Attached files
| file | filename |
|---|---|
| EX-31.1 - STELLAR RESOURCES 10Q, CERTIFICATION 302, CEO - STELLAR RESOURCES LTD | stellarexh31_1.htm |
| EX-32.2 - STELLAR RESOURCES 10Q, CERTIFICATION 906, CFO - STELLAR RESOURCES LTD | stellarexh32_2.htm |
| EX-31.2 - STELLAR RESOURCES 10Q, CERTIFICATION 302, CFO - STELLAR RESOURCES LTD | stellarexh31_2.htm |
| EX-32.1 - STELLAR RESOURCES 10Q, CERTIFICATION 906, CEO - STELLAR RESOURCES LTD | stellarexh32_1.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 2010
or
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
For the transition period from __________ to ___________
Commission File number 0-51400
Stellar Resources Ltd.
(Exact name of registrant as specified in its charter)
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Nevada
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98-0373867
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(State or other jurisdiction of incorporation or organization)
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(IRS Employer Identification No.)
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375 N. Stephanie Street, Suite 1411, Las Vegas, Nevada, 89014-1411
(Address of principal executive offices)
(702) 547-4614
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed 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. x Yes o No
Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and smaller reporting company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | o | Accelerated filer | o | |
| Non- accelerated filer | o (Do not check if a smaller reporting company) | Smaller reporting company | x |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b(2) of the Exchange Act). x Yes o No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. x Yes o No
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: The total number of shares of Common Stock, par value $0.001 per share, outstanding as of June 17, 2010 is 34,060,650.
TABLE OF CONTENTS
Part I – FINANCIAL INFORMATION
Item 1. Financial Statements
STELLAR RESOURCES LTD.
(An Exploration Stage Company)
FINANCIAL STATEMENTS
APRIL 30, 2010
(Unaudited)
STELLAR RESOURCES LTD.
(An Exploration Stage Company)
BALANCE SHEETS
(Unaudited)
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APRIL 30,
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JULY 31,
|
|||||||
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2010
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2009
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|||||||
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ASSETS
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||||||||
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Current
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||||||||
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Cash
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$ | 72,692 | $ | 1,193 | ||||
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Deposit (Note 4)
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20,000 | - | ||||||
| $ | 92,692 | $ | 1,193 | |||||
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LIABILITIES
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||||||||
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Current
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||||||||
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Accounts payable and accrued liabilities
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$ | 27,620 | $ | 4,314 | ||||
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Advances payable (Note 5)
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172,690 | 182,356 | ||||||
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Due to related parties (Note 6)
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143,975 | 689 | ||||||
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Notes payable (Note 7)
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29,280 | 26,722 | ||||||
| 373,565 | 214,081 | |||||||
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STOCKHOLDERS’ DEFICIT
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||||||||
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Capital stock (Note 8)
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||||||||
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Authorized:
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||||||||
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200,000,000 common shares with a par value of $0.001 per share
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||||||||
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Issued and outstanding:
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||||||||
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31,060,650 common shares (July 31, 2009: 31,060,650 common shares)
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31,060 | 31,060 | ||||||
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Additional paid-in capital
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952,142 | 952,142 | ||||||
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Deficit accumulated during the exploration stage
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(1,256,578 | ) | (1,190,833 | ) | ||||
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Accumulated other comprehensive loss
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(7,497 | ) | (5,257 | ) | ||||
| (280,873 | ) | (212,888 | ) | |||||
| $ | 92,692 | $ | 1,193 | |||||
The accompanying notes are an integral part of these financial statements
STELLAR RESOURCES LTD.
(An Exploration Stage Company)
STATEMENTS OF OPERATIONS
(Unaudited)
| CUMULATIVE RESULTS OF OPERATIONS FROM APRIL 9, 1999 (INCEPTION) | ||||||||||||||||||||
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THREE MONTHS ENDED
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NINE MONTHS ENDED | TO | ||||||||||||||||||
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APRIL 30,
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APRIL 30,
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APRIL 30, | APRIL 30, | APRIL 30, | ||||||||||||||||
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2010
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2009
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2010 | 2009 | 2010 | ||||||||||||||||
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Expenses
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||||||||||||||||||||
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Consulting fees
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$ | - | $ | - | $ | - | $ | - | $ | 27,780 | ||||||||||
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Filing fees
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2,776 | 1,297 | 5,485 | 4,425 | 44,399 | |||||||||||||||
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Foreign exchange loss
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2,644 | 157 | 2,846 | 426 | 16,670 | |||||||||||||||
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General and administrative
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6,872 | 298 | 7,251 | 618 | 28,504 | |||||||||||||||
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Interest expense
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104 | 87 | 318 | 374 | 16,180 | |||||||||||||||
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Investor relations
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- | - | 65 | 17,989 | ||||||||||||||||
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Professional fees
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27,380 | 4,511 | 48,740 | 20,631 | 188,626 | |||||||||||||||
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Stock-based compensation
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- | - | - | 39,700 | 750,000 | |||||||||||||||
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Resource property expenditures
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- | - | 1,105 | - | 150,114 | |||||||||||||||
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Property examination costs
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1,635 | - | 1,635 | 15,375 | ||||||||||||||||
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Travel and entertainment
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- | - | - | - | 941 | |||||||||||||||
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Net Loss
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$ | (39,776 | ) | $ | (7,985 | ) | $ | (65,745 | ) | $ | (67,874 | ) | $ | (1,256,578 | ) | |||||
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Basic and Diluted Net Loss Per Common Share
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$ | - | $ | - | $ | - | $ | - | ||||||||||||
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Weighted Average Number of Common Shares Outstanding – Basic and Diluted
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31,060,650 | 30,387,516 | 31,060,650 | 29,336,046 | ||||||||||||||||
The accompanying notes are an integral part of these financial statements
STELLAR RESOURCES LTD.
