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 June 30, 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 [_] NO [X]
Indicate the number of shares outstanding of each of the issuer's classes of
stock as of July 31,2008
59,261,842 Common Shares
Transitional Small Business Disclosure Format:
YES [_] NO [X]
EAST DELTA RESOURCES CORP.
(A Development Stage Company)
INDEX TO FORM 10-Q
Page
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (unaudited) 1
Consolidated Balance Sheets as of June 30, 2008 and December 31, 2007 (unaudited) 1
Consolidated Statements of Operations for the three and six months ended
June 30, 2008 and 2007 (unaudited) 2
Consolidated Statements of Cash Flows for six months ended
June 30, 2008 and 2007 (unaudited) 3
Notes to consolidated Financial Statements (unaudited) 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. Quantitative and Qualitative About Market Risk 11
Item 4. 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)
June 30, 2008 December 31, 2007
------------- -----------------
Current assets:
Cash $ 72,469 $ 248,377
Prepaid expense and other current assets 15,174 2,326
Deferred financing cost 133,600 -
------------ ------------
Total current assets 221,243 250,703
Other assets:
- -
Property, plant and equipment, net of accumulated
depreciation of $16,392 and $10,097, respectively 47,449 43,017
Deferred financing costs, net of accumulated
amortization of $76,660 and $64,117, respectively - 12,543
------------ ------------
Total assets $ 268,692 $ 306,263
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued liabilities $ 671,367 $ 1,102,351
Accounts payable - related parties 36,041 22,998
Short-term notes payable - related party 25,000 -
Short-term notes payable 1,878,784 215,000
------------ ------------
Total current liabilities 2,611,192 1,340,349
Long term liabilities:
Convertible notes - 1,443,393
------------ ------------
Total liabilities 2,611,192 2,783,742
Minority interest in subsidiary 90,955 111,124
Stockholders' deficit
Common stock, $0.0001 par value, 50,000,000
shares authorized, 59,261,842 and 50,848,842 shares
issued and outstanding, respectively 5,926 5,085
Additional paid-in-capital 26,575,862 25,106,363
Other comprehensive income 138,697 138,697
Deficit accumulated during the development stage (29,153,940) (27,838,748)
------------ ------------
Total stockholders' deficit (2,433,455) (2,588,603)
------------ ------------
Total liabilities and stockholders' deficit $ 268,692 $ 306,263
============ ============
1
EAST DELTA RESOURCES CORP.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
Three and six months ended June 30, 2008 and 2007 and
Period from March 4, 1999 (inception) through June 30, 2008
(unaudited)
Three months Three months Six months Six months For the period March
ended June 30, ended June 30, ended June 30, ended June 30, 4, 1999 (inception of
2008 2007 2008 2007 development stage) to
June 30, 2008
Revenues:
Consulting $ - $ - $ - $ - $ 86,544
------------ ------------ ------------ ------------ ------------
Total revenues - - - - 86,544
Operating expenses:
Officer and director compensation - - - - 393,255
Consulting and professional 230,288 539,824 645,603 788,689 11,342,897
General and administrative 185,659 185,498 414,580 342,454 9,274,687
------------ ------------ ------------ ------------ ------------
Total operating expenses 415,947 725,322 1,060,183 1,131,143 21,010,839
------------ ------------ ------------ ------------ ------------
Operating loss (415,947) (725,322) (1,060,183) (1,131,143) (20,924,295)
Loss on derivative liabilities - - - (7,723,498)
Interest income (expense) (101,925) 98,572 (170,563) 69,520 (167,613)
(Loss) Gain on currency transactions 392 (12,796) (104,615) (25,108) (366,366)
------------ ------------ ------------ ------------ ------------
Net loss before
minority interest (517,480) (639,546) (1,335,361) (1,086,731) (29,181,772)
Minority interest in subsidiary
income (loss) 8 (16,795) 20,169 21,804 27,832
------------ ------------ ------------ ------------ ------------
Net loss $ (517,472) $ (656,341) $ (1,315,192) $ (1,064,927) $(29,153,940)
============ ============ ============ ============ ============
Basic and diluted
net loss per share $ (0.01) $ (0.01) $ (0.02) $ (0.02)
Weighted average shares outstanding
basic and diluted 57,748,095 48,856,534 59,613,424 47,959,146
2
EAST DELTA RESOURCES CORP.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended June 30, 2008 and 2007 and
Period from March 4, 1999 (inception) through June 30, 2008
(unaudited)
Six months ended Six months ended For the period
June 30, 2008 June 30, 2007 March 4, 1999
(inception of
development stage)
to June 30, 2008
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(1,315,192) $(1,064,927) $(29,153,940)
Adjustments to reconcile net loss to cash used
in operating activities:
Depreciation and amortization expense 18,838 23,127 93,052
Loss on derivative liabilities - - 7,723,498
Loss on currency transactions 104,615 25,108 348,403
Bad debt expense - 10,403
Stock issued for services 429,972 496,000 11,686,158
Warrant / option expense 71,300 198,879 3,061,353
Minority interest (20,169) 21,854 (15,297)
Changes in assets and liabilities: -
Prepaid expenses and other receivables (12,848) (33,862) 5,278
Accounts payable and accrued liabilities 417,941 (33,103) 1,510,702
----------- ----------- ------------
CASH USED IN OPERATING ACTIVITIES (305,543) (366,924) (4,730,390)
----------- ----------- ------------
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 USED IN 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 123,828 - 338,828
Repayments of short term note payable (8,466) - (8,466)
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 140,362 - 4,600,871
----------- ----------- ------------
EFFECT OF EXCHANGE IN CASH - - 138,697
----------- ----------- ------------
NET CHANGE IN CASH (175,908) (227,447) 72,469
Cash, beginning of period 248,377 391,597 -
Cash, end of period $ 72,469 $ 164,150 $ 72,469
=========== =========== ============
Cash paid for:
Interest $ - $ 41,010 $ 51,380
Income Taxes - - -
Non-cash investing and financing activities: -
Stock payable for deferred financing costs $ - $ - $ 38,330
Stock issued for accounts payable and accrued liabilities 835,882 - 835,766
Stock issued as collateral 133,600 - 133,600
3
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 $517,472 and $1,315,192 for
the three and six months ended June 30, 2008 and has an accumulated deficit and
working capital deficit of ($29,153,940) and ($2,389,949), respectively as of
June 30, 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 was March 31, 2008. The notes were not paid upon maturity and were in
default as of March 31, 2008. East Delta has extended the due date of notes,
totaling 816,000 Euros in principal, to March 31, 2009 by issuing one share of
common stock for each Euro of debt as full payment for the interest due and
outstanding and one warrant with a conversion price of $.25 per share, at
anytime until April 15, 2012. East Delta is currently in negotiations with the
remaining 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 extended the note for an additional six months.
