U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Mark One
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the period ended August 31, 2007
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______ to _______
COMMISSION FILE NUMBER: 0-32593
GENEVA RESOURCES, INC.
______________________
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
NEVADA 98-0441019
______ __________
(STATE OR OTHER JURISDICTION OF INCORPORATION I.R.S. EMPLOYER IDENTIFICATION
OR ORGANIZATION) NO.)
1005 TERMINAL WAY, SUITE 110
RENO, NEVADA 89502
__________________
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(775) 348-9330
______________
(ISSUER'S TELEPHONE NUMBER)
SECURITIES REGISTERED PURSUANT TO SECTION NAME OF EACH EXCHANGE ON WHICH
12(B) OF THE ACT: REGISTERED:
NONE
____
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, $0.001PAR VALUE
_____________________________
(TITLE OF CLASS)
Indicate by checkmark whether the issuer: (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes [X] No[ ]
Indicate by checkmark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
APPLICABLE ONLY TO ISSUER INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS.
N/A
Indicate by checkmark whether the issuer has filed all documents and reports
required to be filed by Section 12, 13 and 15(d) of the Securities Exchange Act
of 1934 after the distribution of securities under a plan confirmed by a court.
Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE REGISTRANTS
Indicate the number of shares outstanding of each of Outstanding as of October
8, 2007 the issuer's classes of common stock, as of the most practicable date:
Class
Common Stock, $0.001 par value 41,200,000
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
GENEVA RESOURCES, INC.
FORM 10-QSB
Part I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Balance Sheet
Statements of Operations
Statements of Cash Flows
Notes to Financial Statements
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN
OF OPERATION.
Item 3. CONTROLS AND PROCEDURES.
Part II OTHER INFORMATION.
Item 1 LEGAL PROCEEDINGS.
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
Item 3. DEFAULTS UPON SENIOR SECURITIES.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Item 5. OTHER INFORMATION.
Item 6. EXHIBITS.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GENEVA RESOURCES, INC.
(FORMERLY GENEVA GOLD CORP.)
(AN EXPLORATION STAGE COMPANY)
FINANCIAL STATEMENTS
AUGUST 31, 2007
(UNAUDITED)
BALANCE SHEETS
STATEMENTS OF OPERATIONS
STATEMENTS OF CASH FLOWS
NOTES TO FINANCIAL STATEMENTS
GENEVA RESOURCES, INC.
(FORMERLY GENEVA GOLD CORP.)
(AN EXPLORATION STAGE COMPANY)
BALANCE SHEETS
August 31, May 31,
2007 2007
_________________________________________________________________________________________________________________________________
(unaudited)
ASSETS
CURRENT ASSETS
Cash $ 104,536 $ 5,749
_________________________________________________________________________________________________________________________________
$ 104,536 $ 5,749
=================================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 870,763 $ 1,028,011
Due to related parties (Note 5) 107,500 47,500
Shareholder's loan and accrued interest (Note 6) 552,038 414,890
_________________________________________________________________________________________________________________________________
1,530,301 1,490,401
_________________________________________________________________________________________________________________________________
GOING CONCERN CONTINGENCY AND COMMITMENTS (Notes 1 and 3 )
STOCKHOLDERS' EQUITY (DEFICIT)
Capital stock (Note 4)
Authorized
200,000,000 shares of common stock, $0.001 par value,
Issued and outstanding
41,200,000 shares of common stock (May 31, 2007 - 41,200,000) 41,200 41,200
Additional paid-in capital 8,498,638 8,498,638
Private placement subscriptions 400,000 -
Deficit accumulated during the development stage (10,365,603) (10,024,490)
_________________________________________________________________________________________________________________________________
(1,425,765) (1,484,652)
_________________________________________________________________________________________________________________________________
$ 104,536 $ 5,749
=================================================================================================================================
The accompanying notes are an integral part of these financial statements
GENEVA RESOURCES, INC.
(FORMERLY GENEVA GOLD CORP.)
(AN EXPLORATION STAGE COMPANY)
STATEMENTS OF OPERATIONS
(UNAUDITED)
Cumulative
results from
Three months Three months April 5, 2004
ended ended (inception) to
August 31, August 31, August 31,
2007 2006 2007
___________________________________________________________________________________________________________________
REVENUE $ - $ - $ 46,974
___________________________________________________________________________________________________________________
DIRECT COSTS - - 56,481
___________________________________________________________________________________________________________________
GROSS MARGIN (LOSS) - - (9,507)
___________________________________________________________________________________________________________________
GENERAL AND ADMINISTRATIVE EXPENSES
Office and general 30,174 335 103,969
Consulting fees 15,000 - 393,026
Marketing expenses - - 877,221
Management Fees 60,000 - 831,145
Mineral Property Expenditures (Note 3) 180,834 - 7,798,694
Professional fees 55,105 17,531 352,041
___________________________________________________________________________________________________________________
341,113 17,866 10,356,096
___________________________________________________________________________________________________________________
NET LOSS $ (341,113) $ (17,866) $ (10,365,603)
===================================================================================================================
BASIC AND DILUTED LOSS PER COMMON SHARE $ (0.00) $ (0.00)
=================================================================================================
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC
AND DILUTED 41,200,000 67,200,000
=================================================================================================
The accompanying notes are an integral part of these financial statements
GENEVA RESOURCES, INC.
