UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934.
For the quarterly period ended March 31, 2008.
[ ] 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 March 31, 2008.
55,868,842 Common Shares
Transitional Small Business Disclosure Format:
YES [_] NO [X]
EAST DELTA RESOURCES CORP.
(A Development Stage Enterprise)
INDEX TO FORM 10-Q
Page
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (unaudited)
Consolidated Balance Sheets as of March 31, 2008 and December 31, 2007 1
Consolidated Statements of Operations for the three months ended
March 31, 2008 and 2007 2
Consolidated Statements of Cash Flows for the three months ended
March 31, 2008 and 2007 3
Notes to Unaudited Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations or Plan of Operations (including cautionary statement) 5
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
PART I - FINANCIAL INFORMATION
Item 1.
EAST DELTA RESOURCES CORP.
(A development stage company)
CONSOLIDATED BALANCE SHEETS
(unaudited)
March 31, 2008 December 31, 2007
-------------- -----------------
Current assets:
Cash $ 251,280 $ 248,377
Prepaid expense and other current assets 27,722 2,326
------------ ------------
Total current assets 279,002 250,703
Other assets:
Property, plan and equipment, net of accumulated
depreciation of $13,200 and $10,097, respectively 50,641 43,017
Deferred financing costs, net of accumulated
amortization of $76,660 and $64,117, respectively - 12,543
------------ ------------
Total assets $ 329,643 $ 306,263
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued liabilities $ 802,558 $ 1,102,351
Accounts payable - related parties 33,941 22,998
Short-term note payable 1,910,154 215,000
------------ ------------
Total current liabilities 2,746,653 1,340,349
Long term liabilities:
Convertible notes - 1,443,393
------------ ------------
Total liabilities 2,746,653 2,783,742
Minority interest in subsidiary 90,963 111,124
Stockholders' deficit
Common stock, $0.0001 par value, 100,000,000
shares authorized, 55,868,842and 50,848,842 shares
issued and outstanding, respectively 5,587 5,085
Additional paid-in-capital 25,959,261 25,106,363
Other comprehensive income 163,647 138,697
------------ ------------
Deficit accumulated during the development stage (28,636,468) (27,838,748)
------------ ------------
Total stockholders' deficit (2,507,973) (2,588,603)
------------ ------------
Total liabilities and stockholders' deficit $ 329,643 $ 306,263
============ ============
1
EAST DELTA RESOURCES CORP.
(A development stage company)
CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended March 31, 2008 and 2007 and
Period from March 4, 1999 (inception) through March 31, 2008
(unaudited)
Three months ended Three months ended For the period
March 31, 2008 March 31, 2007 March 4, 1999
(inception of
development stage)
to March 31, 2008
Revenues:
Consulting $ - $ - $ 86,544
------------ ------------ ------------
Total revenues - - 86,544
Operating expenses:
Officer and director compensation - - 393,255
Consulting and professional 415,315 248,865 11,112,609
General and administrative 228,921 156,956 9,089,028
------------ ------------ ------------
Total operating expenses 644,236 405,821 20,594,892
------------ ------------ ------------
Operating loss (644,236) (405,821) (20,508,348)
Loss on derivative liabilities - - (7,723,498)
Interest income (expense) (68,638) (29,052) (65,688)
(Loss) Gain on currency transactions (105,007) (12,312) (366,758)
------------ ------------ ------------
Net loss before
minority interest (817,881) (447,185) (28,664,292)
Minority interest in subsidiary
income (loss) (20,161) (38,599) (27,823)
------------ ------------ ------------
Net loss $ (797,720) $ (408,586) $(28,636,469)
============ ============ ============
Currency translation 24,950 -
Comprehensive income $ 772,770 $ (408,586)
Basic and diluted
net loss per share $ (0.02) $ (0.01)
Weighted average shares outstanding
basic and diluted 52,734,898 47,051,786
2
EAST DELTA RESOURCES CORP.
