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 quarterly period ended June 30, 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 [_]
Indicate the number of shares outstanding of each of the issuer's classes of
stock as of July 31, 2007:
49,108,842 Common Shares
Transitional Small Business Disclosure Format:
YES [_] NO [X]
EAST DELTA RESOURCES CORP.
(A Development Stage Enterprise)
INDEX TO FORM 10-QSB
Page
PART I. FINANCIAL INFORMATION 3
Item 1. Consolidated Financial Statements (unaudited) 3
Consolidated Balance Sheets as of June 30, 2007 and December 31, 2006 3
Consolidated Statements of Operations for the three and six months ended June 30, 2007 and 2006 4
Consolidated Statements of Cash Flows for the six months ended June 30, 2007 and 2006 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of 7
Operations or Plan of Operations (including cautionary statement)
Item 3. Controls and Procedures 11
PART II. OTHER INFORMATION 12
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.
EAST DELTA RESOURCES CORP.
(A development stage company)
CONSOLIDATED BALANCE SHEETS
(unaudited)
ASSETS
June 30, 2007 December 31, 2006
------------- -----------------
Current assets:
Cash $ 164,150 $ 391,597
Prepaid expense and other current assets 38,397 3,755
Related party receivables 10,251 160,103
------------ ------------
Total current assets 212,798 555,455
Other assets:
Property, plan and equipment, net of accumulated
depreciation of $2,906 and $0, respectively 50,205 42,591
Deferred financing costs, net of accumulated
amortization of $40,875 and $20,657, respectively 35,785 56,003
------------ ------------
Total assets $ 298,788 $ 654,049
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued liabilities $ 426,949 $ 414,173
Accounts payable - related parties 22,000 68,401
------------ ------------
Total current liabilities 448,949 482,574
Long term liabilities:
Convertible notes 1,320,158 1,293,600
------------ ------------
Total liabilities 1,769,107 1,776,174
------------ ------------
Minority interest in subsidiary 126,686 104,832
Stockholders' deficit
Common stock, $0.0001 par value, 50,000,000
shares authorized, 48,998,842 and 47,004,842 shares
issued and outstanding, respectively 4,900 4,701
Additional paid-in-capital 24,892,743 24,198,063
Deficit accumulated during the development stage (26,494,648) (25,429,721)
------------ ------------
Total stockholders' deficit (1,597,005) (1,226,957)
------------ ------------
Total liabilities and stockholders' deficit $ 298,788 $ 654,049
============ ============
3
EAST DELTA RESOURCES CORP.
(A development stage company)
CONSOLIDATED STATEMENTS OF OPERATIONS
Three and Six months ended June 30, 2007 and 2006 and
Period from March 4, 1999 (inception) through June 30, 2007
(unaudited)
For the period
March 4, 1999
Three months Three months Six months Six months (inception of
ended ended ended ended development stage)
June 30, June 30, June 30, June 30, to June 30,
2007 2006 2007 2006 2007
---- ---- ---- ---- ----
Revenues:
Consulting $ - $ - $ - $ - $ 86,544
------------ ------------ ------------ ------------ ------------
Total revenues - - - - 86,544
------------ ------------ ------------ ------------ ------------
Operating expenses:
Officer and director compensation - - - - 393,255
Consulting and professional 539,824 92,957 788,689 357,207 9,927,487
General and administrative 185,498 203,951 342,454 450,394 8,499,181
------------ ------------ ------------ ------------ ------------
Total operating expenses 725,322 296,908 1,131,143 807,601 18,819,923
------------ ------------ ------------ ------------ ------------
Operating loss (725,322) (296,908) (1,131,143) (807,601) (18,733,379)
Loss on derivative liabilities - - - - (7,723,498)
Interest income 98,572 14,456 69,520 19,867 64,148
Loss on currency transactions (12,796) - (25,108) - (125,143)
------------ ------------ ------------ ------------ ------------
Net loss before
minority interest (639,546) (282,452) (1,086,731) (787,734) (26,517,872)
Minority interest in subsidiary
income (loss) (16,795) 4,878 21,804 4,878 23,224
------------ ------------ ------------ ------------ ------------
Net loss $ (656,341) $ 277,574) $(1,064,927) $ (782,856) $(26,494,648)
============ ============ ============ ============ ============
Basic and diluted
net loss per share $ (0.01) $ (0.01) $ (0.02) $ (0.02)
Weighted average shares outstanding
basic and diluted 48,856,534 45,509,842 47,959,146 45,363,911
4
EAST DELTA RESOURCES CORP.