(An Exploration Stage Company)
STATEMENTS OF CASH FLOWS
(Unaudited)
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CUMULATIVE RESULTS OF OPERATIONS FROM APRIL 9, 1999 (INCEPTION)
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||||||||||||
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NINE MONTHS ENDED
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TO
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|||||||||||
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APRIL 30,
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APRIL 30,
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|||||||||||
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2010
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2009
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2010
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||||||||||
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Cash Flows from Operating Activities
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||||||||||||
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Net loss
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$ | (65,745 | ) | $ | (67,874 | ) | $ | (1,256,578 | ) | |||
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Adjustments to reconcile net loss to net cash used in operating activities:
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||||||||||||
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Realized foreign exchange losses on settlement of notes payable
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- | - | 12,523 | |||||||||
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Stock-based compensation
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- | 39,700 | 750,000 | |||||||||
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Accrued interest
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318 | 375 | 18,168 | |||||||||
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Changes in operating assets and liabilities:
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||||||||||||
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Prepaid expenses
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- | (131 | ) | - | ||||||||
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Deposit
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(20,000 | ) | - | (20,000 | ) | |||||||
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Accounts payable and accrued liabilities
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23,306 | (1,378 | ) | 27,620 | ||||||||
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Net cash used in operating activities
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(62,121 | ) | (29,308 | ) | (468,267 | ) | ||||||
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Cash Flows from Financing Activities
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||||||||||||
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Proceeds from issuance of common stock
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- | 40,396 | 130,629 | |||||||||
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Proceeds from notes payable
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- | - | 93,665 | |||||||||
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Advances payable
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(9,666 | ) | 8,542 | 172,690 | ||||||||
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Advances and loans from related parties
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143,286 | - | 143,975 | |||||||||
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Net cash provided by financing activities
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133,620 | 48,938 | 540,959 | |||||||||
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Net Increase in Cash
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71,499 | 19,630 | 72,692 | |||||||||
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Cash, Beginning
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1,193 | (38 | ) | - | ||||||||
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Cash, Ending
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$ | 72,692 | $ | 19,592 | $ | 72,692 | ||||||
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Supplemental Disclosures of Cash Flow Information and Non-Cash Investing and Financing Activities
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||||||||||||
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Interest paid
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$ | - | $ | - | $ | - | ||||||
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Income taxes paid
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$ | - | $ | - | $ | - | ||||||
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Common shares issued on settlement of notes payable and accrued interest
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$ | - | $ | - | $ | 102,573 | ||||||
The accompanying notes are an integral part of these financial statements
6
STELLAR RESOURCES LTD.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2010
(Unaudited)
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1.
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NATURE OF CONTINUED OPERATIONS AND BASIS OF PRESENTATION
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The Company was incorporated in the State of Nevada on April 9, 1999 and is in the exploration stage of its resource property activities.
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. This contemplates that assets will be realized and liabilities and commitments satisfied in the normal course of business. To date, the Company has not generated any revenues from operations and had a working capital deficit of $280,873 and an accumulated deficit of $1,256,578 at April 30, 2010. The Company’s continuance of operations is contingent on raising additional working capital, and on the future development of its potential resource property interests. Accordingly, these factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company is currently negotiating with several parties to provide equity financing sufficient to finance all corporate operations and provide working capital for the next twelve months. Although there is no assurance that management’s plans will be realized, management believes that the Company will be able to continue operations in the future. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue operating as a going concern.
Unaudited Interim Financial Statements
The accompanying unaudited interim financial statements have been prepared in accordance with United States generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q of Regulation S-K. They may not include all information and footnotes required by United States generally accepted accounting principles for complete financial statements. However, except as disclosed herein, there has been no material changes in the information disclosed in the notes to the financial statements for the year ended July 31, 2009 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission. The interim unaudited financial statements should be read in conjunction with those financial statements included in the Form 10-K. In the opinion of management, all adjustments considered necessary for a fair presentation, consisting solely of normal and recurring adjustments have been made. Operating results for the nine months ended April 30, 2010 are not necessarily indicative of the results that may be expected for the year ending July 31, 2010.