(FORMERLY GENEVA GOLD CORP.)
(AN EXPLORATION STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Cumulative
results from
Three months Three months April 5, 2004
ended ended (inception) to
August 31, August 31, August 31,
2007 2006 2007
___________________________________________________________________________________________________________________________________
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (341,113) $ (17,866) $ (10,365,603)
Adjustments to reconcile net loss to net cash used in operating activities:
Non-cash mineral property expenditures - - 7,400,000
Stock-based compensation - - 965,671
Changes in operating assets and liabilities:
Accounts receivable - - -
Prepaid expenses - - -
Accrued interest on shareholder's loan 12,148 - 23,538
Due to related parties (60,000) - 107,500
Accounts payable and accrued liabilities (37,248) 7,586 870,763
___________________________________________________________________________________________________________________________________
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES (426,213) (10,280) (998,131)
___________________________________________________________________________________________________________________________________
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds on sale of common stock 400,000 - 574,167
Proceeds from shareholder advances 125,000 - 528,500
___________________________________________________________________________________________________________________________________
NET CASH PROVIDED BY FINANCING ACTIVITIES 525,000 - 1,102,667
___________________________________________________________________________________________________________________________________
NET INCREASE (DECREASE) IN CASH 98,787 (10,280) 104,536
CASH, BEGINNING 5,749 73,383 -
___________________________________________________________________________________________________________________________________
CASH, ENDING $ 104,536 $ 63,103 $ 104,536
===================================================================================================================================
SUPPLEMENTAL CASH FLOW INFORMATION AND NONCASH INVESTING AND FINANCING ACTIVITIES
Interest paid $ - $ - $ -
===================================================================================================================================
Income taxes paid $ - $ - $ -
===================================================================================================================================
The accompanying notes are an integral part of these financial statements
GENEVA RESOURCES, INC.
(FORMERLY GENEVA GOLD CORP.)
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
AUGUST 31, 2007 (UNAUDITED)
________________________________________________________________________________
NOTE 1 - NATURE OF OPERATIONS AND BASIS OF PRESENTATION
________________________________________________________________________________
The Company was incorporated in the State of Nevada on April 5, 2004. The
Company was initially formed to engage in the business of reclaiming and
stabilizing land in preparation for construction in the United States of
America. On November 27, 2006 the Company filed Articles of Merger with the
Secretary of State of Nevada in order to effectuate a merger whereby the Company
(as Revelstoke Industries, Inc.) would merge with its wholly-owned subsidiary,
Geneva Gold Corp. This merger became effective as of December 1, 2006 and the
Company changed its name to Geneva Gold Corp. On March 1, 2007, the Company
(Geneva Gold Corp) merged with its wholly-owned subsidiary, Geneva Resources,
Inc., pursuant to Articles of Merger that the Company filed with the Nevada
Secretary of State. This merger became effective March 1, 2007 and the Company
changed its name to Geneva Resources, Inc.
During the quarter ended November 30, 2006 the Company entered the business of
exploration of precious metals with a focus on the exploration and development
of gold deposits in North America and Internationally. During the period the
Company entered into Option Agreements to obtain mineral leases in Canada,
Panama, Peru and Nigeria.
The Company has elected a fiscal year of May 31. On May 5, 2006; the Company
completed a forward stock split by the issuance of 42 new shares for each 1
outstanding share of the Company's common stock. On October 13, 2006; the
Company completed a forward stock split by the issuance of 4 new shares for each
1 outstanding share of the Company's stock.
GOING CONCERN
To date the Company has generated minimal revenues from its business operations
and has incurred operating losses since inception of $10,365,603. As at August
31, 2007, the Company has a working capital deficit of $1,425,765. The Company
requires additional funding to meet its ongoing obligations and operating
losses. The ability of the Company to continue as a going concern is dependant
on raising capital to fund its initial business plan and ultimately to attain
profitable operations. Accordingly, these factors raise substantial doubt as to
the Company's ability to continue as a going concern. The Company intends to
continue to fund its mineral exploration business by way of private placements
and advances from related parties as may be required.
UNAUDITED INTERIM FINANCIAL STATEMENTS
The accompanying unaudited interim consolidated financial statements have been
prepared in accordance with generally accepted accounting principals for interim
financial information and with the instructions to Form 10-QSB of Regulation
S-B. They do 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 May 31, 2007 included in the Company's Annual Report on Form 10-KSB 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-KSB. In the opinion of Management, all adjustments
considered necessary for a fair presentation, consisting solely of normal
recurring adjustments, have been made. Operating results for the three months
ended August 31, 2007 are not necessarily indicative of the results that may be
expected for the year ending May 31, 2008.
COMPARATIVE FIGURES
Certain comparative figures have been reclassified in order to conform to the
current year's financial statement presentation.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
________________________________________________________________________________
BASIS OF PRESENTATION
These financial statements are presented in United States dollars and have been
prepared in accordance with generally accepted accounting principles in the
United States of America.
