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 Exchange
Act of 1934
For the quarterly period ended September 30, 2010
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from ____________ to ____________
Commission File No. 333-158721
TOPAZ RESOURCES, INC.
(Exact name of Registrant as specified in its charter)
Florida 26-4090511
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1012 North Masch Branch Road
P.O. Box 2057
Denton, TX 76207-2057
(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code: (940) 243-7744
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Exchange Act 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 at least the
past 90 days. Yes [X] 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 "accelerated filer, large accelerated filer and smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] 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). Yes [ ] No [X]
There were 507,600,000 shares of the Registrant's $0.0001 par value common stock
outstanding as of November 16, 2010.
TOPAZ RESOURCES, INC.
INDEX
Page No.
--------
Part I. Financial Information
Item 1. Financial Statements 3
Condensed Balance Sheets
September 30, 2010 (Unaudited) and December 31, 2009 3
Condensed Statements of Operations
Three and nine months ended September 30, 2010 and 2009 (Unaudited) 4
Condensed Statements of Stockholders' Deficit
Nine months ended September 30, 2010 (Unaudited) 5
Condensed Statements of Cash Flows
Nine months ended September 30, 2010 and 2009 (Unaudited) 6
Notes to Unaudited Condensed Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operation 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk 13
Item 4T. Controls and Procedures 13
Part II. Other Information
Item 1. Legal Proceedings 13
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 13
Item 3. Default Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 14
Item 6. Exhibits 14
Signatures 15
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2
PART I--FINANCIAL INFORMATION
Topaz Resources, Inc.
(formerly Kids Germ Defense Corp.)
(A Development Stage Company)
Condensed Balance Sheets
(Unaudited)
September 30, December 31,
2010 2009
---------- ----------
ASSETS
Current assets:
Cash $ 80,414 $ 25,254
Note receivable, related party 186,678 --
Interest receivable, related party 2,123 --
---------- ----------
Total current assets 269,215 25,254
---------- ----------
TOTAL ASSETS $ 269,215 $ 25,254
========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 3,679 $ 35,388
Accounts payable-related party 2,451 --
Due to related party -- 18,000
---------- ----------
Total current liabilities 6,130 53,388
---------- ----------
Stockholders' equity:
Preferred stock; $0.0001 par value; 10,000,000 shares authorized;
none issued and outstanding -- --
Common stock; $0.0001 par value; 700,000,000 shares authorized; 50,460 8,330
504,600,000 and 499,800,000 shares issued and outstanding at
September 30, 2010 and December 31, 2009, respectively
Common stock payable 125,000 --
Additional paid in capital 222,747 26,670
Stock subscription receivable -- (500)
Accumulated deficit during Development Stage (135,122) (62,634)
---------- ----------
Total stockholders' equity 263,085 (28,134)
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 269,215 $ 25,254
========== ==========
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The accompanying notes are an integral part of
the condensed financial statements.
3
Topaz Resources, Inc.
(Formerly Kids Germ Defense Corp.)
(A Development Stage Company)
Condensed Statements of Operations
(Unaudited)
Period Period
January 16, 2009 January 16, 2009
Three Months Ended Nine Months (Date of Inception) (Date of Inception)
September 30, Ended through through
----------------------------- September 30, September 30, September 30,
2010 2009 2010 2009 2010
------------ ------------ ------------ ------------ ------------
Revenue $ -- $ -- $ -- $ -- $ --
Operating expenses:
Professional fees expense 34,275 13,770 49,247 20,583 93,717
Professional fees expense -
related party 10,038 -- 17,025 -- 17,025
General and administrative
expenses 1,462 772 8,339 1,749 26,503
------------ ------------ ------------ ------------ ------------
Loss from operations (45,775) (14,542) (74,611) (22,332) (137,245)
Net loss before taxes (45,775) (14,542) (74,611) (22,332) (137,245)
Other Income:
Interest income 2,123 -- 2,123 -- 2,123
Income tax expense -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Total Other Income 2,123 -- 2,123 -- 2,123
Net loss $ (43,652) $ (14,542) $ (72,488) $ (22,332) $ (135,122)
============ ============ ============ ============ ============
Net loss per share $ (0.00) $ (0.00) $ (0.00) $ (0.00)
============ ============ ============ ============
Weighted average number of
common shares outstanding 504,600,000 378,000,000 502,630,770 378,000,000
============ ============ ============ ============
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The accompanying notes are an integral part of
the condensed financial statements.