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2.
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RECENT ACCOUNTING PRONOUNCEMENTS
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Accounting Standards Codification
The Accounting Standards Codification (ASC) has become the source of authoritative U.S. generally accepted accounting principles (“GAAP”). The ASC only changes the referencing of financial accounting standards and does not change or alter existing GAAP.
Recently Adopted Accounting Pronouncements
Effective August 1, 2009, the Company adopted ASC 855, Subsequent Events (formerly FAS No. 165 “Subsequent Events”). ASC 855 requires companies to recognize in the financial statements the effects of subsequent events that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements. An entity shall disclose the date through which subsequent events have been evaluated, as well as whether that date is the date the financial statements were issued. Companies are not permitted to recognize subsequent events that provide evidence about conditions that did not exist at the date of the balance sheet but arose after the balance sheet date and before financial statements are issued. Some non recognized subsequent events must be disclosed to keep the financial statements from being misleading. For such events a company must disclose the nature of the event, an estimate of its financial effect, or a statement that such an estimate cannot be made. This Statement applies prospectively for interim or annual financial periods ending after June 15, 2009. The adoption of ASC 855 did not have a material impact on the Company’s results of operations and financial position.
7
STELLAR RESOURCES LTD.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2010
(Unaudited)
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2.
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RECENT ACCOUNTING PRONOUNCEMENTS (Continued)
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Certain other recent accounting pronouncements have not been disclosed as they are not applicable to the Company.
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3.
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RESOURCE PROPERTIES
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Texada Island, British Columbia, Proposed Earn In Agreement
On June 15, 2009, the Company entered into an Earn In Agreement with Zyrox Mining Company Ltd. (“Zyrox”), to further explore and develop Zyrox’s mineral tenures located on Texada Island, British Columbia. Under the terms of the Earn In Agreement, Zyrox agreed to make available to the Company its 250 ton per day processing plant, historical exploration data, its bulk test permit to extract 10,000 tons, reclamation bond and intellectual property pertaining to the mineral tenures which comprise 104 mining claims totaling 3,846 hectares. Zyrox also granted the Company the exclusive right to acquire a 70% working interest in the property on or before June 15, 2010.
In order to acquire its 70% interest in the property the Company must provide Cdn$1,000,000 working capital in order to commission the production facility and commence bulk testing, explore and bulk test Zyrox’s portfolio of mining assets and commission a geological report. The Company has also agreed to pay Cdn$4,000 per month for the use of the processing plant during the life of the agreement. Within 30 days of receipt of a third party evaluation of the mineral interests and pilot plant, the Company will negotiate the definitive terms to acquire a 70% working interest in the property.
As of July 31, 2009 the Company has incurred property investigation costs amounting to US$14,270 (2008 - $nil) in relation to this agreement. During the nine month period ended April 30, 2010 the Company incurred $1,105 in expenses pursuant to the agreement.
On November 10, 2009, the Company terminated the Earn In Agreement with Zyrox.
Chunya Mining District of Mbeya Tanzania, Earn-in Agreement
On September 9, 2008, the Company entered into a Farm-In Agreement with Canafra Mineral Exploration Corp., a Canadian private company, and Two Drums G & C Company Limited, a Tanzanian private company, (jointly “Canafra”), whereby the Company has the right to acquire a 50% interest in a mineral property in Tanzania. The property consists of three Mining and Prospecting Licenses and the Granted Mining and Prospecting Concessions comprising approximately 26 square kilometers, in the Chunya mining district of Mbeya Tanzania. The operator of the property will be Canafra.
The funding provisions and share issuance are subject to the Company receiving the Mining and Prospecting Licenses for the property, which to date have not yet been received.
In order to acquire its full interest in the property the Company will advance to Canafra $1,100,000 to fund exploration expenditures and provide working capital in phased payments and also issue 4,000,000 restricted common shares to Canafra in stages as described below. The Company will earn its interest at a vested rate of 10% based on its funding efforts until fully funded.
8
STELLAR RESOURCES LTD.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2010
(Unaudited)
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3.
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RESOURCE PROPERTIES (Continued)
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Chunya Mining District of Mbeya Tanzania, Earn-in Agreement (Continued)
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Common
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||||||||
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Cash
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Stock to be
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|||||||
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Consideration
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Issued
|
|||||||
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Phase I – Conditional upon receipt of Mining and
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||||||||
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Prospecting Licenses
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||||||||
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Within 30 days of receiving the Mining and Prospecting Licenses
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$ | 60,000 | - | |||||
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Within 60 days of receiving the Mining and Prospecting Licenses
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80,000 | - | ||||||
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Within 90 days of receiving the Mining and Prospecting Licenses
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80,000 | - | ||||||
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Within 120 days of receiving the Mining and Prospecting Licenses
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80,000 | - | ||||||
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Within 150 days of receiving the Mining and Prospecting Licenses
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80,000 | - | ||||||
| 380,000 | - | |||||||
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Phase II – Within 90 days of completion of Phase I
|
||||||||
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including geological work to be done by Canafra
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380,000 | 2,000,000 | ||||||
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Phase III – Within 90 days of completion of Phase II or
|
||||||||
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within a mutually agreed timeframe, including
|
||||||||
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further geological work done by Canafra
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340,000 | 2,000,000 | ||||||
| $ | 1,100,000 | 4,000,000 | ||||||
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4.
