UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-QSB
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934.
For the three months ended March 31, 2007
[ ] Transition report pursuant to Section 13 or 15(d) of the Exchange
Act for the transition period from ____________to____________
Commission File Number: 0-32477
EAST DELTA RESOURCES CORP.
(Exact name of registrant as specified in charter)
DELAWARE 98-0212726
-------- -----------
(State of or other jurisdiction of (IRS Employer I.D. No.)
incorporation or organization)
447 St. Francois Xavier St.
Montreal, Quebec, Canada H2Y 2T1
(Address of Principal Executive Offices)
(514) 845-6448
(Registrant's Telephone Number, Including Area Code)
Check whether the registrant: (1) has filed all reports required to be filed by
Section by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 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 shell company (as defined in
Rule 12b-2 of the Exchange Act): YES [X] NO[ ]
Number of shares outstanding of the issuer's classes of stock as of April 30,
2007: 48,873,842 Shares
Transitional Small Business Disclosure Format: YES [ ] NO [X]
EAST DELTA RESOURCES CORP.
(A Development Stage Enterprise)
INDEX TO FORM 10-QSB
Page
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PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements 3
Consolidated Balance Sheets s of March 31, 2007 and
December 31, 2006 3
Consolidated Statements of Operations for the three months
ended March 31, 2007 and 2006 4
Consolidated Statements of Cash Flows for the three months
ended March 31, 2007 and 2006 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis 7
Item 3. Controls and Procedures 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Securities Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
2
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
EAST DELTA RESOURCES CORP.
(A development stage company)
CONSOLIDATED BALANCE SHEETS
(unaudited)
ASSETS
March 31, 2007 December 31, 2006
-------------- -----------------
Current assets:
Cash $ 334,918 $ 391,597
Prepaid expense and other current assets 43,091 3,755
Related party receivables 10,177 160,103
------------ ------------
Total current assets 388,186 555,455
------------ ------------
Other assets:
Property, plant and equipment, net of accumulated
depreciation of $2,130 and $0, respectively 50,984 42,591
Deferred financing costs, net of accumulated
amortization of $30,356 and $20,657, respectively 46,270 56,003
------------ ------------
Total assets $ 485,440 $ 654,049
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued liabilities $ 444,374 $ 414,173
Accounts payable - related parties 62,407 68,401
------------ ------------
Total current liabilities 506,781 482,574
------------ ------------
Long term liabilities:
Notes payable 1,306,840 1,293,600
------------ ------------
Total liabilities 1,813,621 1,776,174
------------ ------------
Minority interest in subsidiary 66,233 104,832
------------ ------------
Stockholders' deficit:
Common stock, $0.0001 par value, 100,000,000
shares authorized, 47,173,842 and 47,004,842 shares
issued and outstanding , respectively 4,718 4,701
Additional paid-in-capital 24,439,175 24,198,063
Deficit accumulated during the development stage (25,838,307) (25,429,721)
------------ ------------
Total stockholders' deficit (1,394,414) (1,226,957)
------------ ------------
Total liabilities and stockholders' deficit $ 485,440 $ 654,049
============ ============
3
EAST DELTA RESOURCES CORP.
(A development stage company)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months ended March 31, 2007 and 2006 and
Period from March 4, 1999 (Inception of Development Stage) through March 31, 2007
(unaudited)
For the period
March 4, 1999
Three months Three months (inception of
ended ended development stage)
March 31, March 31, through March 31,
2007 2006 2007
---- ---- ----
Revenue:
Consulting $ -- $ -- $ 86,544
---------- ---------- ------------
Total revenues -- -- 86,544
---------- ---------- ------------
Operating expenses:
Officer and director compensation -- -- 393,255
Consulting and professional 248,865 264,250 9,387,663
General and administrative 156,956 246,442 8,313,683
---------- ---------- ------------
Total operating expenses 405,821 510,692 18,094,601
---------- ---------- ------------
Operating loss (405,821) (510,692) (18,008,057)
---------- ---------- ------------
Loss on derivative liabilities -- -- (7,723,498)
Other income (expense) (29,052) 5,411 (34,424)
Loss on currency transactions (12,312) -- (112,347)
---------- ---------- ------------
Loss before minority interest (447,185) (505,281) (25,878,326)
---------- ---------- ------------
Minority interest 38,599 -- 40,019
---------- ---------- ------
Net loss $ (408,586) $ (505,281) $(25,838,307)
========== ========== ============
Net loss per share - basic and diluted $ (0.01) $ (0.01)
Weighted average shares outstanding
- basic and diluted 47,051,786 45,216,358
4
EAST DELTA RESOURCES CORP.