4
Topaz Resources, Inc.
(Formerly Kids Germ Defense Corp.)
(A Development Stage Company)
Condensed Statements of Stockholders' Equity
For the Nine Months Ended September 30, 2010 and
For Each of the Years From January 16, 2009 (Date of Inception)
through September 30, 2010
(Unaudited)
Common Stock Preferred Stock Deficit
---------------------- --------------- Accumulated
Amount Additional Common Stock During
Par Value Paid-In Stock Subscriptions Development
Shares $0.0001 Shares Amount Capital Payable receivable Stage Total
------ ------- ------ ------ ------- ------- ---------- ----- -----
Balance at Inception,
January 16, 2009 -- $ -- -- $ -- $ -- $ -- $ -- $ -- $ --
Issuance of common stock
for cash ($0.000095,
January 16, 2009) 378,000,000 37,800 -- -- (31,800) -- -- -- 6,000
Issuance of common stock
for cash ($0.0014,
December 9, 2009) 121,800,000 12,180 -- -- 16,820 -- (500) -- 28,500
Net loss for the period -- -- -- -- -- -- -- (62,634) (62,634)
----------- -------- ------ ------ -------- -------- ------- --------- --------
Balance, December 31, 2009 499,800,000 49,980 -- -- (14,980) -- (500) (62,634) (28,134)
Payment on stock
subscription receivables
(January 14, 2010)
(unaudited) -- -- -- -- -- -- 500 -- 500
Capital contribution
from shareholders
(February 16, 2010)
(unaudited) -- -- -- -- 38,207 -- -- -- 38,207
Issuance of common stock
and warrants for cash
($0.25, March 26, 2010)
(unaudited) 4,800,000 480 -- -- 199,520 -- -- -- 200,000
Payment received for common
stock (unaudited) -- -- -- -- -- 125,000 -- -- 125,000
Net loss for the nine months
ended September 30, 2010
(unaudited) -- -- -- -- -- -- -- (72,488) (72,488)
----------- -------- ------ ------ -------- -------- ------- --------- --------
Balance, September 30, 2010
(unaudited) 504,600,000 $ 50,460 -- $ -- $222,747 $125,000 $ -- $(135,122) $263,085
=========== ======== ====== ====== ======== ======== ======= ========= ========
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The accompanying notes are an integral part of
the condensed financial statements.
5
Topaz Resources, Inc.
(Formerly Kids Germ Defense Corp.)
(A Development Stage Company)
Condensed Statements of Cash Flows
(Unaudited)
Period Period
For the January 16, 2009 January 16, 2009
Nine Months (Date of Inception) (Date of Inception)
Ended through through
September 30, September 30, September 30,
2010 2009 2010
---------- ---------- ----------
OPERATING ACTIVITIES:
Net loss $ (72,488) $ (22,332) $ (135,122)
Adjustments to reconcile net loss to
net cash used in operating activities:
Contribution from stockholder 38,207 -- 38,207
Increase in interest receivable (2,123) -- (2,123)
(Decrease) increase in:
Accounts payable (31,709) -- 3,679
Accounts payable-related party 2,451 -- 2,451
---------- ---------- ----------
Net cash used by operating activities (65,662) (22,332) (92,908)
---------- ---------- ----------
FINANCING ACTIVITIES:
Proceeds from advances from stockholder -- 16,500 18,000
Repayment of advances from stockholder (18,000) -- (18,000)
Increase in notes receivable, related party (348,403) -- (348,403)
Decrease in notes receivable, related party 161,725 -- 161,725
Increase in common stock payable 125,000 -- 125,000
Proceeds from issuance of common stock 200,500 6,000 235,000
---------- ---------- ----------
Net cash provided by financing activities 120,822 22,500 173,322
---------- ---------- ----------
NET INCREASE IN CASH 55,160 168 80,414
CASH, BEGINNING OF PERIOD 25,254 -- --
---------- ---------- ----------
CASH, END OF PERIOD $ 80,414 $ 168 $ 80,414
========== ========== ==========
SUPPLEMENT INFORMATION
Cash paid for interest $ -- $ -- $ --
========== ========== ==========
Cash paid for taxes $ -- $ -- $ --
========== ========== ==========
NON-CASH ACTIVITIES
Stock issued for services $ -- $ -- $ --
========== ========== ==========
Stock issued for accounts payable $ -- $ -- $ --
========== ========== ==========
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The accompanying notes are an integral part of
the condensed financial statements.