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PROPOSED AQUISITION AND SALE AGREEMENTS
|
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a)
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Acquisition of Elk Hills Heavy Oil, LLC and Four Bear Heavy Oil, LLC
|
On March 3, 2010 the Company entered into an agreement to acquire 100% of Elk Hills Heavy Oil, LLC (“EHHO”) and Four Bear Heavy Oil, LLC. (“FBHO”) from a newly appointed director and his business associate. The EHHO assets consists of more than 20,000 continuous acres of oil and gas leases in Carbon County, Montana, and FBHO assets consists of more than 6,400 acres of oil and leases in Park County, Wyoming.
In consideration for the acquisitions the Company will:
a) issue of a total of three million common shares
b) make cash payments of $250,000 on or before December 31, 2011.
c) grant the vendors a net profit interest of five per cent on the properties
As at April 30, 2010, the transaction had not closed and the Company had advanced $20,000 as a non-refundable deposit in connection with the acquisition. On June 10, 2010, the transaction closed.
9
STELLAR RESOURCES LTD.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2010
(Unaudited)
|
4.
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PROPOSED AQUISITION AND SALE AGREEMENTS (Continued)
|
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b)
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Sale of 50% interest in EHHO to Elk Hills Petroleum Canada Ltd.
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On March 8, 2010 the Company entered into an agreement (amended April 13, 2010) with Elk Hills Petroleum Canada Ltd. (“EHPC”) whereby EHPC would acquire a 50% interest in EHHO for $3,000,000. The agreement requires EHPC to complete its due diligence on or before June 30, 2010.
As consideration for the sale the Company will receive staged payments as follows:
|
|
(i)
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A payment of $1,250,000 is due on or before June 30, 2010.
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|
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(ii)
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A payment of $1,750,000 is due within thirty days after EHPC has received a copy of a third party prepared report on drill cores obtained from the EHHO leases and the reservoir study conducted on the EHHO leases.
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5.
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ADVANCES PAYABLE
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Advances received from the Company’s former president. The advances are unsecured, non-interest bearing and have no specific terms of repayment.
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6.
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DUE TO RELATED PARTIES
|
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APRIL 30,
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JULY 31,
|
|||||||
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2010
|
2009
|
|||||||
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(Note 10)
|
||||||||
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i) Loan Payable
|
||||||||
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Loan from a company related by virtue of a common director. The amount is unsecured, bears no interest and falls due on June 30, 2010.
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$ | 100,000 | $ | - | ||||
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ii) Due to Directors
|
||||||||
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Advances received from two directors. The advances are unsecured, non-interest bearing and have no specific terms of repayment
|
||||||||
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Amounts payable for reimbursement of corporate expenses
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43,975 | 689 | ||||||
| $ | 143,975 | $ | 689 | |||||
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7.
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NOTES PAYABLE
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As of April 30, 2010 the Company had received a total of $22,874 (Cdn$23,000), (July 31, 2009 -$21,181, Cdn$23,000) from unrelated third parties by way of unsecured demand promissory notes bearing interest at the Bank of Canada prime rate plus 2% (2.5% as of April 30, 2010). As at April 30, 2010 $6,406 (July 31, 2009 - $5,541) of accrued interest is payable. Of the notes payable, $4,975 (Cdn$5,000) are due to a director.
10
STELLAR RESOURCES LTD.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2010
(Unaudited)
|
7.
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NOTES PAYABLE (Continued)
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During the nine months ended April 30, 2010, the Company recorded a foreign exchange transaction loss of $1,844 (April 30, 2009: gain of $3,461) in connection with these notes payable and accrued interest payable as a result of fluctuations in the foreign exchange rate.
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8.
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CAPITAL STOCK
|
The Company’s capitalization is 200,000,000 authorized common shares with a par value of $0.001 per share.
As of April 30, 2010 and July 31, 2009, the Company has 31,060,650 common shares issued and outstanding.
As of April 30, 2010 and July 31, 2009, the Company has no outstanding stock options or warrants.
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9.
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SUBSEQUENT EVENT
|
On June 10, 2010, the agreement to acquire 100% of EHHO and FBHO closed.
The Company evaluated subsequent events through the financial statements filing.
Item 2. Management Discussion and Analysis of Financial Condition and Results of Operations
Our actual results could differ materially from those reflected in these forward-looking statements as a result of certain factors that include, but are not limited to, the risks discussed in the Section entitled “Risk Factors”. Please see the statements contained under the Section entitled “Forward-Looking Statements”.