USE OF ESTIMATES AND ASSUMPTIONS
Preparation of the financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain 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 expenses during the period. Accordingly, actual results
could differ from those estimates.
GENEVA RESOURCES, INC.
(FORMERLY GENEVA GOLD CORP.)
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
AUGUST 31, 2007 (UNAUDITED)
________________________________________________________________________________
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
________________________________________________________________________________
MINERAL PROPERTY EXPENDITURES
The Company is primarily engaged in the acquisition, exploration and development
of mineral properties.
Mineral property acquisition costs are capitalized in accordance with EITF 04-2
when management has determined that probable future benefits consisting of a
contribution to future cash inflows have been identified and adequate financial
resources are available or are expected to be available as required to meet the
terms of property acquisition and budgeted exploration and development
expenditures. Mineral property acquisition costs are expensed as incurred if the
criteria for capitalization are not met. In the event that mineral property
acquisition costs are paid with Company shares, those shares are recorded at the
estimated fair value at the time the shares are due in accordance with the terms
of the property agreements.
Mineral property exploration costs are expensed as incurred.
When mineral properties are acquired under option agreements with future
acquisition payments to be made at the sole discretion of the Company, those
future payments, whether in cash or shares, are recorded only when the Company
has made or is obliged to make the payment or issue the shares. Because option
payments do not meet the definition of tangible property under EITF 04-2, all
option payments are expensed as incurred.
When it has been determined that a mineral property can be economically
developed as a result of establishing proven and probable reserves and pre
feasibility, the costs incurred to develop such property are capitalized.
Estimated future removal and site restoration costs, when determinable are
provided over the life of proven reserves on a units-of-production basis. Costs,
which include production equipment removal and environmental remediation, are
estimated each period by management based on current regulations, actual
expenses incurred, and technology and industry standards. Any charge is included
in exploration expense or the provision for depletion and depreciation during
the period and the actual restoration expenditures are charged to the
accumulated provision amounts as incurred.
As of the date of these financial statements, the Company has incurred only
property option payments and exploration costs which have been expensed.
To date the Company has not established any proven or probable reserves on its
mineral properties.
ASSET RETIREMENT OBLIGATIONS
The Company has adopted the provisions of SFAS No. 143 "Accounting for Asset
Retirement Obligations," which establishes standards for the initial measurement
and subsequent accounting for obligations associated with the sale, abandonment
or other disposal of long-lived tangible assets arising from the acquisition,
construction or development and for normal operations of such assets. The
adoption of this standard has had no effect on the Company's financial position
or results of operations. To May 31, 2007 any potential costs relating to the
ultimate disposition of the Company's mineral property interests have not yet
been determinable.
INCOME TAXES
The Company follows the liability method of accounting for income taxes. Under
this method, 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
balances. Deferred tax assets and liabilities are measured using enacted or
substantially enacted tax rates expected to apply to the taxable income in the
years in which those differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the date of enactment or
substantive enactment. As at May 31, 2007 the Company had net operating loss
carry forwards. However, due to the uncertainty of realization the Company has
provided a full valuation allowance for the deferred tax assets resulting from
these loss carryforwards.
NET LOSS PER SHARE
The Company computes loss per share in accordance with SFAS No. 128, "Earnings
per Share" which requires presentation of both basic and diluted earnings per
share on the face of the statement of operations. Basic loss per share is
computed by dividing net loss available to common shareholders by the weighted
average number of outstanding common shares during the
GENEVA RESOURCES, INC.
(FORMERLY GENEVA GOLD CORP.)
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
AUGUST 31, 2007 (UNAUDITED)
________________________________________________________________________________
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)
________________________________________________________________________________
period. Diluted loss per share gives effect to all dilutive potential common
shares outstanding during the period. Dilutive loss per share excludes all
potential common shares if their effect is anti-dilutive.
FOREIGN CURRENCY TRANSLATION
The financial statements are presented in United States dollars. In accordance
with SFAS No. 52, "Foreign Currency Translation", foreign denominated monetary
assets and liabilities are translated to their United States dollar equivalents
using foreign exchange rates which prevailed at the balance sheet date. Revenue
and expenses are translated at average rates of exchange during the period.
Related translation adjustments are reported as a separate component of
stockholders' equity, whereas gains or losses resulting from foreign currency
transactions are included in results of operations.
STOCK-BASED COMPENSATION
On March 1, 2006, the Company adopted SFAS No. 123 (revised 2004) (SFAS No.
123R), SHARE-BASED PAYMENT, which addresses the accounting for stock-based
payment transactions in which an enterprise receives employee services in
exchange for (a) equity instruments of the enterprise or (b) liabilities that
are based on the fair value of the enterprise's equity instruments or that may
be settled by the issuance of such equity instruments. In January 2005, the
Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB)
No. 107, which provides supplemental implementation guidance for SFAS No. 123R.