6
Topaz Resources, Inc.
(Formerly Kids Germ Defense Corp.)
(A Development Stage Company)
Notes to Unaudited Condensed Interim Financial Statements
Three and Nine Months Ended September 30, 2010
NOTE 1. GENERAL ORGANIZATION AND BUSINESS
Topaz Resources, Inc. formerly Kids Germ Defense Corp. (the "Company") is a
development stage enterprise that was incorporated in the state of Florida on
January 16, 2009. To date, the Company's activities have been limited to raising
capital, organizational matters and structuring its business plan. The corporate
headquarters are located in Denton, Texas. The Company is an independent oil and
gas company focusing on production, acquisitions and developmental drilling
opportunities within proven producing areas of North-Central-West Texas.
Effective April 16, 2010, the Company changed its name from Kids Germ Defense
Corp. to Topaz Resources, Inc.
ACCOUNTING BASIS
In the opinion of management, all adjustments consisting only of normal
recurring adjustments necessary for a fair statement of (a) the results of
operations for the three and nine month periods ended September 30, 2010 and
2009 and the Period January 16, 2009 (Date of Inception) through September 30,
2010, (b) the financial position at September 30, 2010 and December 31, 2009,
and (c) cash flows for the periods ended September 30, 2010 and 2009, and the
Period January 16, 2009 (Date of Inception) through September 30, 2010, have
been made.
The unaudited condensed financial statements and notes are presented in
accordance with SEC Form 10-Q. Accordingly, certain information and note
disclosures normally included in the financial statements prepared in accordance
with accounting principles generally accepted in the United States of America
have been omitted. The accompanying condensed financial statements and notes
should be read in conjunction with the audited financial statements and notes of
the Company for the fiscal year ended December 31, 2009. The results of
operations for the three and nine month periods ended September 30, 2010 are not
necessarily indicative of those to be expected for the entire year.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
NOTE 2. GOING CONCERN
The accompanying condensed financial statements have been prepared assuming that
the Company will continue as a going concern. For the three and nine months
ended September 30, 2010 and since inception through September 30, 2010, the
Company has had a net loss of $43,652, $72,488 and $135,122, respectively. As of
September 30, 2010, the Company has not emerged from the development stage. In
view of these matters, the Company's ability to continue as a going concern is
dependent upon the Company's ability to begin operations and to achieve a level
of profitability. Since inception, the Company has financed its activities
principally from loans from the executive officer and sale of public equity
securities. The Company intends on financing its future development activities
and its working capital needs largely from the sale of public equity securities
with some additional funding from other traditional financing sources, including
term notes until such time that funds provided by operations are sufficient to
fund working capital requirements. The financial statements of the Company do
not include any adjustments relating to the recoverability and classification of
recorded assets, or the amounts and classifications of liabilities that might be
necessary should the Company be unable to continue as a going concern.
7
NOTE 3. RECENT ACCOUNTING PRONOUNCEMENTS
Management has reviewed all recent accounting pronouncements issued by FASB
(including EITF), the AICPA and the SEC since the last audited financial
statements, and does not believe that they will have a material impact on the
Company's present or future financial statements.
NOTE 4. STOCKHOLDER'S EQUITY TRANSACTIONS
The Company's Board of Directors has authorized 700,000,000 shares of common
stock with a par value of $0.0001 and 10,000,000 shares of preferred stock, par
value of $0.0001 to be issued in accordance with the terms and conditions as
determined by the Board. The Preferred Stock ranks senior to the common stock as
to dividends and liquidation. As of September 30, 2010, the Company has no
preferred stock issued or outstanding.
On January 16, 2009, the Company issued 378,000,000 shares of common stock at
$0.00001587 per share for a total of $6,000.
On January 16, 2009, the Company authorized a Private Placement Offering of up
to 126,000,000 shares of common stock at a price of $0.000233 per share. The
total amount raised in this financing was $29,000. As of December 31, 2009, the
Company had issued 121,800,000 common shares and had received $28,500 in cash
proceeds, and $500 in a stock subscription receivable. As of September 30, 2010
the additional $500 had been received for the total of $29,000 from the sale of
its stock.