(A development stage company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended March 31, 2008 and 2007 and
Period from March 4, 1999 (inception) through March 31, 2008
(unaudited)
Three months ended Three months ended For the period
March 31, 2008 March 31, 2007 March 4, 1999
(inception of
development stage)
to March 31, 2008
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(797,720) $(408,586) $(28,636,469)
Adjustments to reconcile net loss to cash used
in operating activities:
Depreciation and amortization expense 15,646 11,863 89,860
Loss on derivative liabilities - - 7,723,498
Loss on currency transactions 105,007 12,312 348,795
Bad debt expense 10,403
Stock issued for services 240,000 42,250 11,496,186
Warrant / option expense - 198,879 2,990,053
Minority interest (20,161) (38,599) (15,289)
Changes in assets and liabilities: -
Prepaid expenses and other receivables (7,995) (38,482) 10,131
Accounts payable and accrued liabilities 324,550 24,207 1,417,311
--------- --------- ------------
CASH USED IN OPERATING ACTIVITIES (140,673) (196,156) (4,565,521)
--------- --------- ------------
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)
Investments - - -
Purchase of fixed assets (10,727) (10,523) (63,841)
--------- --------- ------------
CASH PROVIDED BY INVESTING ACTIVITIES (10,727) 139,477 63,291
--------- --------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of deferred financing costs - - (38,330)
Payments to related party - - (53,000)
Advances from related party 25,000 - 78,000
Proceeds from related party loan - - 422,474
Repayments of related party loan - - (422,474)
Proceeds from short term note payable 106,427 - 321,427
Repayments of short term note payable (2,074) - (2,074)
Proceeds from convertible notes - - 1,193,565
Sale of minority interest in subsidiary - - 305,500
Shares issued for cash, net of offering costs - - 2,784,774
--------- --------- ------------
CASH PROVIDED BY FINANCING ACTIVITIES 129,353 - 4,589,862
--------- --------- ------------
EFFECT OF EXCHANGE IN CASH 24,950 - 163,648
--------- --------- ------------
NET CHANGE IN CASH 2,903 (56,679) 226,329
========= ========= ============
Cash, beginning of period $ 248,377 $ 391,597 $ -
Cash, end of period $ 251,280 $ 334,918 $ 226,329
Cash paid for:
Interest $ - $ - $ 51,380
Income Taxes $ - $ - $ -
Non-cash investing and financing activities: $ - $ - $ 38,330
Stock payable for deferred financing costs $ - $ - $ -
3
EAST DELTA RESOURCES CORP.
(formerly AVIC Technologies Ltd.)
(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 $772,770 for the three
months ended March 31, 2008 and has an accumulated deficit and working capital
deficit of ($28,636,468) and ($2,507,973), respectively as of March 31, 2008.
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 - NOTES PAYABLE
During the period between March 15, 2006 and May 2, 2006, East Delta issued an
aggregate of 980,000 Euros, or approximately $1,193,565 on the date of issuance,
in convertible debentures denominated in Euros. The notes were issued at a price
of 1 Euro per debenture. The debentures are 6% senior secured convertible notes,
convertible at the option of the note holders into shares of the East Delta's
common stock, at a conversion price of 0.80 Euros. The maturity date for these
notes is March 31, 2008. The notes were not paid upon maturity and are in
default. East Delta is currently in negotiations with the note holders.
In January 2008, East Delta borrowed $25,000 under a term loan from a related
party. This note was due on March 15, 2008, bears interest at 6% per annum. East
Delta has not repaid the note and is currently under negotiations to extend the
terms of the note.
In March 2008, East Delta borrowed $100,000 under a term loan. This note is due
on October 1, 2008 and converts to a sinking fund to be repaid in three
installments, consisting of $30,000, $30,000, and $40,000 payable on the first
day of each succeeding month, that is, November 1, 2008, December 1, 2008 and
January 1, 2009. The loan bears and interest rate of 25% of the face value of
the loan, payable as 15% in common stock valued at $0.12 per share, due and to
be issued upon receipt of funds by EDLT and 10% in cash, due and to be paid
January 1, 2009. The lender has the option to convert the cash portion of the
interest payment into common shares of EDLT at a cost of $0.12 per share.
In March 2008, East Delta financed their D & O insurance in the amount of
$17,401. The note is to be repaid in eight monthly installments in the amount of
$2,075, bears a finance charge in the amount of $1,073, and is due in October
2008. Principal paid as of March 31, 2008 was $2,075, which leaves a balance of
$15,327 as of March 31, 2008.