SFAS No. 123R eliminates the ability to account for stock-based compensation
transactions using the intrinsic value method under Accounting Principles Board
(APB) Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and instead
generally requires that such transactions be accounted for using a
fair-value-based method. The Company uses the Black-Scholes-Merton ("BSM")
option-pricing model to determine the fair-value of stock-based awards under
SFAS No. 123R, consistent with that used for pro forma disclosures under SFAS
No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION. The Company has elected the
modified prospective transition method as permitted by SFAS No. 123R and
accordingly prior periods have not been restated to reflect the impact of SFAS
No. 123R. The modified prospective transition method requires that stock-based
compensation expense be recorded for all new and unvested stock options,
restricted stock, restricted stock units, and employee stock purchase plan
shares that are ultimately expected to vest as the requisite service is rendered
beginning on March 1, 2006. Stock-based compensation expense for awards granted
prior to March 1, 2006 is based on the grant date fair-value as determined under
the pro forma provisions of SFAS No. 123.
Prior to the adoption of SFAS No. 123R, the Company measured compensation
expense for its employee stock-based compensation plans using the intrinsic
value method prescribed by APB Opinion No. 25. The Company applied the
disclosure provisions of SFAS No. 123 as amended by SFAS No. 148, ACCOUNTING FOR
STOCK-BASED COMPENSATION - TRANSITION AND DISCLOSURE, as if the fair-value-based
method had been applied in measuring compensation expense. Under APB Opinion No.
25, when the exercise price of the Company's employee stock options was equal to
the market price of the underlying stock on the date of the grant, no
compensation expense was recognized.
FAIR VALUE OF FINANCIAL INSTRUMENTS
In accordance with the requirements of SFAS No. 107, the Company has determined
the estimated fair value of financial instruments using available market
information and appropriate valuation methodologies. The fair value of financial
instruments classified as current assets or liabilities approximate their
carrying value due to the short-term maturity of the instruments.
NOTE 3 -MINERAL EXPLORATION PROPERTIES
________________________________________________________________________________
(A) GEORGES LAKE PROPERTY
On October 20, 2006 the Company entered into a "Mineral Property Option
Agreement", with War Eagle Mining Company, Inc., a TSX Venture Exchange company
("War Eagle"). pursuant to which War Eagle has granted the Company the sole and
exclusive option to acquire a 70% undivided interest in and to seven mineral
claims comprising a total of 979 hectares, which are located in the Province of
Saskatchewan, Canada.
GENEVA RESOURCES, INC.
(FORMERLY GENEVA GOLD CORP.)
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
AUGUST 31, 2007 (UNAUDITED)
________________________________________________________________________________
NOTE 3 -MINERAL EXPLORATION PROPERTIES (CONTINUED)
________________________________________________________________________________
(A) GEORGES LAKE PROPERTY (CONTINUED)
In order to exercise its Option the Company is required to incur, or cause to be
incurred, on or before December 31, 2008, expenditures in connection with the
Property of not less than $1,000,000 pursuant to a work program or work programs
commenced and operated by the operator thereon. Upon exercise of the Option, if
any, the parties further interests in and to the property will be determined
through an industry standard joint venture agreement which will be deemed to be
effective upon the exercise of the Option. No cash consideration has been paid
for the option and no costs have been incurred as of May 31, 2007.
(B) SAN JUAN PROPERTY
On November 16, 2006 the Company entered into a "Property Option Agreement" with
Petaquilla Minerals Ltd ("Petaquilla"). Petaquilla therein has granted the
Company the sole and exclusive option to acquire up to a 70% undivided interest
in and to five exploration concessions situated in the Republic of Panama which
are owned and controlled by Petaquilla's wholly-owned subsidiary.
In order to exercise the initial portion of its Option (the "First Option") to
acquire an initial 60% undivided interest in and to the property the Company is
required: (i) to pay to Petaquilla the aggregate sum of $600,000 in cash, as
noted in 1, 3 and 4 below;
(ii) issue Petaquilla 4,000,000 common shares from the treasury of the Company;
and (iii) incur, or cause to be incurred, directly or indirectly, and pay for an
aggregate of $6,000,000 in exploration expenditures as follows:
1. The sum of $100,000 in cash (paid).
2. 4,000,000 common shares of the Company to be issued and delivered to
Petaquilla within five business days from the execution and delivery
of the Option Agreement. On December 1, 2006 the Company issued to
Petaquilla 4,000,000 common shares from the treasury of the Company,
at which time Petaquilla became a significant shareholder of the
Company. The estimated fair value of the 4,000,000 shares was
$7,400,000 and has been recorded as mineral property expenditures and
included in operating results for the year ended May 31, 2007.
3. An additional $200,000 in cash to be paid by wire transfer, and
exploration expenditures of not less than $1,000,000 to be incurred
and paid, both on or before May 31, 2007. An additional $300,000 in
cash to be paid by wire transfer, and exploration expenditures of not
less than $3,000,000 to be incurred and paid, both on or before May
31, 2008.
4. Cumulative exploration expenditures of not less than $6,000,000 to be
incurred and paid on or before May 31, 2009. Subject to the prior
exercise of the First Option, and in accordance with the terms and
conditions of the Option Agreement, Petaquilla has therein also
granted to the Company the exclusive right and further option (the
"Second Option") to increase the Company's undivided interest in the
property from 60% to 70% by incurring and paying for an additional
$3,000,000 in exploration expenditures during the period between
exercise of the First Option and May 31, 2010.
5. During the term of the Option Agreement Petaquilla is entitled to
nominate up to 40% of the total number of directors of the Company.