Effective April 16, 2010, the Company changed its name from Kids Germ Defense
Corp. to Topaz Resources, Inc. The Company also effected a forward stock split
of the Company's common stock on a seven for one basis, such that it's
authorized shares of common stock has increased from 100,000,000 to 700,000,000.
All shares of the Company's common stock have been adjusted to reflect the
forward stock split.
The Financial Industry Regulatory Authority (FINRA) has approved the Company's
share dividend of 5 additional shares of common stock for each share of common
stock held by each shareholder of record as of the close of business November
12, 2010 with a payment date of November 15, 2010.
Effective April 22, 2010, the Company and an investor signed a subscription
agreement to purchase a total of 4,800,000 shares of the Company's common stock
at $0.04167 per share plus 180,000,000 warrants to purchase shares of the
Company's common stock at an exercise price of $0.0833 per share for a total
amount of $200,000.
The warrant entitles the holder to purchase 180,000,000 shares of the Company's
common stock, at any time, at an exercise price of $0.50833 per share, provided,
however, that in no event shall the holder be entitled to exercise this warrant
for a number of shares in excess of the number of shares which, upon giving
effect to such exercise, would cause the aggregate number of shares of common
stock beneficially owned by the holder and its affiliates to exceed 4.99% of the
outstanding shares of common stock. The holder may exercise the warrant on
either a cash or cashless exercise as determined by the holder of the warrant.
The warrants expire in 2015.
Range of Weighted Average
Shares Exercise Prices Exercise Price
---------- --------------- --------------
Outstanding at December 31, 2009 0
Warrants granted 180,000,000 $0.0833 $0.0833
Warrants cancelled or expired
-----------
Outstanding at September 30, 2010 180,000,000 $0.0833 $0.0833
===========
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The value of each award is estimated at the grant date using the Black-Scholes
option model with the following assumptions for awards granted during the nine
months ended September 30, 2010:
8
Nine Months Ended
September 30, 2010
------------------
Dividend rate 0%
Risk free interest rate 2.57%
Expected term 5 years
Expected volatility 182%
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The basis for the above assumptions are as follows: the dividend rate is based
upon the Company's history of dividends; the risk-free interest rate for periods
within the expected term of the option is based on the U.S. Treasury yield curve
in effect at the time of grant; the expected term was calculated based on the
Company's historical pattern of options granted and the period of time they are
expected to be outstanding; and expected volatility was calculated by review of
a peer company's historical activity.
As of September 30, 2010, the fair value of the 30,000,000 warrants was
calculated to be $5,631,326 using the Black Scholes option model and the above
assumptions. The cost of the warrant was treated as "share issue costs"
resulting in the fair market value being debited and credited to Additional Paid
in Capital, resulting in a null journal entry.
During August 2010, the Company and an investor signed a subscription agreement
to purchase a total of 3,000,000 shares of the Company's common stock at
$0.04167 per share for a total amount of $125,000, which has been recorded as
Common Stock Payable in the accompanying balance sheet. The Company issued the
3,000,000 shares of common stock during November 2010.
NOTE 5. DUE FROM RELATED PARTY
On June 3, 2010 the Company advanced $150,000 to Dark Horse Operating Co.,
L.L.C. ("DHOC"), an affiliate of the Company, under a Promissory Note, which
bears 3.50% interest per annum and is due on demand. This advance was made
during the normal course of business and DHOC is to use these funds to pay for
the drilling of a well, of which DHOC is the operator. As of September 30, 2010,
the Company has advanced DHOC a total of $348,403, of which $186,678 remains due
and payable to the Company.
DHOC is the operator of the wells that are being acquired and/or drilled by the
Company. DHOC was created in 2003-04 and is owned by Robert P. Lindsay and Rand
Stinnett, minority shareholders and officers of the Company. Lindsay is also a
director of the Company. There are two additional officers of the Company
(Edward Munden and Bill Williamson) who have no interest in DHOC and can out
vote Lindsay and Stinnett on any and all matters relating to DHOC, noting
Lindsay and Stinnett are prevented from voting on any of the Company matters
related to DHOC to prevent a possible conflict of interest.