NOTE 4 - COMMON STOCK
During the three months ended March 31, 2008, East Delta issued 5,020,000,
shares of common stock for services performed during the three months ended
March 31, 2008 and prior period services accrued. These shares were recorded at
their fair value of $853,400.
4
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 March
31, 2008. 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, 2007.
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.
5
Results of Operations and Financial Condition
The following selected financial data for the three months ended March 31, 2008
and 2007 and the period from inception March 4, 1999 to March 31, 2008 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,
2008 2007 2008
---- ---- ----
Total revenues $ - $ - $ 86,544
Total operating expenses 644,236 405,821 20,594,892
Loss before minority interest (817,881) (447,185) (28,664,292)
Net loss $(772,770) $(408,586) $(28,636,469)
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, 2008 and 2007.
Operating expenses and net losses
Our total operating expenses for the three months ended March 31, 2008 and 2007
were $644,236 and $405,821, respectively. The increase is primarily due to stock
issued to consultants for services.
No officer and director compensation was paid for the three months ended March
31, 2008 and 2007.
Liquidity and Capital Resources
During the three months ending March 31, 2008 and 2007, we incurred an operating
loss of $644,236 and $405,821, respectively. As of March 31, 2008, we have a
deficit accumulated during the development stage of $28,611,518.
Liquidity and Capital Resources
Balance Sheet Data:
As of March 31, 2008
--------------------
Working capital deficit $(2,467,651)
Total assets 329,643
Total liabilities 2,746,653
Stockholders' deficit (2,507,973)
As of March 31, 2008, our cash position was $251,280.
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.
6
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 $772,770 for the three
months ended March 31, 2008 and has an accumulated deficit and working capital
deficit of $28,611,518 and $2,467,651, respectively as of March 31, 2008. 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 2008, the Company's emphasis will be to:
o Undertake a financing campaign of minimum $500,000.
o Prepare and implement (subject to levels of funding) a new drilling
plan at the core property (Bake) based on results to date;
Further, although the acquisition at Huaqiao has not been closed as yet,
management has decided to proceed as if it has and has begun to do the
following:
o Re-start mining operations, with ore extraction from Level 6 of the
mine;
o Re-commence mill operations, processing 20-25 T/day initially, with
the intention of a ramp-up to full 100-125 T capacity by mid-year.
o Continue exploration activities at lower levels of the mine.
At Qinghai,
o Exploration activity at Yaqu, the extent of which is dependent on
funding available
o Sign agreements with other sources for the Ni-Cu processing plant at
Huang Yuan
o Complete Ni-Cu plant, test its operations, and ramp-up capacity to
50T/day.
o Feasibility study and cost analysis to triple capacity at the plant to
150T/day.
Additional plans, in general, are:
o Complete ongoing property acquisitions and seek other acquisitions;
o Consolidate the acquisitions by integrating them into the Company's
Chinese operations.
More specifically details for each project:
Bake
Surface mapping has been completed for an 8 square kilometer area of interest
lying within the 85 square kilometer Bake-Jiaoyun concession. The objective of
the next phase is to focus activities on the most promising of the many
mineralization zones that have been mapped within different sectors of the
mapped portions of the property, while completing the surface mapping of the
remaining 2 square kilometer area of interest.
The Company will conduct geophysical analysis as well as trenching and drilling
campaigns to determine/verify the grades and thickness of the zones that are
predicted in resource models and preliminary exploration results.
The Company intends to continue a program commenced earlier to:
a) assess and prioritize the potential of known mineralized zones by
drilling at least 20 drill holes of lengths varying between 200 to 500
meters;
b) continue explore the high priority deposits near Zone 1 and Zone 2;
c) hiring independent "western" qualified geologists to prepare resource
estimates to US/Canadian standards.
7
A drilling program is being conducted to assess the metallurgical grades of
several highly prospective zones identified to date, and to further map out the
property's potential resource values.
The location of the proposed drilling activity was determined by staff
geologists based on previous mining activity in our immediate area which had
occurred during the 1990s. There are numerous underground openings that
demonstrated mine-able veins widths and gold mineralization. The area of
drilling was located on the axis of the anti-cline that was known to contain
turbidite style gold mineralization.