6. In addition, the Company is to establish a stock option plan which
allocates not less than 15% of the then issued shares in the capital
of the Company for the granting of options and shall grant to
Petaquilla, or its nominees stock options equal in number to not less
than one-third of the number of options allocated under such plan.
On January 30, 2007 the Company was advised that Petaquilla Minerals Ltd. had
resolved to rescind its Property Option Agreement with the Company. The Company
has disputed the alleged rescission and advised Petaquilla that the Option is in
good standing. Consequently, on February 13, 2007 the Company, in accordance
with the provisions of the Agreement and as a consequence of Petaquilla's
purported rescission of the Agreement, filed a notice with the British Columbia
International Commercial Arbitration Centre seeking arbitration. On March 5,
2007 the Company filed its Statement of Claim with the arbitrators seeking
specific performance of the Agreement and damages. On April 10, 2007 Petaquilla
filed a Statement of Defence. The parties are awaiting formal arbitration
proceedings and accordingly the outcome of the arbitration is presently not
determinable.
(C) VILCORO GOLD PROPERTY
On February 23, 2007, the Company entered into a Property Option Agreement with
St. Elias Mines Ltd., a publicly traded company on the TSX-V exchange, to
acquire not less than an undivided 66% legal, beneficial and registrable
interest in certain mining leases in Peru comprised of approximately 600
hectares in Peru.
GENEVA RESOURCES, INC.
(FORMERLY GENEVA GOLD CORP.)
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
AUGUST 31, 2007 (UNAUDITED)
________________________________________________________________________________
NOTE 3 -MINERAL EXPLORATION PROPERTIES (CONTINUED)
________________________________________________________________________________
(C) VILCORO GOLD PROPERTY (CONTINUED)
Under the terms of the Property Option Agreement, and in order to exercise its
Option to acquire the properties, the Company is required to make the following
non-refundable cash payments to St. Elias totaling $350,000 in the following
manner:
1. Payment of $50,000 in cash (paid)
2. The second payment of $100,000 is due on or before the twelve-month
anniversary of the signing of the Property Option Agreement.
3. The third payment of $200,000 cash and 50,000 shares of the Company's
common stock are due on or before the twenty-fourth-month anniversary
of the signing of the Property Option Agreement.
The Company is also required to incur costs totaling $2,500,000 as follows:
1. expenditures of $500,000 are to be incurred on or before the twelve
month anniversary of the signing of the Property Option Agreement.
2. expenditures of $750,000 are to be incurred on or before the twenty
fourth month anniversary of the signing of the Property Option
Agreement; and
3. expenditures of $1,250,000 are to be incurred on or before the thirty
sixth month anniversary of the signing of the Property Option
Agreement.
Also under the terms of the Property Option Agreement, St. Elias will be the
operator of the properties and will receive an 8% operator fee on all
exploration expenditures. Once the Company exercises the Option, the Company
agrees to pay 100% of all ongoing exploration, development and production costs
until commercial production and the Company has the right to receive 100% of any
cash flow from commercial production of the properties until it has recouped its
production costs, after which the cash flow will be allocated 66% to the Company
and 34% to St. Elias.
(D) ALLIED MINERAL PROPERTY
Effective April 30, 2007, the Company entered into a Property Financing and
Operating Agreement with Allied Minerals ("Allied"), a company incorporated
under the laws of the Federal Republic of Nigeria. Pursuant to the Agreement,
Allied granted the Company the exclusive right and option, to acquire an initial
and undivided 65% beneficial and economic interest in and to certain mineral
licenses, claims, concessions or reservations situated in Nigeria.
Under the terms of the Agreement, the Company was granted a forty five day due
diligence period starting on the effective date of the Agreement which has
subsequently been extended to November 11, 2007. If the Company does not provide
Allied with written notice to proceed (the "Notice") the Agreement shall be
treated as being at an end and of no further force and effect.
If the Company provides Allied with written notice to proceed, under the terms
of the Agreement, the Company will be deemed to have exercised the Option, and
shall be entitled to an undivided initial 65% and economic interest in and to
the Property, provided that the Company:
1. Grants to Allied, within five business days of the date of the notice
to proceed 300,000 stock options to acquire an equivalent number of
common shares of the Company, with the Share Options being exercisable
for a period of three years from the grant date at an exercise price
equal to the five-day average trading price of the Company's shares
preceding the date of delivery of the notice to proceed; and
2. Fund certain expenditures on the Property totaling not less than
$3,000,000 commencing after the Notice to Proceed is given.
3. Each of the Company and Allied will have the right to appoint one
representative to the Board of Directors of the other party.
GENEVA RESOURCES, INC.
(FORMERLY GENEVA GOLD CORP.)
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
AUGUST 31, 2007 (UNAUDITED)
________________________________________________________________________________
NOTE 3 -MINERAL EXPLORATION PROPERTIES (CONTINUED)
________________________________________________________________________________
(D) ALLIED MINERAL PROPERTY (CONTINUED)
4. The Company will be the operator of the Property and the Company and
Allied will establish a Management Committee to determine overall
policies and objectives with a view to bringing the Property into
commercial production as a mine.
