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 September 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 the number of shares outstanding of each of the issuer's classes of
stock as of November 14, 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 September 30, 2007 and December 31, 2006 3
Consolidated Statements of Operations for the three and nine months
ended September 30, 2007 and 2006 4
Consolidated Statements of Cash Flows for the three months and nine months
ended September 30, 2007 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)
September 30, 2007 December 31, 2006
------------------ -----------------
Current assets:
Cash $ 66,788 $ 391,597
Prepaid expense and other current assets 77,995 3,755
Related party receivables - 160,103
------------ ------------
Total current assets 144,783 555,455
Other assets:
Property, plant and equipment, net of accumulated
depreciation of $7,441 and $0, respectively 45,673 42,591
Deferred financing costs, net of accumulated
amortization of $49,428 and $20,657, respectively 24,512 56,003
------------ ------------
Total assets $ 214,968 $ 654,049
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued liabilities $ 450,561 $ 414,173
Accounts payable - related parties 22,000 68,401
Short-term note payable 39,900 -
------------ ------------
Total current liabilities 512,461 482,574
Long term liabilities:
Convertible notes 1,398,636 1,293,600
------------ ------------
Total liabilities 1,911,097 1,776,174
Minority interest in 124,742 104,832
Stockholders' deficit
Common stock, $0.0001 par value, 50,000,000 shares
authorized, 49,108,842 and 47,004,842 shares
issued and outstanding, respectively 4,911 4,701
Additional paid-in-capital 24,922,431 24,198,063
Deficit accumulated during the development stage (26,748,213) (25,429,721)
------------ ------------
Total stockholders' deficit (1,820,871) (1,226,957)
------------ ------------
Total liabilities and stockholders' deficit $ 214,968 $ 654,049
============ ============
3
EAST DELTA RESOURCES CORP.
(A development stage company)
CONSOLIDATED STATEMENTS OF
OPERATIONS Three and Nine months ended
September 30, 2007 and 2006 and
Period from March 4, 1999 (inception) through September 30, 2007
(unaudited)
Three months Three months Nine months Nine months For the period
ended ended ended ended March 4, 1999
September 30, September 30, September 30, September 30, (inception of
2007 2006 2007 2006 development
stage)to
September 30,
2007
Revenues:
Consulting $ - $ - $ - $ - $ 86,544
------------ ------------ ------------ ------------ ------------
Total revenues
- - - - 86,544
Operating expenses:
Officer and director compensation - - 13,500 - 393,255
Consulting and professional 34,864 483,953 929,555 879,490 9,962,351
General and administrative 102,172 91,247 325,124 503,311 8,601,353
------------ ------------ ------------ ------------ ------------
Total operating expenses 137,036 575,200 1,268,179 1,382,801 18,956,959
------------ ------------ ------------ ------------ ------------
Operating loss (137,036) (575,200) (1,268,179) (1,382,801) (18,870,415)
Loss on derivative liabilities - - - - (7,723,498)
Interest income (expense) (30,067) - 39,453 - 34,081
(Loss) gain on currency transactions (84,518) (17,909) (109,626) 1,958 (209,661)
------------ ------------ ------------ ------------ ------------
Net loss before
minority interest (251,621) (593,109) (1,338,352) (1,380,843) (26,769,493)
Minority interest in subsidiary
income (loss) (1,944) (3,481) 19,860 1,397 21,280
------------ ------------ ------------ ------------ ------------
Net loss $ (253,565) $ (596,590) $ (1,318,492) $ (1,379,446) $(26,748,213)
============ ============ ============ ============ ============
Basic and diluted
net loss per share $ (0.01) $ (0.01) $ (0.03) $ (0.03)
Weighted average shares outstanding
basic and diluted 49,108,842 45,509,842 48,348,677 45,414,235
4
EAST DELTA RESOURCES CORP.