(A development stage company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended June 30 2007 and 2006 and
Period from March 4, 1999 (inception) through June 30, 2007
(unaudited)
For the period
Six months Six months March 4, 1999
ended ended (inception)
June 30, June 30, to June 30,
2007 2006 2007
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (1,064,927) $ (782,856) $(26,494,648)
Adjustments to reconcile net loss to cash used
in operating activities:
Depreciation and amortization expense 23,127 2,720 43,784
Loss on derivative liabilities - - 7,723,498
Loss on currency transactions 25,108 - 125,143
Stock issued for services 496,000 264,205 11,141,087
Warrant / option expense 198,879 - 3,041,349
Minority interest 21,854 (4,878) 20,434
Changes in assets and liabilities:
Prepaid expenses and other receivables (33,862) (124,867) (17,165)
Accounts payable and accrued liabilities (33,103) (119,172) 411,141
------------ ------------ ------------
CASH USED IN OPERATING ACTIVITIES (366,924) (764,848) (4,005,377)
------------ ------------ ------------
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) (38,330)
Payments to related party - 25,000 (53,000)
Advances from related party - - 53,000
Proceeds from related party loan - - 422,474
Repayments of related party loan - (150,000) (422,474)
Proceeds from convertible notes - 1,193,565 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 - 1,035,245 4,095,509
------------ ------------ ------------
NET CHANGE IN CASH (227,447) 270,397 164,150
Cash, beginning of period 391,597 735,974 -
------------ ------------ ------------
Cash, end of period $ 164,150 $ 1,006,371 $ 164,150
============ ============ ============
Cash paid for:
Interest $ 41,010 $ - $ 41,010
Income Taxes - - -
Non-cash investing and financing activities:
Stock payable for deferred financing costs - 38,330 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 $1,064,927 for the six
months ended June 30, 2007 and has an accumulated deficit and working capital
deficit of $236,151 as of June 30, 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 six months ended June 30, 2007. In addition to the
principal repayment, Sino Canadian received 100,000 common shares of Silver
Dragon Resources as interest. 50,000 unrestricted shares of Silver Dragon were
sold on the open market for $101,500 and 50,000 restricted shares of Silver
Dragon Resources were sold to two related parties at $50,000. Sino Canadian
recognized $71,750 loss in the later transaction.
NOTE 4 - COMMON STOCK
During the six months ended June 30 2007, East Delta issued 1,994,000 shares of
common stock for services. These shares were recorded at their fair value of
$496,000.
NOTE 5 - WARRANTS
During the six months ended June 30, 2007, East Delta granted two consultants
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.
These 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 warrant expense related to these
grants.
6
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS OR PLAN OF OPERATIONS
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 June
30, 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 mainland 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 and six months ended June
30, 2007 and 2006 and the period from inception to June 30, 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 Six Months Six Months (inception of
ended ended ended ended development stage)
June 30, June 30, June 30, June 30, through June 30,
2007 2006 2007 2006
---- ---- ---- ---- ---------------
Total revenues $ -- $ -- $ -- $ -- $ 86,544
Total operating expenses 725,322 296,908 1,131,143 807,601 18,819,923
Loss before minority interest (639,546) (282,452) (1,043,123) (787,734) (26,517,872)
Net loss (656,341) (277,574) (1,064,927) (782,856) (26,494,648)
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 and six months ended June 30, 2007 and 2006.
Operating expenses and net losses
Our total expenses for the three and six months ended June 30, 2007 were
$725,322 and $1,131,143, respectively, compared to $296,908 and $807,601 for the
three and six months ended June 30, 2006, respectively. The increase is
primarily due to stock issued to consultants for services.
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 and six months ended
June 30, 2007 and 2006.
During the three and six months ending June 30, 2007, we incurred an operating
loss of $725,322 and $1,131,143 respectively, as compared to an operating loss
of $296,908 and $807,601 for the three and six months ending June 30, 2006,
respectively. As of June 30, 2007, we have a deficit accumulated during the
development stage of $26,494,648.
Liquidity and Capital Resources
Balance Sheet Data:
As of June 30, 2007
--------------------
Working capital deficit $ (236,151)
Total assets 298,788
Total liabilities 1,769,107
Stockholders' deficit (1,597,005)
As of June 30, 2007, our cash position was $164,150 and we had a working capital
deficit of $236,151.
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 $1,064,927 for the six
months ended June 30, 2007 and has an accumulated deficit of $26,494,648 and
working capital deficit of $236,151 as of June 30, 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 Chief Executive Office,
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 Chief Executive Office 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 review
adjustments found by our auditor during their review of our June 30, 2007
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 Chief
Executive Office 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 June 30, 2007, we issued 1,825,000 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: August 14, 2007 By: /s/ Victor Sun
--------------------------
Victor I.H. Sun
Chief Executive Officer,
Chief Operating Officer,
and Chief Financial Officer
13