5. The Company will be required to contribute 100% of all costs with
respect to the Property. Following commencement of commercial
production, if any, the net profit interests will be 35% Allied and
65% for the Company until such time a the Company has recouped 175% of
its preproduction and production costs, after which the Company shall
be entitled to received 52% of all cash flow from the Property and
Allied shall be entitled to receive 48% of all cash flow from the
Property.
6. If and when the Company has recouped 175% of its costs as set forth in
item 5 and commercial production reaches 250 tons of mineral product
per day, the Company will issue to the order and direction of Allied
250,000 fully paid and non-assessable shares from the Company's
treasury.
NOTE 4 - STOCKHOLDERS' EQUITY
________________________________________________________________________________
The Company's capitalization is 200,000,000 common shares with a par value of
$0.001 per share. On January 12, 2007 shareholder consented to increase the
authorized share capital of the Company from 50,000,000 shares of common stock
to 200,000,000 shares of common stock with the same par value of $0.001 per
share.
On May 1, 2006, a majority of shareholders and the directors of the Company
approved a special resolution to undertake a forward stock split of the common
stock of the Company on a 42 new shares for 1 old share basis whereby 16,400,000
common shares were issued pro-rata to shareholders of the Company as of the
record date on May 1, 2006.
On September 27, 2006 four founding shareholders returned 7,500,000 (pre - 4:1
Forward Split) of their restricted founders' shares, previously issued at
$0.0016 - $0.009 (pre - 4:1 Forward Split) per share, to treasury and the shares
were subsequently cancelled by the Company. The shares were returned to treasury
for no consideration to the founding shareholders.
On October 13, 2006, a majority of the Board of Directors approved by way of a
stock dividend to undertake a forward stock split of the common stock of the
Company on a 4 new shares for 1 old share basis whereby 27,900,000 common shares
were issued pro-rata to shareholders of the Company as of October 13, 2006.
All references in these financial statements to number of common shares, price
per share and weighted average number of common shares outstanding prior to the
42:1 forward split and the 4:1 forward split have been adjusted to reflect these
stock splits on a retroactive basis, unless otherwise noted.
On December 1, 2006 the Company issued 4,000,000 common shares valued at
$7,400,000 in connection with the San Juan Property Option Agreement
As of August 31, 2007 the Company has received $400,000 under a private
placement. The Units were offered at $1.00 per unit. Each unit consists of one
common share and one warrant to acquire an additional common share, exercisable
at $1.50 for twelve months.
NOTE 5 - STOCK OPTION PLAN
________________________________________________________________________________
On May 9, 2007 the Board of Directors of the Company ratified, approved and
adopted a Stock Option Plan for the Company in the amount of 5,000,000 shares
with an exercisable period up to 10 years. In the event an optionee ceases to be
employed by or to provide services to the Company for reasons other than cause,
any Stock Option that is vested and held by such optionee maybe exercisable
within up to ninety calendar days after the effective date that his position
ceases. No Stock Option granted under the Stock Option Plan is transferable. Any
Stock Option held by an optionee at the time of his death may be exercised by
his estate within one year of his death or such longer period as the Board of
Directors may determine. On May 9, 2007 the Board of Directors of the Company
ratified and approved under the Company's existing Stock Option Plan the
issuance of 1,500,000 shares for ten years at $1.00 per share.
GENEVA RESOURCES, INC.
(FORMERLY GENEVA GOLD CORP.)
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
AUGUST 31, 2007 (UNAUDITED)
________________________________________________________________________________
NOTE 5 - STOCK OPTION PLAN (CONTINUED)
________________________________________________________________________________
On May 9, 2007 the Company granted 1,500,000 stock options to officers,
directors and consultants of the Company at $1.00 per share. The term of these
options are ten years. The total fair value of these options at the date of
grant was $965,671, and was estimated using the Black-Scholes option pricing
model with an expected life of 3 years, a risk free interest rate of 4.49%, a
dividend yield of 0% and expected volatility of 164% and has been recorded as a
stock based compensation expense in the year ended May 31, 2007
A summary of the Company's stock options as of August 31, 2007 and changes
during the period ended is presented below: There were 1,500,000 stock options
granted in fiscal 2007.
_______________________________________________________________________________________________________________________________
Number of Options Weighted average exercise Weighted average remaining
Price per share Contractual life (in years)
_______________________________________________________________________________________________________________________________
Outstanding at May 31, 2006 - - -
_______________________________________________________________________________________________________________________________
Granted 1,500,000 - -
_______________________________________________________________________________________________________________________________
Exercised - - -
_______________________________________________________________________________________________________________________________
OUTSTANDING AT MAY 31, 2007 AND AUGUST 1,500,000 $1.00 9.69
31, 2007
_______________________________________________________________________________________________________________________________
NOTE 6 - RELATED PARTY TRANSACTIONS
________________________________________________________________________________
MANAGEMENT FEES
During the three month period ended August 31, 2007, the Company incurred
$60,000 for management fees to officers and directors (2006 - $16,799). The
total amount owing to the officers and directors as of August 31, 2007 was
$107,500 (May 31, 2007 - $47,500.)