(A development stage company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended September 30 2007 and 2006 and
Period from March 4, 1999 (inception) through September 30, 2007
(unaudited)
Nine months Nine months For the period
ended September ended March 4, 1999
30, 2007 September 30, (inception of
2006 development
stage) to
September 30,
2007
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (1,318,492) $ (1,379,446) $(26,748,213)
Adjustments to reconcile net loss to cash used
in operating activities:
Depreciation and amortization expense 38,932 11,356 59,589
Loss on derivative liabilities - - 7,723,498
Loss on currency transactions 109,626 203,621
Stock issued for services 525,700 264,205 11,170,786
Warrant / option expense 198,879 - 3,041,349
Minority interest 19,860 (1,397) 18,440
Changes in assets and liabilities:
Prepaid expenses and other receivables (63,209) (29,870) (46,512)
Accounts payable and accrued liabilities (15,482) 124,240 434,803
------------ ------------ ------------
CASH USED IN OPERATING ACTIVITIES (504,186) (1,010,912) (4,142,639)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash received from purchase of Omega
with common stock - - 157,687
Loan to Sino Silver - 25,000 (150,545)
Repayment from Sino Silver 150,000 - 150,000
Note receivable from third party - (30,010) (30,010)
Purchase of fixed assets (10,523) - (53,114)
------------ ------------ ------------
CASH USED IN INVESTING ACTIVITIES 139,477 (5,010) 74,018
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of deferred financing costs - (38,330) (38,330)
Payments to related party - - (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 short term note payable 39,900 - 39,900
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 39,900 1,010,245 4,135,409
------------ ------------ ------------
NET CHANGE IN CASH $ (324,809) $ (5,677) $ 66,788
============ ============ ============
Cash, beginning of period 391,597 735,974 -
------------ ------------ ------------
Cash, end of peroid $ 66,788 $ 730,297 $ 66,788
============ ============ ============
Cash paid for:
Interest $ 41,010 $ - $ 45,330
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 consolidated 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 $1,318,492 for the nine
months ended September 30, 2007 and has an accumulated deficit and working
capital deficit of $26,748,213 and $367,678, respectively as of September 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 RECEIVABLE
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 - NOTE PAYABLE
In July 2007, East Delta borrowed $39,900 under a $50,000 term loan. This note
is due on September 1, 2008, bears interest at 12% per annum. East Delta
received the remaining $10,100 in October 2007.
NOTE 5 - COMMON STOCK
During the nine months ended September 30, 2007, East Delta issued 2,104,000
shares of common stock to its consultants for services. These shares were
recorded at their fair value of $525,700.
NOTE 6 - WARRANTS
During the nine months ended September 30, 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.
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
September 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 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 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 nine months ended
September, 30, 2007 and 2006 and the period from inception to September 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 Nine Months Nine Months (inception of
Ended Ended Ended Ended development stage)
September 30, September 30, September 30, September 30, through September 30,
2007 2006 2007 2006 2007
---------------- --------------- ------------------------------ ----------------------
Total revenues $ - $ - $ - $ - $ 86,544
Total operating expenses 137,036 575,200 1,268,179 1,382,801 18,958,472
Loss before minority interest (251,621) (593,109) (1,338,352) (1,380,843) (26,769,493)
Net loss $ (253,565) $ (596,590) $ (1,318,492) $ (1,379,446) $(26,748,213)
Revenues
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 nine months ended September 30, 2007 and
2006.
Operating expenses and net losses
Our total expenses for the three and nine months ended September 30, 2007 were
$137,036 and $ 1,268,179, respectively, compared to $575,200 and $1,382,801 for
the three and six months ended September 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 nine months
ended September 30, 2007 and 2006.
During the three and nine months ending September 30, 2007, we incurred an
operating loss of $137,036 and $ 1,268,179, respectively, as compared to an
operating loss of $575,200 and $1,382,801 for the three and nine months ending
September 30, 2006, respectively. As of September 30, 2007, we have a deficit
accumulated during the development stage of $26,748,213.
Liquidity and Capital Resources
Balance Sheet Data:
As of September 30, 2007
--------------------
Working capital deficit $ (367,678)
Total assets 214,968
Total liabilities 1,911,097
Stockholders' deficit 1,820,871
8
As of September 30, 2007, our cash position was $ 66,788 and we had a working
capital deficit of $ 367,678.
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.
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 $1,318,492 for the nine
months ended September 30, 2007 and has an accumulated deficit and working
capital deficit of $26,748,213 and $367,678, respectively as of September 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.
Plan of Operations
Overall, during 2007 and early 2008, the Company's emphasis will be to:
a) complete drilling at the core property (Bake) per exploration plan;
b) develop additional drilling programs over an expanded area at the site;
c) define the mineral resources and reserves uncovered to date 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; construct a tailings pool;
f) develop plans for expanding capacity.
Additional plans for China are:
g) Complete ongoing property acquisitions and seek other acquisitions;
h) Consolidate the acquisitions by integrating them into the Company's Chinese
operations.
Sino-Canadian Metals Inc.
Sino-Canadian Metals plans to invest in a joint venture in China, Qinghai Dong
Zhou Metals Development Company Limited. Dong Zhou is currently building a small
pilot project to process up to 50 tonnes of nickel ore. Preparations are under
way to start to produce nickel by late winter/early spring 2008. A factory has
been rented and all necessary equipment is being purchased and installed. In
addition, Dong Zhou is negotiating with two regional nickel mines for their raw
material for this plant.
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 September 30, 2007, we issued 110,000 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: November 14, 2007 By: /s/ Victor Sun
--------------------------
Victor I.H. Sun
Chief Executive Officer,
Chief Operating Officer,
and Chief Financial Officer
13