(A development stage company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended March 31 2007 and 2006; and
Period from March 4, 1999 (Inception of Development Stage) through March 31, 2007
(unaudited)
For the period
March 4, 1999
Three months Three months (inception of
ended ended development stage)
March 31, March 31, through March 31,
2007 2006 2007
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (408,586) $ (505,281) $(25,838,307)
Adjustments to reconcile net loss to cash used
in operating activities:
Depreciation and amortization expense 11,863 -- 32,520
Loss on derivative liabilities -- -- 7,723,498
Loss on currency transaction 12,312 -- 112,347
Stock issued for services 42,250 264,250 10,687,337
Warrant / option expense 198,879 -- 3,041,349
Minority interest (38,599) -- (40,019)
Changes in assets and liabilities:
Receivables and prepaid expenses (38,482) (19,012) (21,785)
Accounts payable and accrued liabilities 24,207 (47,851) 468,451
------------ ------------ ------------
CASH USED IN OPERATING ACTIVITIES (196,156) (307,894) (3,834,609)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash received from purchase of Omega
with common stock -- -- 157,687
Loan to Sino Silver -- -- (150,545)
Repayment from Sino Silver 150,000 -- 150,000
Note receivable from third party -- -- (30,010)
Purchase of fixed assets (10,523) -- (53,114)
------------ ------------ ------------
CASH PROVIDED BY INVESTING ACTIVITIES 139,477 -- 74,018
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of deferred financing costs -- -- (38,330)
Payments to related party -- -- (53,000)
Advances from related party -- 25,000 53,000
Proceeds from related party loan -- -- 422,474
Repayments of related party loan -- (150,000) (422,474)
Proceeds from convertible notes -- 149,216 1,193,565
Sale of minority interest in subsidiary -- 5,000 305,500
Shares issued for cash, net of offering costs -- 10 2,634,774
------------ ------------ ------------
CASH PROVIDED BY FINANCING ACTIVITIES -- 29,226 4,095,509
------------ ------------ ------------
NET CHANGE IN CASH (56,679) (278,668) 334,918
Cash, beginning of period 391,597 735,974 --
------------ ------------ ------------
Cash, end of period $ 334,918 $ 457,306 $ 334,918
============ ============ ============
Cash paid for:
Interest $ -- $ -- $ --
Income taxes -- -- --
Non-cash investing and financing activities:
Stock payable for deferred financing coasts $ -- $ -- $ 38,330
5
EAST DELTA RESOURCES CORP.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited interim financial statements of East Delta Resources
Corp. 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 the audited
consolidated financial statements and notes thereto contained in East Delta's
latest Annual Report 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 results 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 consolidated financial
statements which would substantially duplicate the disclosure contained in the
audited financial statements for the most recent fiscal year as reported in Form
10-KSB have been omitted.
NOTE 2 - GOING CONCERN
East Delta is in the development stage and will require a significant amount of
capital to proceed with its business plan. East Delta's ability to continue as a
going concern is ultimately contingent upon its ability to attain profitable
operations through the successful development of its business model and/or the
integration of an operating business. As shown in the accompanying consolidated
financial statements, East Delta incurred losses of $408,586 for the three
months ended March 31, 2007 and has an accumulated deficit and working capital
deficit of $25,838,307 and $118,595, respectively, as of March 31, 2007. These
conditions raise substantial doubt as to East Delta's ability to continue as a
going concern. Management's plans include obtaining additional capital through
debt or equity financing. The consolidated financial statements do not include
any adjustments that might be necessary if East Delta is unable to continue as a
going concern.
NOTE 3 - RELATED PARTY TRANSACTIONS
On December 28, 2005, Sino Canadian loaned Sino Silver Corp., a company operated
by a related party, $150,000 in a term loan with an interest rate of 2% on the
outstanding balance per month, or fraction thereof. Sino Silver's exploration
properties in China were pledged as collateral to the loan. The principal amount
was paid in full during the three months ended March 31, 2007.
NOTE 5 - COMMON STOCK
During the three months ended March 31, 2007, East Delta issued 169,000 shares
of common stock to several individuals for services. In connection with this
transaction, East Delta recorded an expense equal to the fair value of the
shares issued, which was $42,250.
NOTE 6 - WARRANTS AND OPTIONS
During the three months ended March 31, 2007, East Delta granted two consultants
an aggregate 1,000,000 warrants to purchase East Delta's common stock. These
warrants are exercisable immediately at $0.35 per share and expire on December
31, 2009. The warrants were valued using the Black-Scholes Method with the
following assumptions: i) Expected share price volatility of 122.30%; ii) Risk
free interest rate of 4.9%; iii) Expected weighted average life - 2.8 years; and
iv) No dividend yield. East Delta recorded $198,879 of expense related to these
warrants.
NOTE 7 - SUBSEQUENT EVENTS
Subsequent to March 31, 2007, East Delta issued 1,700,000 shares of common stock
for services. In connection with this transaction, East Delta recorded an
expense equal to the fair value of the shares issued, which was $425,000.