Except for historical information, the following Management’s Discussion and Analysis contains forward-looking statements based upon current expectations that involve certain risks and uncertainties. Such forward-looking statements include statements regarding, among other things, (a) our estimates of mineral reserves and mineralized material, (b) our projected sales and profitability, (c) our growth strategies, (d) anticipated trends in our industry, (e) our future financing plans, (f) our anticipated needs for working capital, (g) our lack of operational experience, and (h) the benefits related to ownership of our common stock. Forwarding-looking statements, which involve assumptions and describe our future plans, strategies, and expectations, are generally identifiable by use of the words “may,” “will,” “should,” “expect” “anticipate,” “estimate,” “believe,” “intend,” or “project” or the negative of these words or other variations on these words or comparable terminology. This information may involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements expressed or implied by any forward-looking statements. These statements may be found under “Management’s Discussions and Analysis of Financial Condition and Results of Operations” and “Business” as well as in this Form 10-K generally. Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including, without limitation, the risks outlined under “Risk Factors” and matters described in this Form 10-Q generally. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this Form 10-Q will in fact occur as projected.
OVERVIEW
Since our formation on April 9, 1999, we have been in the pre-exploration stage and are not operators of any mines nor are we engaged in any mineral production or sales activities. We have a minimum amount of cash and have not yet developed any producing mines. We have no history of any earnings. There is no assurance that we will be a profitable company. We presently operate with minimum overhead costs and need to raise additional funds in the next 12 months, either in the forms of loans or issuance of equity, in order to continue our operations. We were primarily engaged in the acquisition and exploration of mineral resource properties. We have recently focused our efforts on the acquisition and further exploration and development of oil and gas properties.
On December 6, 2009 Mr. Lee Balak tendered his resignation as our Chief Executive Officer and director. Mr. Luigi Rispoli was appointed as our Chief Executive Officer and Chief Financial Officer. On March 3rd 2010 we announced the appointment of Mr. Ray Jefferd to the Board of Directors. Mr. Jefferd also took the position of President and Chief Executive Officer. We also welcomed Mr. Panfilo Rosatone as a director. Mr. Luigi Rispoli resigned his position as our President and Chief Executive Officer, Mr. Rispoli will continue as a director and as our Chief Financial Officer.
Concurrent to the above changes of our officers and directors, we announced entering into an agreement to acquire 100% of Elk Hills Heavy Oil, LLC ("Elk Hills") and Four Bear Heavy Oil, LLC (“Four Bear”) from Mr. Ray Jefferd and Mr. Glen Landry (the "Sellers"). The Elk Hills assets consists of more than 20,000 continuous acres of oil and gas leases in Carbon County, Montana, and Four Bear Heavy Oil, LLC assets consists of more than 6,400 acres of oil and leases in Park County, Wyoming. We will have an area of mutual interest with the Sellers to acquire additional leases within one mile of the borders of the existing oil and gas leases, excluding the properties in Big Horn County Montana.
We also announced that an agreement with Elk Hills Petroleum Canada Ltd. (EHPC) for an investment of $3,000,000 to acquire a 50% interest in our Elk Hills property.
Results of Operations for the Three Months Ended April 30, 2010
We have not generated any revenues from operations since our incorporation on April 9, 1999 through April 30, 2010. During the three month period ended April 30, 2010 the Company incurred a loss of $39,776. The loss for the comparable three month period of the prior year was $7,985. During the three month period ended April 30, 2010 professional fees, comprising legal, accounting and audit costs increased to $27,380 (2009 - $4,511) primarily as a result of legal fees incurred as a result due diligence on the potential acquisition of Elk Hills and Four Bear. Interest expense increased to $104 (2009 - $87) The interest is based on Canadian dollar denominated loans which has been reduced as a result of falling interest rates. General and administrative expenses increased to $6,872 (2009 - $298) as a result of the Company renting premises in Vancouver BC, developing a Corporate Website and incurring other office related expenses in the current quarter which were not experienced in the comparative quarter. We also experienced a foreign exchange loss of $2,644 (2009 – $157) as a result of foreign exchange changes during the quarter which affected transactions not denominated in the US dollar, and filing fees increased to $2,776 (2009 - $1,297). The Company incurred $nil (2009 - $1635) in property examination costs.
Sales and Marketing Expenses: We have incurred no sales and marketing expense since the date of inception due to the fact that we are in the pre-exploration stage of our business.
Our activities have been financed from proceeds of shareholders, related or third party loans. We do not anticipate earning revenues until such time as we have entered into commercial production of any mineral claims. We are presently in the pre-exploration stage of our business and we can provide no assurance that we will discover commercially exploitable levels of mineral resources on any properties, or if such resources are discovered, that we will enter into commercial production of any claims.
Net Loss for the Nine Month Period Ended April 30, 2010
For the nine month period ended April 30, 2010, we recorded an operating loss of $65,745 compared to a loss of $67,874, for the comparative nine month period of the prior year. The loss consists of: management fee - stock based compensation of $nil, (2009 - $39,700) filing fees of $5,485 (2009 - $4,425); interest expense of $318 (2009 - $374), general and administrative expenses of $7,251 (2009 - $618), professional fees of $48,740 (2009 - 20,631), investor relations of $nil (2009 - $65), resource property expenditures of $1,105 (2009 - $nil) and a loss on foreign exchange of $2,846 (2009 - $426).