The above transactions have been in the normal course of operations and, in
management's opinion, undertaken with similar terms and conditions as
transactions with unrelated parties.
NOTE 7 - SHAREHOLDER'S LOAN
________________________________________________________________________________
On November 14, 2006 a significant shareholder of the Company advanced $100,000
to Petaquilla on behalf of the Company (Refer to Note 3). Additional advances of
$303,500 were received during the year ended May 31, 2007. During the three
months ended August 31, 2007 an additional $125,000 was advanced by the same
shareholder under the same terms and conditions. These amounts are unsecured,
bear interest at 10% per annum, and have no set terms of repayment. The total
amount outstanding as of August 31, 2007 including accrued interest is $552,038.
NOTE 8 - CONTINGENCY
________________________________________________________________________________
During July 2007 we terminated our President's employment for cause. She has
since made certain false allegations against the Company, as specifically
described in the body of the August 31, 2007 10-QSB. Although the Company
refutes her allegations and believes termination was justified, it is possible
that the Company may be exposed to a loss contingency. However the amount of
such loss, if any, cannot be reasonably estimated at this time.
FORWARD LOOKING STATEMENTS
Statements made in this Form 10-QSB that are not historical or current facts are
"forward-looking statements" made pursuant to the safe harbor provisions of
Section 27A of the Securities Act of 1933 (the "Act") and Section 21E of the
Securities Exchange Act of 1934. These statements often can be identified by the
use of terms such as "may," "will," "expect," "believe," "anticipate,"
"estimate," "approximate" or "continue," or the negative thereof. We intend that
such forward-looking statements be subject to the safe harbors for such
statements. We wish to caution readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made. Any
forward-looking statements represent management's best judgment as to what may
occur in the future. However, forward-looking statements are subject to risks,
uncertainties and important factors beyond our control that could cause actual
results and events to differ materially from historical results of operations
and events and those presently anticipated or projected. We disclaim any
obligation subsequently to revise any forward-looking statements to reflect
events or circumstances after the date of such statement or to reflect the
occurrence of anticipated or unanticipated events.
AVAILABLE INFORMATION
Geneva Resources, Inc. files annual, quarterly, current reports, proxy
statements, and other information with the Securities and Exchange Commission
(the "Commission"). You may read and copy documents referred to in this
Quarterly Report on Form 10-QSB that have been filed with the Commission at the
Commission's Public Reference Room, 450 Fifth Street, N.W., Washington, D.C. You
may obtain information on the operation of the Public Reference Room by calling
the Commission at 1-800-SEC-0330. You can also obtain copies of our Commission
filings by going to the Commission's website at http://www.sec.gov.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF
OPERATION
GENERAL
Geneva Resources, Inc. was incorporated under the laws of the State of Nevada on
April 5, 2004 under the name "Revelstoke Industries, Inc." for the purpose of
reclaiming and stabilizing land in preparation for construction in Canada.
Effective November 27, 2006, we changed our name to "Geneva Gold Corp.".
Subsequently, effective February 28, 2007, we changed our name to "Geneva
Resources, Inc.".
CURRENT BUSINESS OPERATIONS
We are currently engaged in the business of exploration of precious metals with
a focus on the exploration and development of gold deposits in North American
and internationally. As of the date of this Quarterly Report, our mineral
interests consist mainly of options agreements on exploration stage properties
as discussed below. We have not established any proven or probable reserves on
our mineral property interests.
MINERAL PROPERTIES
GEORGE LAKE PROPERTY
On approximately October 20, 2006, we entered into a mineral property option
agreement (the "George Lake Option Agreement") with War Eagle Mining Company
("War Eagle"). In accordance with the terms and provisions of the George Lake
Option Agreement: (i) War Eagle granted to us the sole and exclusive option (the
"Option") to acquire a 70% undivided interest in and to seven mineral claims
comprising a total of 979 hectares located in the Province of Saskatchewan,
Canada, approximately 135 kilometers northwest of La Ronge, Saskatchewan (the
"George Lake Property"); (ii) in order to exercise the Option, we are required
to incur or cause to be incurred on or before December 31, 2008 expenditures in
connection with the George Lake Property of not less than $1,000,000 pursuant to
a work program to be commenced and operated by the operator thereon; and (iii)
upon exercise of the Option, the further interests of the parties in and to the
George Lake Property will be determined through an industry standard joint
venture agreement, which will be deemed to be effective upon the exercise of the
Option. As of the date of this Quarterly Report, we have not paid any
consideration to exercise the Option nor incurred any expenditures.
SAN JUAN PROPERTY
On approximately November 16, 2006, we entered into a property option agreement
(the "Petaquilla Option Agreement") with Petaquilla Minerals Ltd.
("Petaquilla"). In accordance with the terms and provisions of the Petaquilla
Option Agreement, Petaquilla granted to us the sole and exclusive option (the
"Option") to acquire up to a 70% undivided interest in and to five exploration
concessions situated in the Republic of Panama (the "San Juan Property"), which
are owned and controlled by Petaquilla's wholly-owned Panamanian subsidiary, as
described below.