6
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion of our financial condition and results of operations
should be read in conjunction with the accompanying financial statements and the
related footnotes thereto.
Forward-Looking Statements
Some of the statements contained in this report discuss future
expectations, contain projections of results of operations or financial
condition, or state other "forward-looking" information. The words "believe,"
"intend," "plan," "expect," "anticipate," "estimate," "project," "goal" and
similar expressions identify such statement was made. These statements are
subject to known and unknown risks, uncertainties, and other factors that could
cause the actual results to differ materially from those contemplated by the
statements. The forward-looking information is based on various factors and is
derived using numerous assumptions. Factors that might cause or contribute to
such a discrepancy include, but are not limited to the risks discussed in this
and our other SEC filings. We do not promise to update forward-looking
information to reflect actual results or changes in assumptions or other factors
that could affect those statements. Future events and actual results could
differ materially from those expressed in, contemplated by, or underlying such
forward-looking statements.
The following discussion and analysis of our financial condition is as of
March 31, 2007. Our results of operations and cash flows should be read in
conjunction with our un-audited financial statements and notes thereto included
elsewhere in this report and the audited financial statements and the notes
thereto included in our Form 10-KSB for the year ended December 31, 2006.
Overview
East Delta Resources Corp., ("we", or the "Company" or "EDLT"), a Delaware
corporation, was incorporated on March 4, 1999.
We are a start-up, development stage company and have not yet generated or
realized any revenues from our new business operations. Since inception, we have
sold our equity to raise money for property acquisitions, corporate expenses and
to repay outstanding indebtedness. Our current business strategy focuses on gold
exploration and mining development in main land China.
There is little historical financial information about our company upon which to
base an evaluation of our performance. We have never generated any revenues from
our mining operations. Accordingly, comparisons with prior periods are not
meaningful. We are subject to risks inherent in the establishment of a new
business enterprise, including limited capital resources, possible delays in the
exploration of our properties, and possible cost overruns due to price and cost
increases in services.
Our primary activity, once we become operational, will be in gold exploration,
mining development and production. We also plan to participate in other mineral
exploration and mining, specifically, nickel, zinc and lead. The geographic
focus is in growth mining regions in Southeast Asia, primarily in China. Our
goal is to establish ourselves, in these areas, as a major force in the mining
industry by bringing together a network of financing sources, management
expertise, the latest mining technology and extensive local industry contacts.
7
Results of Operations and Financial Condition
The following selected financial data for the three months ended March 31, 2007
and 2006 and the period from inception to March 31, 2007 is derived from the
financial statements included elsewhere herein. The following data should be
read in conjunction with the financial statements of the Company.
For the period
March 4, 1999
Three months Three months (inception of
ended ended development stage)
March 31, March 31, through March 31,
2007 2006 2007
---- ---- ----
Total revenues $ -- $ -- $ 86,544
Total operating expenses 405,821 510,692 18,094,601
Loss before minority interest (447,185) (505,281) (25,878,326)
Net loss (408,586) (505,281) (25,838,307)
Our operations have been fairly minimal to date, and have not generated any
revenues. Accordingly, we are considered to be in the development stage as
defined in Financial Accounting Standards Board Statement No. 7.
Revenues
We had no revenues during the three months ended March 31, 2007 and 2006.
Operating expenses and net losses
Our total expenses for the three months ended March 31, 2007 and 2006 were
$405,821 and $510,692, respectively. The decrease is primarily due to less
operating expenses in China.
Our average monthly recurring expenses during these three months approximated
$30,000 and include salaries, office overhead, professional fees, travel,
business entertainment and insurance.
No officer and director compensation was paid for the three months ended March
31, 2007 and 2006.
During the three months ending March 31, 2007, we incurred an operating loss of
$405,821 as compared to an operating loss of $510,692 for the three months
ending March 31, 2006. As of March 31, 2007, we have a deficit accumulated
during the development stage of $25,838,307.
Liquidity and Capital Resources
Balance Sheet Data:
As of March 31, 2007
--------------------
Working capital deficit $ (118,595)
Total assets 485,440
Total liabilities 1,813,621
Stockholders' deficit (1,394,414)
As of March 31, 2007, our cash position was $334,918 and we had a working
capital deficit of $118,595.
We are of the opinion that we need to obtain additional funds for the next 12
months to further develop our major property, Bake and to integrate at least one
acquisition of an additional property into our operations. And the subsequent
progress on this acquisition and on any additional acquisitions will depend on
our ability to find financing in the order of several million dollars.