Cumulative Loss to April 30, 2010
We have not generated any revenues from operations since our incorporation on April 9, 1999 through April 30, 2010. We have recorded a cumulative loss from Inception to April 30, 2010 totalling $1,256,578. This loss comprises the following: management fees - stock based compensation of $750,000; consulting fees of $27,780; filing fees of $44,399, foreign exchange losses of $16,670, general and administrative expenses of $28,504, interest expense of $16,180, investor relations charges of $17,989, professional fees of $188,626, resource property expenditures of $150,114; property examination costs of $15,375 and travel and entertainment charges of $941.
There can be no assurance that we will ever achieve profitability or that revenues will be generated and sustained in the future. We are dependent upon obtaining additional and future financing to pursue our exploration activities.
Liquidity and Further Capital Resources
At April 30, 2010, we had assets of $92,692 consisting of cash of $72,692 and a non-refundable deposit of $20,000. Total stockholders’ deficit was $280,873 at April 30, 2010. We are a pre-exploration stage company and, since inception, have experienced significant changes in liquidity, capital resources and shareholders’ equity.
To finance the Company’s operations the Company has relied upon cash on hand, advances from shareholders and financing via loans and debt financing.
As of April 30, 2010, we have advances payable of $172,690 (July 31, 2009 - $182,356) relating to advances received from the former president.
As of April 30, 2010 amounts owing to related parties totaled 143,975 (July 31, 2010 - $689) comprising the following:
|
APRIL 30,
|
JULY 31,
|
|||||||
|
2010
|
2009
|
|||||||
|
i) Loan Payable
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||||||||
|
Loan from a company related by virtue of a common director. The amount is unsecured, bears no interest and falls due on June 30, 2010.
|
$ | 100,000 | $ | - | ||||
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ii) Due to Directors
|
||||||||
|
Advances received from two directors. The advances are unsecured, non-interest bearing and have no specific terms of repayment
|
||||||||
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Amounts payable for reimbursement of corporate expenses
|
43,975 | 689 | ||||||
| $ |
143,975
|
$ |
689
|
|||||
Debt financing received at April 30, 2010 from shareholders secured by Promissory Notes together with accrued interest amounted to $29,280 (Cdn$29,442). Interest is calculated on the basis of a 365 or 366 day year on the unpaid principal balance from day to day and computed from the date of the Promissory Note until the principal amount is paid completely at Bank of Canada prime rate per annum plus two percent. These notes are payable upon demand. If we are not able to get further financing, we may not be able to continue as a going concern and we may have to delay exploration or cease our operations and liquidate our business.
The Company has not raised any equity from stock issuances during the nine month period ended April 30, 2010.
To date, the Company has not generated any revenues from operations and had a working capital deficit of $280,873 and an accumulated deficit of $1,256,578 at April 30, 2010. The Company’s continuance of operations is contingent on raising additional working capital, and on the future development of its potential resource property interests. Accordingly, these factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company is currently negotiating with several parties to provide equity financing sufficient to finance additional exploration work and provide working capital for the next twelve months. Although there is no assurance that management’s plans will be realized, management believes that the Company will be able to continue operations in the future.
RESOURCES PROPERTIES
Chunya Mining District of Mbeya Tanzania
On September 9, 2008, the Company entered into a Farm-In Agreement with Canafra Mineral Exploration Corp., a Canadian private company, and Two Drums G & C Company Limited, a Tanzanian private company, (jointly “Canafra”), whereby the Company has the right to acquire a 50% net profit interest in the subject mineral property in Tanzania. The property consists of three Mining and Prospecting Licenses and the Granted Mining and Prospecting Concessions comprising approximately 26 square kilometers, in the Chunya mining district of Mbeya Tanzania. The operator of the property will be Canafra.
|
Common
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||||||||
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Cash
|
Stock to be
|
|||||||
|
Consideration
|
Issued
|
|||||||
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Phase I – Conditional upon receipt of Mining and
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Prospecting Licenses
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||||||||
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Within 30 days of execution of agreement
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$ | 60,000 | - | |||||
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Within 60 days of execution of agreement
|
80,000 | - | ||||||
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Within 90 days of execution of agreement
|
80,000 | - | ||||||
|
Within 120 days of execution of agreement
|
80,000 | - | ||||||
|
Within 150 days of execution of agreement
|
80,000 | - | ||||||
| 380,000 | - | |||||||
|
Phase II – Within 90 days of completion of Phase I
|
||||||||
|
including geological work to be done by Canafra
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380,000 | 2,000,000 | ||||||
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Phase III – Within 90 days of completion of Phase II or
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||||||||
|
within a mutually agreed timeframe, including
|
||||||||
|
further geological work done by Canafra
|
340,000 | 2,000,000 | ||||||
| $ | 1,100,000 | 4,000,000 | ||||||
The funding provisions are subject to the Company receiving the Mining and Prospecting Licenses for the subject property, which to date have not yet been received.