The program is designed to determine the continuity of the known existing gold
veins and is being conducted to assess the metallurgical grades of several these
identified prospective zones identified. We intend to do some near surface
(100-200 meters) and some deeper drilling (200-500 meters) both along the ais
and the flanks of the anti-cline.
In addition to ongoing geological mapping and soil sampling, we have set a six
month budget of a total $200,000 to cover all these activities, to be paid for
from existing funds.
Huaqiao Project
The acquisition of Huaqiao has not as yet been closed, nevertheless management
has decided to proceed with various activities related to this project that
would be beneficial to us upon closing. The work involves general planning and
budgeting, refurbishment and modernization of an existing mill on the property,
and further resource determination.
East Delta intends to do the following in 2008 at Huaqiao:
Exploration
o Create new computerized geologic model for resource/reserve estimation
o Based on results from the mapping, model and sampling, plan drill
holes.
Production
o Contract an expatriate mine manager to oversee all operations at the
mine;
o Address tailings disposal concerns;
o Complete construction of new labor living quarters;
o Cost analysis study and installation of backup electrical generators
o Purchase additional ore hoppers
o Purchase and install additional production equipment as required; and
o Assess and streamline management reporting structure.
The above activities should build upon the estimated mine-able gold on this
property offering the option to increase future ore production from 125-150
tonne/day (t/d) to 300 t/d or more.
Qinghai Hua Long Ding Shun Nickel Project
The property has not been explored by any western company. The initial work
planned for last year was not undertaken due to lack of available funding. The
Company however has carried these plans over to late 2008.
Exploration results from precious work in the area will be collected,
translated, and compiled.
A geologic management team will be assembled to oversee and perform the work.
A baseline geologic survey will be completed.
Target areas for geophysical analysis will be determined with intent to
prioritize targets
Underground tunnels will be mapped and sampled.
All surface occurrences will be trenched and sampled.
Drill targets will be identified
Resource estimates completed for known mineralization by end of 2008.
Huang Yuan Plant
We are in the process of making arrangements to purchase the Ni-Cu ore from
several small low grade Nickel Copper mines within a radius of 100 kilometers of
the plant. The grades range from 0.5 to 0.87% of Nickel and 1% to 1.8% of
Copper. With the current elevated price of Ni and Cu, a 50 ton/day plant has
been estimated to generate net profit of approximately US$1,000,000 annually.
8
The plant will produce an intermediate product, iced Nickel-Copper (Ni-CU)
Aggregate, or Nickel-Copper Aggregate. Ni-Cu alloys are widely used for marine
applications due to their excellent resistance to seawater corrosion, high
inherent resistance to bio-fouling and good fabric ability. The major refinery
can further process them to separate them into Nickel, Copper and other trace
metals found in the alloy.
Our main supplier of the raw ore is located about 85 kilometers from the plant.
The particular exided Ni-Cu ore that we are purchasing is relatively inexpensive
due the fact very few producers have the experience in handling the particular
type of ore. In addition, this particular low grade deposit also contains gold,
silver, platinum, palladium and cobalt. Our customer-refinery will test each
production run and will likely credit us for additional metals extractable from
our product.
The plant is to be operated twenty-four hours per day, in three shifts. The
process will mix the raw nickel ore with other materials, such as limestone,
coal, sulfur and iron ore and then be fed into the furnace. Upon reaching target
temperatures the process will generate a small amount of the Nickel-Copper
aggregate and residue material. The residue will be sold to the cement plants,
as it contains rich iron and other minerals that are used to enhance the
strength of the cement.
We have lined up four major Nickel Copper Producers as potential customers of
our plant output:
1. Jin Chuan non-ferrous Metals Group Company.
2. Xin Jiang Non-Ferrous Metals Company, Ltd.
3. Cheng Du Electric Treatment Factory
4. Jilin Nickel Industry Company Ltd.
Our partner, Professor Liu Jiang is currently finalizing agreements as to
pricing, payment methods, delivery schedule and other related details.
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.
(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, 2008, we issued 5,020,000 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 20, 2008 By: /s/ Victor Sun
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Victor I.H. Sun
Chief Executive Officer,
Chief Operating Officer,
and Chief Financial Officer
13