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 June 30, 2008 was $8,468, which leaves a balance of
$8,933 as of June 30, 2008.
NOTE 4 - COMMON STOCK
During the six months ended June 30, 2008, East Delta issued 8,413,000, shares
of common stock for accrued but unpaid interests, services performed during the
six months ended June 30, 2008 and prior period services accrued. These shares
were recorded at their fair value of $1,399,040.
NOTE 5 - WARRANTS
During the six months ended June 30, 2008, East Delta granted fifteen note
holders an aggregate 806,000 warrants to purchase East Delta's common stock in
return for the extension of their notes from March 31, 2008 to March 31, 2009.
These warrants are exercisable immediately at $0.25 per share and expire on
April 15, 2012. The warrants were valued using the Black-Scholes Method with the
following assumptions: i) Expected share price volatility of 94.78%; ii) Risk
free interest rate of 3.38%; iii) Contractual term weighted of 4 years; and iv)
No dividend yield. East Delta recorded $71,300 of expense related to these
warrants.
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 June
30, 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 and six months ended June
30, 2008 and 2007 and the period from inception March 4, 1999 to June 30, 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
(inception of
Three Months Three Months Six Months Six Months development
Ended Ended Ended Ended stage)
June 30, June 30, June 30, June 30, through June
2008 2008 2008 2008 30,2008
---- ---- ---- ---- ----
Total revenues $ - $ - $ - $ - $ 86,544
Total operating expenses 415,947 725,322 1,060,183 1,131,143 21,010,839
Loss before minority interest (517,480) (639,546) (1,335,361) (1,086,731) (29,181,772)
--------- --------- ----------- ----------- ------------
Net loss $(517,472) $(656,341) $(1,315,192) $(1,064,927) $(29,153,940)
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 six months ended June 30, 2008 and 2007.
Operating expenses and net losses
Our total operating expenses for the three and six months ended June 30, 2008
were $415,947 and $1,060,183, respectively, compared to $725,322 and $1,131,143
for the three and six months ended June 30, 2007, respectively. The decrease is
primarily due to stock issued to consultants for services.
No officer and director compensation was paid for the three and six months ended
June 30, 2008 and 2007.
Liquidity and Capital Resources
During the three and six months ending June 30, 2008 and 2007, we incurred an
operating loss of $415,947and $1,060,183, respectively, as compared to an
operating loss of $725,322 and $1,131,143 for the three and six months ending
June 30, 2007, respectively. As of June 30, 2008, we have a deficit accumulated
during the development stage of $29,153,940.
Liquidity and Capital Resources
Balance Sheet Data:
As of June 30, 2008
-------------------
Working capital deficit $(2,389,949)
Total assets 268,692
Total liabilities 2,611,192
Stockholders' deficit (2,433,455)
As of June 30, 2008, our cash position was $72,469 and we had a working capital
deficit of $2,389,949.
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 $517,472 and 1,315,192 for
the three and six months ended June 30, 2008 and has an accumulated deficit and
working capital deficit of $29,153,940 and $2,389,949, respectively as of June
30, 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 the latter half of 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, as funds permit:
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 Surface exploration activity at Yaqu, the extent of which is dependent on
funding available
o As we have successfully tested our Ni-Cu plant, we plan to commence operation,
eventually ramping-up to our capacity of 50T/day.
o Feasibility study and cost analysis to double or 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.
Upon successful raising of funds as indicated earlier, 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 $50,000 to cover some of 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.
As most planned activities planned in the first half of 2008 were not completed
to lack of funds, East Delta intends to do the following in latter half of 2008
at Huaqiao, again depending on the success of financing activities:
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 mid 2009.
Huang Yuan Plant
We have made the necessary arrangements to purchase Ni-Cu ore from a relatively
low grade Nickel Copper mine within a radius of 100 kilometers of the plant. The
grades from this mine tested in the 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, and the quality of
our Ni-Cu concentrate product, our 50 ton/day plant has been estimated to have
the potential to generate net profit of approximately US$1,000,000 annually.
Production is scheduled to commence during the week of August 18, 2008.
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 mixture. 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-Q, 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-Q 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-Q to reflect events or circumstances after the
date of this Form 10-Q or to reflect the occurrence of unanticipated events.
10
ITEM 3 - QUANTITATIVE AND QUALITATIVE ABOUT MARKET RISK
Not applicable
ITEM 4 - 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, 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.
(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.
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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, 2008, we issued 3,393,000 shares of our
common stock to various consultants for services rendered to us and to note
holders in lieu of interest
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)
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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, 2008 By: /s/ Victor Sun
--------------------------
Victor I.H. Sun
Chief Executive Officer,
Chief Operating Officer,
and Chief Financial Officer
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