHNSON
_____________________________
Marcus Johnson, President/
Chief Executive Officer
Dated: October 10, 2008 By: /s/ D. BRUCE HORTON
_____________________________
D. Bruce Horton, Chief
Financial Officer
24