SAEI Supatcha Resources Inc (CE)

 

 

 

 

SUPATCHA RESOURCES INC.

(AN EXPLORATION STAGE COMPANY)

NOTES TO CONDENSED UNAUDITED FINANCIAL STATEMENTS

AUGUST 31, 2010

(STATED IN U.S. DOLLARS)

(H) Income Taxes

 

The Company accounts for income taxes under the Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes” (“ASC 740”). Under ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

 

(I) Cash and Cash Equivalents

 

Cash and cash equivalents are highly liquid investments, such as term deposits with major financial institutions, having a maturity of three months or less at acquisition, that are readily convertible to contracted amounts of cash.

     

NOTE 2

MINERAL PROPERTY

 

Bonanza Property

 

Pursuant to a mineral property purchase and sale agreement dated October 22, 2007, the Company acquired a 100% interest in the 9 Units Mineral Claim, known as the Bonanza Mineral Claim, located in the Greenwood Mining Division of British Columbia, Canada, for a purchase price of $6,500.

Barlevskoye and Vynohradiv Properties

On February 16, 2010, the Company has entered into a letter of intent, and on April 5, 2010 signed a definitive agreement to acquire a 90% interest in the Barlevskoye and Vynohradiv Gold licenses in the Southwest Ukraine. Under the proposed terms, the Company will pay $7,500,000 and will issue 500,000 common shares to Poltavas Capital Management Ltd. as consideration for the 90% interest in the properties held by way of two special permissions issued by the Government of Ukraine.  As of August 31, 2010, $2,000,000 has been spent towards this acquisition.

 

SUPATCHA RESOURCES INC.

(AN EXPLORATION STAGE COMPANY)

NOTES TO CONDENSED UNAUDITED FINANCIAL STATEMENTS

AUGUST 31, 2010

(STATED IN U.S. DOLLARS)

Maiskoe Property

On April 30, 2010, the Company entered in the letter of intent with Derzhnagldo Polymetals to acquire 98% interest in the mining claims of their property in Southern Ukraine. The agreement is binding and subject to a number of conditions, including financing and due diligence.

 

Under the proposed terms, the Company will pay a total of $3,500,000 of which $200,000 will be paid as a non-refundable deposit, with the balance to be paid within 45 days of the signing of the Letter of Intent (the payment terms were extended) after which the Company will own 98% of the mine (including all of the capital equipment) and the mineral concessions. The Company has also agreed to invest a further US$2,800,000 in expanding the current operation over the next year. The deal is subject to due diligence period during which time the Company will carry out additional surface sampling and a limited diamond drill program.  As of August 31, 2010, $500,000 has been spent towards this acquisition.

   

NOTE 3

STOCKHOLDERS’ EQUITY (DEFICIENCY)

 

On October 15, 2007, the Company issued 32,500,000 shares of common stock at par value to its founders for cash of $6,500 ($0.001 par value per share).

 

On December 12, 2007, the Company issued 28,500,000 shares of common stock for cash of $57,000. The discount of $1,071 on sale of shares was recognized due to currency rate fluctuations.

 

On May 17, 2010, the Board of Directors approved a 5 for 1 forward stock split for all shareholders of the Company as of June 30, 2010. All share and per share amounts have been retroactively restated to reflect this stock split.

As of August 31, 2010, the Company’s officers contributed rent, administrative expenses and interest expense with a fair value of $15,556 to the Company since inception (See Note 4).

   

NOTE 4

RELATED PARTY

 

As of August 31, 2010, the Company’s officers contributed rent, administrative expenses and interest expense with a fair value of $15,556 to the Company since inception (See Note 3).

 

As of August 31, 2010, the Company’s former President and current stockholder loaned the Company $6,150. This amount is unsecured, bears no interest and is due on demand.

During the period ended August 31, 2010, the Company’s President loaned the Company $0. The total balance owed to the President as of August 31, 2010 is $29,800. This amount is unsecured, bears no interest and is due on demand.

  

NOTE 5

FINANCING

 

b) On April 7, 2010, the Company announced the execution of an agreement with Melco Investments, Ltd. (“MIL”), providing for a $10,000,000 financing. This financing is in the form of a convertible debenture with terms stipulating an interest rate of 8% and a loan repayment term of 24 months from the date of execution of the agreement, by way of cash or through the conversion of shares of the Company’s stock.  The repayment terms of the financing are amenable to the Company’s property development schedule and to future financings plans to retire the debt.

The securities potentially offered to the investor, under the terms of the financing, will not be registered under the Securities Act of 1933 as amended (the "Act"), and may not be offered or sold in the United States absent of registration, or an applicable exemption from registration, under the Act

As of August 31, 2010, $5,000,000 of the proceeds have been received the Company.

SUPATCHA RESOURCES INC.

(AN EXPLORATION STAGE COMPANY)

NOTES TO CONDENSED UNAUDITED FINANCIAL STATEMENTS

AUGUST 31, 2010

(STATED IN U.S. DOLLARS)

NOTE 6

CONCENTRATION OF CREDIT RISK

 

The Company maintains its operating cash balances in banks located in US financial institutions. The Federal Depository Insurance Corporation (FDIC) insures accounts at each institution up to $250,000.

 

NOTE 7

GOING CONCERN

 

The accompanying financial statements included herein have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. The Company has accumulated a deficit of $387,389 and has used cash from operations of $366,647 since inception, has yet to achieve profitable operations and further losses are anticipated in the development of its business, raising substantial doubt about the Company’s ability to continue as a going concern. Its ability to continue as a going concern is dependent upon the ability of the Company to generate profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. These financial statements do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary should the Company be unable to continue as a going concern. The Company anticipates that additional funding will be in the form of equity financing from the sale of common stock. The Company may also seek to obtain short-term loans from the directors of the Company. There can be no assurance that the Company will be successful in obtaining such financing, or that it will attain positive cash flow from operations.