NOTE 6. EARNINGS (LOSS) PER SHARE
Earnings (loss) per share are computed using the basic and diluted calculations
on the face of the statement of operations. Basic earnings (loss) per share are
calculated by dividing net income (loss) available to common shareholders by the
weighted average number of shares of common stock outstanding for the period.
Diluted earnings (loss) per share is calculated by dividing the net income
(loss) by the weighted average number of shares of common stock outstanding for
the period, adjusted for the dilutive effect of common stock equivalents, using
the treasury stock method. There were no items that were considered potentially
dilutive related to the fully diluted share calculation at September 30, 2010.
The following sets forth the computation of basic and diluted net earnings
(loss) per common share for three and nine months ended September 30, 2010 and
the period January 16, 2009 through September 30, 2009:
9
For the For the Period
For the Three Months Ended Nine Months January 16, 2009
September 30, Ended through
----------------------------- September 30, September 30,
2010 2009 2010 2009
------------ ------------ ------------ ------------
Numerator:
Net loss $ (43,652) $ (14,542) $ (72,488) $ (22,332)
Less preferred stock
dividend and accreted
dividends -- -- -- --
------------ ------------ ------------ ------------
Net loss available to
common stockholders $ (43,652) $ (14,542) $ (72,488) $ (22,332)
============ ============ ============ ============
Denominator:
Weighted average basic
shares outstanding 504,600,000 378,000,000 502,630,770 378,000,000
Stock options -- -- -- --
Warrants -- -- -- --
------------ ------------ ------------ ------------
Weighted average fully
diluted shares
outstanding 504,600,000 378,000,000 502,630,770 378,000,000
============ ============ ============ ============
Net loss per common
share--Basic and diluted $ (0.00) $ (0.00) $ (0.00) $ (0.00)
------------ ------------ ------------ ------------
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NOTE 7. RELATED PARTY TRANSACTION
The Company has hired an individual consultant, who is the adult son of an
officer of the Company, to provide title research services on an as needed
basis. The Company recognized expense of approximately $10,000 for the three
months ended September 30, 2010 and approximately $17,000 for the nine months
ended September 30, 2010. At September 30, 2010, $2,451 was included in accounts
payable-related party for amounts owed to this individual.
NOTE 8. SUBSEQUENT EVENTS
Subsequent to September 30, 2010, the Company entered into an agreement to
purchase an oil and gas lease from Viejo Coyotes Energy, LLC for $16,000.
The Financial Industry Regulatory Authority (FINRA) has approved the Company's
share dividend of 5 additional shares of common stock for each share of common
stock held by each shareholder of record as of the close of business November
12, 2010 with a payment date of November 15, 2010.
No other material subsequent events have occurred since September 30, 2010 that
requires recognition or disclosure in these financial statements.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
THE FOLLOWING DISCUSSION AND ANALYSIS OF OUR FINANCIAL CONDITION AND RESULTS OF
OPERATIONS SHOULD BE READ IN CONJUNCTION WITH OUR FINANCIAL STATEMENTS AND THE
NOTES THERETO INCLUDED ELSEWHERE IN THIS QUARTERLY REPORT ON FORM 10-Q AND IN
OUR ANNUAL REPORT ON FORM 10-K FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
ON FEBRUARY 16, 2010.