In order to acquire its full interest in the property the Company will advance to the operator $1,100,000 to fund exploration expenditures and provide working capital in phased payments and also issue 4,000,000 restricted common shares to the operator in stages as described below. The Company will earn its interest at a vested rate of 10% based on its funding efforts until fully funded.
The Company awaits formal licensing documentation from Canafra showing that the Mining and Prospecting Licenses with the geographic coordinates are 100% owned by Canafra. The delay is as a result of Canafra experiencing certain setbacks, due to the current economic conditions, and there can be no assurances that we will be able to obtain sufficient funding in order to complete our obligations under the agreement.
Texada Island British Columbia, Earn In Agreement
On June 15, 2009, the Company entered into a proposed Earn In Agreement with Zyrox Mining Company Ltd. (“Zyrox”), to further explore and develop Zyrox’s mineral tenures located on Texada Island, British Columbia.
On November 10, 2009 the Company terminated the earn in agreement with Zyrox.
Acquisition of Oil and Gas Properties
On March 3, 2010, we announced entering into an agreement to acquire 100% of Elk Hills Heavy Oil, LLC and Four Bear Heavy Oil, LLC from Mr. Ray Jefferd and Mr. Glen Landry. The Elk Hills assets consists of more than 20,000 continuous acres of oil and gas leases in Carbon County, Montana. The Four Bear Heavy Oil, LLC assets consists of more than 6,400 acres of oil and leases in Park County, Wyoming. We will have an area of mutual interest with the Sellers to acquire additional leases within one mile of the borders of the existing oil and gas leases, excluding the properties in Big Horn County Montana.
|
|
a)
|
Acquisition of Elk Hills Heavy Oil, LLC and Four Bear Heavy Oil, LLC
|
On March 3, 2010 the Company entered into an agreement to acquire 100% of Elk Hills Heavy Oil, LLC (“EHHO”) and Four Bear Heavy Oil, LLC. (“FBHO”) from a newly appointed director and his business associate. The EHHO assets consists of more than 20,000 continuous acres of oil and gas leases in Carbon County, Montana, and FBHO assets consists of more than 6,400 acres of oil and leases in Park County, Wyoming.
In consideration for the acquisitions the Company will:
a) issue of a total of three million common shares
b) make cash payments of $250,000 on or before December 31, 2011.
c) grant the vendors a net profit interest of five per cent on the properties
As at April 30, 2010, the transaction had not closed and the Company had advanced $20,000 as a non refundable deposit in connection with the acquisition. On June 10, 2010, the transaction closed.
|
|
b)
|
Sale of 50% interest in EHHO to Elk Hills Petroleum Canada Ltd.
|
On March 8, 2010 the Company entered into an agreement (amended April 13, 2010) with Elk Hills Petroleum Canada Ltd. (“EHPC”) whereby EHPC would acquire a 50% interest in EHHO for $3,000,000. The agreement requires EHPC to complete its due diligence on or before June 30, 2010.
As consideration for the sale the Company will receive staged payments as follows:
|
(i)
|
A payment of $1,250,000 is due on or before June 30, 2010.
|
|
(ii)
|
A payment of $1,750,000 is due within thirty days after EHPC has received a copy of a third party prepared report on drill cores obtained from the EHHO leases and the reservoir study conducted on the EHHO leases.
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Item 3. Quantitative and Qualitative Disclosure About Market Risk
Not applicable.
Item 4T. Controls and Procedures
As of April 30, 2010, the end of our third fiscal quarter covered by this report, we carried out an evaluation, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of April 30, 2010. This evaluation was carried out under the supervision and with the participation of our Chief Financial Officer, Mr. Luigi Rispoli. Based upon that evaluation, our Chief Financial Officer concluded that, as of April 30, 2010, our disclosure controls and procedures are satisfactory. There have been no changes in our internal controls over financial reporting during the quarter ended April 30 2010. Effective June 1, 2010 the Company adopted an Audit Committee Charter and formed an Audit Committee comprised of Ray Jefferd, Luigi Rispoli and Panfilo Rosatone. The Audit Committee Charter as adopted follows below.
STELLAR RESOURCES LTD.
AUDIT COMMITTEE CHARTER
Purpose
To assist the board of directors in fulfilling its oversight responsibilities for the financial reporting process, the system of internal control over financial reporting, the audit process, and the company’s process for monitoring compliance with laws and regulations and the code of conduct.
Authority
The audit committee has authority to conduct or authorize investigations into any matters within its scope of responsibility. It is empowered to:
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●
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Retain outside counsel, accountants or others to advise the committee or assist in the conduct of an investigation
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|
●
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Seek any information it requires from employees –all of whom are directed to cooperate with the committee’s requests –or external parties
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●
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Meet with company officers, external auditors or outside counsel, as necessary
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Composition
The audit committee will consist of at least three and no more than six members the majority of which shall also be members of the board of directors. The board or its nominating committee will appoint committee members and the committee chair. Each committee member will be financially literate, as defined by applicable regulation and the board of directors. At least one member shall have expertise in financial reporting.