 

 

 

Plan of Operation

 

We are an exploration stage company. We have not yet started operations or generated or realized any revenues from our business operations.

 

Our auditors have issued a going concern opinion. This means that there is substantial doubt that we can continue as an ongoing business for the next twelve months unless we obtain additional capital to cover our financial obligations. This is because we have not generated any revenues and no revenues are anticipated until we identify minerals worthy of exploration and begin removing and selling such minerals. Accordingly, we must raise cash from sources other than the sale of minerals found on the property. We have negotiated a source of debt financing to fund our operations and development, but the Company will not receive any proceeds from this financing source until the next fiscal year. Our other sources for cash at this time are loans from related parties and additional sales of common stock. Our success or failure will be determined by what additional financing we obtain and what we find under the ground.

 

If we find mineralized material and it is economically feasible to remove the mineralized material, we will attempt to raise additional money through a subsequent private placement, public offering or through loans. If we do not have enough money to complete our exploration of the property, we will have to find alternative sources, like a second public offering, a private placement of securities, or loans from our officers or others.

 

Our officers and directors are unwilling to make any commitment to loan us any money except to cover expenses relating to reclamation if materialized material is not found at this time. At the present time, we have made arrangements to raise additional cash financing, but this financing is subject to availability from the prospective lender and their due diligence of our prospective projects.  If we need additional cash and can't raise it, we will either have to suspend activities until we do raise the cash, or cease activities entirely. Other than as described in this paragraph, we have no other financing plans.

 

Even if we continue with the Bonanza mineral claim and complete our current exploration program and it is successful in identifying a mineral deposit, we will have to spend substantial funds on further drilling and engineering studies before we will know if we have a commercially viable mineral deposit, a reserve.  Additionally, the Company has committed to the purchase and development of several other mineral properties located in the Ukraine, which are contingent upon the availability of financing proceeds.

 

We will be conducting research in the form of exploration of the property. Our exploration program is explained in as much detail as possible in the business section of this prospectus. We are not going to buy or sell any plant or significant equipment during the next twelve months. We will not buy any equipment until we have located a reserve and we have determined it is economical to extract the minerals from the land.

 

We do not intend to interest other companies in the property if we find mineralized materials. We intend to try to develop the reserves ourselves.

 

If we are unable to complete any phase of exploration because we don’t have enough money, we will cease activities until we raise more money. If we can’t or don’t raise more money, we will cease activities. If we cease activities, we don’t know what we will do and we don’t have any plans to do anything.

 

We do not intend to hire additional employees at this time. All of the work on the property will be conduct by unaffiliated independent contractors that we will hire. The independent contractors will be responsible for surveying, geology, engineering, exploration, and excavation. The geologists will evaluate the information derived from the exploration and excavation and the engineers will advise us on the economic feasibility of removing the mineralized material.

 

 

RESULTS OF OPERATIONS

 

Results from Operations for the three months ended August 31, 2010 and 2009:

 

As of August 31, 2010, the Company had total assets of $4,736,027 consisting of $2,231,732 in cash, $4,295 in prepaid expenses and $2,500,000 in mineral property interests.

 

The Company’s liabilities at August 31, 2010, totaled $5,045,431 consisting of $9,481 in accounts payables and accrued liabilities, $35,950 due to a related party and a $5,000,000 debenture loan.

 

For the six month period ending August 31, 2010, the Company generated no revenues and has incurred operating expenses of $281,667 consisting of $18,227 in accounting and audit fees, $76,159 in consulting fees, $114,762 in exploration costs, $29,494 in general and administrative expenses, $29,985 in investor relations fees, $4,655 in listing and filing fees and $8,385 in legal fees.  For the six month period ending August 31, 2009, the Company generated no revenues and incurred operating expenses of $19,638 consisting of $11,745 in accounting and audit fees, $1,300 in exploration costs, $3,102 in general and administrative expenses, $991 in listing and filing fees and $2,500 in legal fees.

 

Liquidity and Capital Resources

 

As of August 31, 2010, our total assets were $4,736,027 and our total liabilities were $5,045,431. Cash and prepaid expenses were not the company’s sole asset and resource. However, since the Company has no revenues to sustain its operations, the independent auditors of the Company have expressed substantial doubt about the Company’s ability to continue as a going concern.

 

Our present sources of cash may not be adequate to support our operations and plans for the next twelve months. If we are unable to raise additional cash to support our operation for the next twelve months, we may cease our operation as a going concern.

 

As of February 28, 2010, our total assets were $7,511 and our total liabilities were $37,657.

 

CRITICAL ACCOUNTING POLICIES

 

The Company has identified the policies outlined below as critical to our business operations and an understanding of our results of operations. The list is not intended to be a comprehensive list of all of our accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by accounting principles generally accepted in the United States, with no need for management's judgment in their application. The impact and any associated risks related to these policies on our business operations is discussed throughout Management's Discussion and Analysis or Plan of Operations where such policies affect our reported and expected financial results. For a detailed discussion on the application of these and other accounting policies, see the Notes to the August 31, 2010, Financial Statements. Note that our preparation of the financial statements requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of our financial statements, and the reported amounts of revenue and expenses during the reporting period. There can be no assurance that actual results will not differ from those estimates.