THIS FILING, INCLUDING BUT NOT LIMITED TO "MANAGEMENT'S DISCUSSION AND
ANALYSIS", CONTAINS FORWARD-LOOKING STATEMENTS. THE WORDS "ANTICIPATED,"
"BELIEVE," "EXPECT," "PLAN," "INTEND," "SEEK," "ESTIMATE," "PROJECT," "WILL,"
"COULD," "MAY," AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING
STATEMENTS. THESE STATEMENTS INCLUDE, AMONG OTHERS, INFORMATION REGARDING FUTURE
OPERATIONS, FUTURE CAPITAL EXPENDITURES, AND FUTURE NET CASH FLOW. SUCH
STATEMENTS REFLECT THE COMPANY'S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND
FINANCIAL PERFORMANCE AND INVOLVE RISKS AND UNCERTAINTIES, INCLUDING, WITHOUT
LIMITATION, GENERAL ECONOMIC AND BUSINESS CONDITIONS, CHANGES IN FOREIGN,
POLITICAL, SOCIAL, AND ECONOMIC CONDITIONS, REGULATORY INITIATIVES AND
COMPLIANCE WITH GOVERNMENTAL REGULATIONS, THE ABILITY TO ACHIEVE FURTHER MARKET
PENETRATION AND ADDITIONAL CUSTOMERS, AND VARIOUS OTHER MATTERS, MANY OF WHICH
ARE BEYOND THE COMPANY'S CONTROL. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY
FROM THOSE ANTICIPATED IN THESE FORWARD- LOOKING STATEMENTS AS A RESULT OF
SEVERAL FACTORS, INCLUDING THE RISKS FACED BY US AS DESCRIBED BELOW AND
ELSEWHERE IN THIS FORM 10-Q AS WELL AS IN OUR FORM 10-K FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 16, 2010. IN LIGHT OF THESE RISKS
AND UNCERTAINTIES THERE CAN BE NO ASSURANCE THAT THE FORWARD-LOOKING STATEMENTS
CONTAINED IN THIS FORM 10-Q WILL OCCUR. WE HAVE NO OBLIGATION TO PUBLICLY UPDATE
OR REVISE THESE FORWARD-LOOKING STATEMENTS TO REFLECT NEW INFORMATION, FUTURE
EVENTS, OR OTHERWISE, EXCEPT AS REQUIRED BY FEDERAL SECURITIES LAWS AND WE
CAUTION YOU NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS. WE
MAY NOT UPDATE THESE FORWARD-LOOKING STATEMENTS, EVEN THOUGH OUR SITUATION MAY
CHANGE IN THE FUTURE.
OVERVIEW
The following discussion and analysis should be read in conjunction with the
financial statements, included herewith. This discussion should not be construed
to imply that the results discussed herein will necessarily continue into the
future, or that any conclusion reached herein will necessarily be indicative of
actual operating results in the future. Such discussion represents only the best
present assessment of our management.
Our immediate priority is to either secure suitable financing to continue with
our existing business or change our business and conclude a merger, acquisition
or combination with a business prospect. This is critical to insure our survival
and to preserve our shareholder's investment in our common shares. At this stage
in our operations, we believe either course is acceptable, as our operations
have not been profitable and our Company will fail without further significant
financing. We currently have $80,414 in cash.
Concurrent with our search for additional financing for our existing business,
we are also actively seeking business opportunities with established business
entities for the merger of a target business with our Company.
RESULTS OF OPERATIONS
Our Company posted losses of $135,122 from inception of the Company, January 16,
2009, through September 30, 2010. The principal components of our losses for the
three and nine months ended September 30, 2010 were related to the preparation
of our Annual and Quarterly Reports, legal and audit fees. During the period
from January 16, 2009 through September 30, 2009, the loss of $7,789 was
primarily related to the start up expenses, legal and administrative fees.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2010 we had cash on hand of $80,414. Because of a minimum
amount of cash, and not being able to generate any revenue from our business we
need to raise additional funds for the development of our business and to
respond to unanticipated requirements or expenses, or to fund the
identification, evaluation and combination or merger with a suitable business
opportunity.
11
Effective April 22, 2010, the Company and an investor signed a subscription
agreement to purchase a total of 4,800,000 shares of the Company's common stock
at $0.04167 per share plus 180,000,000 warrants to purchase shares of the
Company's common stock at an exercise price of $0.0833 per share for a total
amount of $200,000.
During August 2010, the Company and an investor signed a subscription agreement
to purchase a total of 3,000,000 shares of the Company's common stock at
$0.04167 per share for a total amount of $125,000, which has been recorded as
Common Stock Payable in the accompanying balance sheet. The Company issued the
3,000,000 shares of common stock during November 2010.
The Financial Industry Regulatory Authority (FINRA) has approved the Company's
share dividend of 5 additional shares of common stock for each share of common
stock held by each shareholder of record as of the close of business November
12, 2010 with a payment date of November 15, 2010.
We do not currently have any arrangements for financing and we can provide no
assurance to investors we will be able to find such financing. There can be no
assurance that additional financing will be available to us, or on terms that
are acceptable. Consequently, we may not be able to proceed with our intended
business plans and our business will then likely fail.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. For the three and nine months ended
September 30, 2010, the Company incurred a net loss of $43,652 and $72,488,
respectively, and has incurred significant losses since inception. As of
September 30, 2010, the Company has an accumulated deficit of $135,122. The
Company used $65,662 and $22,332 of cash from operations during the nine months
ended September 30, 2010 and 2009, respectively, which was funded by proceeds
from the sale of common stock. Financing activities provided $120,822 and
$22,500 from the issuance of common stock and advanced from related parties, net
of repayments, for the nine months ended September 30, 2010 and 2009,
respectively. There is no assurance that such financing will be available in the
future. In view of these matters, there is substantial doubt that the Company
will continue as a going concern. The Company is currently pursuing the
following sources of short and long-term working capital.