8
East Delta is in the development stage and will require a significant amount of
capital to proceed with its business plan. East Delta's ability to continue as a
going concern is ultimately contingent upon its ability to attain profitable
operations through the successful development of its business model and/or the
integration of an operating business. As shown in the accompanying consolidated
financial statements, East Delta incurred losses of $408,586 for the three
months ended March 31, 2007 and has an accumulated deficit and working capital
deficit of $25,838,307 and $118,595, respectively, as of March 31, 2007. These
conditions raise substantial doubt as to East Delta's ability to continue as a
going concern. Management's plans include obtaining additional capital through
debt or equity financing.
Plan of Operations
Overall, during 2007, the Company's emphasis will be to:
a) Complete drilling at the core property (Bake) per exploration plan;
b) Define the mineral resources and reserves at Bake in accordance with
US/Canadian reporting standards;
At Huaqiao, the work will be to:
c) map, sample and plan drill program at Huaqiao;
d) re-commence mining operations;
e) addressing environmental and safety issues;
f) Expand capacity.
Additional plans are:
g) Complete ongoing property acquisitions and seek other acquisitions;
h) Consolidate the acquisitions by integrating them into the Company's
Chinese operations.
9
CAUTIONARY STATEMENT
This Form 10-QSB, press releases and certain information provided periodically
in writing or orally by our officers or our agents contain statements which
constitute forward-looking statements within the meaning of Section 27A of the
Securities Act, as amended and Section 21E of the Securities Exchange Act of
1934. The words expect, anticipate, believe, goal, plan, intend, estimate and
similar expressions and variations thereof if used are intended to specifically
identify forward-looking statements. Those statements appear in a number of
places in this Form 10-QSB and in other places, particularly, Management's
Discussion and Analysis or Results of Operations, and include statements
regarding the intent, belief or current expectations us, our directors or our
officers with respect to, among other things: (i) our liquidity and capital
resources; (ii) our financing opportunities and plans and (iii) our future
performance and operating results. Investors and prospective investors are
cautioned that any such forward-looking statements are not guarantees of future
performance and involve risks and uncertainties, and that actual results may
differ materially from those projected in the forward-looking statements as a
result of various factors. The factors that might cause such differences
include, among others, the following: (i) any material inability to successfully
internally develop our products; (ii) any adverse effect or limitations caused
by Governmental regulations; (iii) any adverse effect on our positive cash flow
and ability to obtain acceptable financing in connection with our growth plans;
(iv) any increased competition in business; (v) any inability to successfully
conduct our business in new markets; and (vi) other risks including those
identified in our filings with the Securities and Exchange Commission. We
undertake no obligation to publicly update or revise the forward looking
statements made in this Form 10-QSB to reflect events or circumstances after the
date of this Form 10-QSB or to reflect the occurrence of unanticipated events.
10
ITEM 3 - CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
Management has evaluated, with the participation of our President,
the effectiveness of our disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) as of the end of the period covered
by this report. Based upon this evaluation, our President concluded that, as of
the end of the period covered by this report, our disclosure controls and
procedures were not effective to ensure that information required to be
disclosed by us in the reports we file or submit under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in the Commission's rules and forms. This finding is based on a number of audit
adjustments found by our auditor during their audit of our December 31, 2006
financial statements.
We identified deficiencies in our internal controls and disclosure
controls related to the expense recognition of stock-based compensation and
accounting for minority interest. We are in the process of improving our
internal control over financial reporting in an effort to remediate these
deficiencies through improved supervision and training of our accounting staff.
These deficiencies have been disclosed to our Board of Directors. We believe
that this effort is sufficient to fully remedy these deficiencies and we are
continuing our efforts to improve and strengthen our control processes and
procedures. Our President and directors will continue to work with our auditors
and other outside advisors to ensure that our controls and procedures are
adequate and effective.
(b) Changes in Internal Control over Financial Reporting
There have been no significant changes in our internal controls over
financial reporting that occurred during the fiscal quarter covered by this
report that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
11
PART II. - OTHER INFORMATION
Item 1. Legal Proceedings
NONE
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
During the quarter ending March 31, 2007, we issued 169,000 shares of our common
stock to various consultants for services rendered to us.
The stock was issued in transactions exempt from registration either under
section 4(2) to U.S. persons or under Regulation S to non-U.S persons as
promulgated under the Securities Act of 1933, 1933, as amended (the "Securities
Act"). No commissions were paid.
Item 3. Defaults Upon Senior Securities
NONE
Item 4. Submission of Matters to a Vote of Securities Holders
NONE
Item 5. Other Information
NONE
Item 6. Exhibits
31.1 Certification of Chief Executive Officer and Chief Financial Officer
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rules 13a-14 and
15d-14 of the Exchange Act)
32.1 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(18 U.S.C. 1350)
12
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated: May 17, 2007 By: /s/ Victor Sun
--------------------------
Victor I.H. Sun
Chief Executive Officer,
Chief Operating Officer,
and Chief Financial Officer
13