Meetings
The committee will meet at least four times a year, with authority to convene additional meetings, as circumstances require. All committee members are expected to attend each meeting, in person or via tele –or video-conference. The committee will invite members of management, auditors or others to attend meetings and provide pertinent information, as necessary. It will hold private meetings with auditors (see below) and executive sessions. Meeting agendas will be prepared and provided in advance to members, along with appropriate briefing materials. Minutes will be prepared.
Responsibilities
The committee will carry out the following responsibilities:
Financial Statements
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●
|
Review significant accounting and reporting issues, including complex or unusual transactions and highly judgmental areas, and recent professional and regulatory pronouncements, and understand their impact on the financial statements
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●
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Review with management and the external auditors the results of the audit, including any difficulties encountered
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|
●
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Review the annual financial statements, and consider whether they are complete, consistent with information known to committee members, and reflect appropriate accounting principles
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●
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Review other sections of the annual report and related regulatory filings before release and consider the accuracy and completeness of the information
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●
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Review with management and the external auditors all matters required to be communicated to the committee under generally accepted auditing standards
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|
●
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Understand how management develops interim financial information, and the nature and extent of internal and external auditor involvement
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|
●
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Review interim financial reports with management and the external auditors, before filing with regulators, and consider whether they are complete and consistent with the information known to committee members
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Internal Controls
|
●
|
Consider the effectiveness of the company’s internal control over annual and interim financial reporting, including information technology security and control
|
|
●
|
Understand the scope of internal and external auditors’ review of internal control over financial reporting, and obtain reports on significant findings and recommendations, together with management’s responses
|
Internal Audit
|
●
|
Determine annually whether the company should establish an internal audit function.
|
|
●
|
Currently the company does not have an internal audit function.
|
External Audit
|
●
|
Review the external auditors’ proposed audit scope and approach, including coordination of audit effort with internal audit
|
|
●
|
Review the performance of the external auditors, and exercise final approval on the appointment or discharge of the auditors
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|
●
|
Review and confirm the independence of the external auditors by obtaining statements from the auditors on relationships between the auditors and the company, including non-audit services, and discussing the relationship with the auditors
|
|
●
|
On a regular basis, meet separately with the external auditors to discuss any matters that the committee or auditors believe should be discussed privately
|
Compliance
|
●
|
Review the effectiveness of the system for monitoring compliance with laws and regulations and the results of management’s investigation and follow-up (including disciplinary action) of any instances of noncompliance
|
|
●
|
Review the findings of any examinations by regulatory agencies, and any auditor observations
|
|
●
|
Review the process for communicating the code of conduct to company personnel, and for monitoring compliance therewith
|
|
●
|
Obtain regular updates from management and company legal counsel regarding compliance matters
|
Reporting Responsibilities
|
●
|
Regularly report to the board of directors about committee activities, issues and related recommendations
|
|
●
|
Provide an open avenue of communication between internal audit, if any, the external auditors and the board of directors
|
|
●
|
Review any other reports the company issues that relate to committee responsibilities
|
Other Responsibilities
|
●
|
Perform other activities related to this charge as requested by the board of directors
|
|
●
|
Institute and oversee special investigations as needed
|
|
●
|
Confirm annually that all responsibilities outlined in this charter have been carried out
|
|
●
|
Evaluate the committee’s and individual members’ performance on a regular basis
|
Effective
|
●
|
This Audit Committee Charter is effective as of June 1, 2010.
|
|
●
|
Review and assess the adequacy of the committee charter annually, requesting board approval for proposed changes
|
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported, within the time period specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Limitations on effectiveness of Internal Controls
Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving our objectives and our Chief Executive Officer and Chief Financial Officer conclude that our disclosure controls and procedures are effective at that reasonable assurance level. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the internal control. The design of any system controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, control may become inadequate because of changes in conditions, or the degree of compliance within the policies or procedures may determine.
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
We are not aware of any pending litigation nor do we have any reason to believe that any such litigation exists.
Item 1A. Risk Factors
A smaller reporting company is not required to provide the information required by this Item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to Vote a of Security Holders
No matters were submitted to a vote of the Company's shareholders during the three months ended April 30, 2010.
Item 5. Other Information
Reports were filed by the Issuer March 4th and 10th 2010 respectively.
Item 6. Exhibits
|
|
|
|
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Dated: June 17, 2010
STELLAR RESOURCES LTD.
|
|
By:
|
/s/ Ray Jefferd | |
| Ray Jefferd | |||
| President and Chief Executive Officer | |||
| By: | /s/ Luigi Rispoli | ||
| Luigi Rispoli | |||
| Director and Chief Financial Officer | |||
21