The Company's ability to continue as a going concern is highly dependent on our
ability to obtain additional sources of cash flow sufficient to fund our working
capital requirements. However, there can be no assurance that the Company will
be successful in its efforts to secure such cash flow. Any failure by us to
timely procure additional financing or investment adequate to fund our ongoing
operations, including planned product development initiatives and
commercialization efforts, will have material adverse consequences on our
financial condition, results of operations and cash flows.
The financial statements of the Company do not include any adjustments relating
to the recoverability and classification of recorded assets, or the amounts and
classifications of liabilities that might be necessary should the Company be
unable to continue as a going concern.
ECONOMY AND INFLATION
Except as disclosed herein, we have not experienced any significant cancellation
of orders due to the downturn in the economy and only a small number of
customers requested delays in delivery or production of orders in process. Our
management believes that inflation has not had a material effect on our results
of operations.
OFF-BALANCE SHEET ARRANGEMENTS
We do not have any off balance sheet arrangements that are reasonably likely to
have a current or future effect on our financial condition, revenues, and
results of operations, liquidity or capital expenditures.
12
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLSOURES ABOUT MARKET RISK
Not applicable.
ITEM 4T. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Our Chief Executive Officer and Chief Financial Officer (collectively the
"Certifying Officers") maintain a system of disclosure controls and procedures
that is designed to provide reasonable assurance that information, which is
required to be disclosed, is accumulated and communicated to management timely.
The Certifying Officers have concluded that the disclosure controls and
procedures are effective at the "reasonable assurance" level. Under the
supervision and with the participation of management, as of the end of the
period covered by this report, the Certifying Officers evaluated the
effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act).
Furthermore, the Certifying Officers concluded that our disclosure controls and
procedures in place are designed to ensure that information required to be
disclosed by us in reports that we file or submit under the Exchange Act is (i)
recorded, processed, summarized and reported on a timely basis in accordance
with applicable Commission rules and regulations; and (ii) accumulated and
communicated to our management, including our Certifying Officers and other
persons that perform similar functions, if any, to allow us to make timely
decisions regarding required disclosure in our periodic filings.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
No change in the Company's internal control over financial reporting occurred
during the nine months ended September 30, 2010, that materially affected, or is
reasonably likely to materially affect, the Company's internal control over
financial reporting.
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The status of our legal proceedings, as disclosed in our Annual Report remains
unchanged. The Company may be party to lawsuits from time to time arising in the
ordinary course of its business. The Company provides for costs relating to
these matters when a loss is probable and the amount is reasonably estimable.
The effect of the outcome of these matters on the Company's future results of
operations cannot be predicted because any such effect depends on future results
of operations and the amount and timing of the resolution of such matters.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
During the three months ended September 30, 2010, the Company did not issue any
unregistered equity.
ITEM 3. DEFAULT UPON SENIOR SECURITIES
There have been no defaults in any material payments during the covered period.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the three months ended September 30, 2010, the Company did not submit any
matters to a vote of its security holders.
13
ITEM 5. OTHER INFORMATION
The Company does not have any other material information to report with respect
to the three months ended September 30, 2010.
ITEM 6. EXHIBITS
No. Exhibit
--- -------
3.1 Articles of Incorporation*
3.2 By Laws*
31.1 Certification of Chief Executive Officer pursuant to section 302 of the
Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer pursuant to section 302 of the
Sarbanes-Oxley Act of 2002
32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
----------
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* Incorporated by reference to the exhibits included with the Registration
Statement on Form S-1, File No. 333-158721, as filed December 8, 2009.
14
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.
TOPAZ RESOURCES, INC.
(Registrant)
/s/ EDWARD J. MUNDEN Dated: November 18, 2010
-------------------------------------------
Edward J. Munden
President and Chief Executive Officer
(Principal Executive Officer)
Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)
|
15
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