On January 30, 2007, we received notice pursuant to a news release from
Petaquilla that the board of directors of Petaquilla has resolved to rescind the
Petaquilla Option Agreement. We were current in our obligations under the
Petaquilla Option Agreement and disputed the alleged rescission and advised
Petaquilla that the Option was in good standing. Consequently, on February 13,
2007, in accordance with the provisions of the Petaquilla Option Agreement and
as a result of Petaquilla's purported rescission of the Petaquilla Option
Agreement, we filed a notice with the British Columbia International Commercial
Arbitration Center seeking arbitration. On March 5, 2007, we filed our Statement
of Claims with the arbitrators seeking specific performance of the Petaquilla
Option Agreement and damages. On April 10, 2007, Petaquilla filed a Statement of
Defense. As of the date of this Quarterly Report, we are awaiting formal
arbitration proceedings. "Part II. Item 1. Legal Proceedings."
FIRST OPTION. In order to exercise the initial portion of the Option to acquire
an initial 60% undivided interest in and to the San Juan Property (the "First
Option"), we are required to: (i) pay to Petaquilla the aggregate sum of
$600,000 (of which $100,000 was paid on approximately November 17, 2006); (ii)
issue to Petaquilla 4,000,000 shares of our restricted common stock (which
4,000,000 shares were issued as of December 1, 2006); and (iii) incur or cause
to be incurred directly or indirectly and pay for an aggregate of $6,000,000 in
cumulative exploration expenditures as follows: (a) the sum of $100,000, which
has been paid to Petaquilla); (b) issue 4,000,000 shares of restricted common
stock, which have been issued to Petaquilla; (c) payment of an additional
$200,000 and incurrence and payment of exploration expenditures of not less than
$1,000,000 on or before May 31, 2007; (d) payment of an additional $300,000 and
incurrence and payment of exploration expenditures of not less than $3,000,000
on or before May 31, 2008; and (e) incurrence and payment of cumulative
exploration expenditures of not less than $6,000,000 on or before May 31, 2009.
As of December 1, 2006, we satisfied our current obligations with respect to the
exercise of the First Option under the Petaquilla Option Agreement to acquire an
initial 60% undivided interest in and to the San Juan Property. SECOND OPTION.
Subject to the prior exercise of the First Option and in accordance with the
terms and conditions of the Petaquilla Option Agreement, Petaquilla granted to
us the exclusive right and further portion of the Option (the "Second Option")
to increase our undivided interest in and to the San Juan Property from 60% to
70% by incurring and paying for $3,000,000 in exploration expenditures during
the period between the delivery of the Notice of Election and May 31, 2010.
Within sixty (60) days following the exercise of the First Option, we are
required to give Petaquilla notice (the Notice of Election) that either: (i) we
elect to accept the grant of the Second Option; or (ii) we elect not to accept
the Second Option. If we make the election, then all further work on the San
Juan Property and the subsequent relationship between us and Petaquilla shall be
governed by a joint venture agreement between the parties. If we elect to accept
the grant of the Second Option but fail to exercise the Second Option, we and
Petaquilla shall have initial interests of 60% and 40%, respectively. We shall
be deemed to have exercised the Second Option and thus acquired a 70% undivided
interest in the San Juan Property by having incurred and paid for $3,000,000 in
exploration expenditures during the period between the delivery of the Notice of
Election and May 31, 2010. If we fail to incur the $3,000,000 in exploration
expenditures by the end of the last day, we may at any time within fifteen days
of such day make a cash payment to Petaquilla in an amount equal to the
deficiency in the $3,000,000 exploration expenditures to be incurred.
VILCORO GOLD PROPERTY
On January 22, 2007, we entered into a letter of intent with St. Elias Mines
Ltd. ("St Elias"), pursuant to which St. Elias proposed to grant to us an option
to acquire not less than an undivided 66% legal, beneficial and registerable
interest in certain mining leases in Peru including St. Elias' option to earn a
95% interest in the Vilcoro Gold Property project comprised of approximately 600
hectares in Peru (collectively, the Vilcoro Properties").
On February 23, 2007, we entered into a formal property option agreement ("the
"Volcoro Option Agreement") with St. Elias pursuant to which St. Elias granted
to us an option to acquire not less than the undivided 66% legal, beneficial and
registerable interest in the Vilcoro Properties (the `Volcoro Option").
Under the terms of the Volcoro Option Agreement and in order to exercise the
Volcoro Option, we are required to make the following non-refundable cash
payments to St. Elias aggregating $350,000 as follows: (i) $50,000 within five
business days from the execution of the Volcoro Option Agreement, which as of
the date of this Annual Report, has been paid; (ii) $100,000 due on or before
the 12-month anniversary of execution of the Volcoro Option Agreement; and (iii)
$200,000 due on or before the 24-month anniversary of execution of the Volcoro
Option Agreement.
In accordance with the terms and provisions of the Volcoro Option Agreement, we
are further required to: (i) issue to St. Elias 50,000 shares of our restricted
common stock on or before the 12-month anniversary of execution of the Volcoro
Option Agreement; and (ii) incur costs totally $2,5000,000 as follows: (a) first
expenditure of $500,000 are to be incurred on or before the 12-month anniversary
of execution of the Volcoro Option Agreement, (b) second expenditure of $750,000
are to be incurred on or before the 24-month anniversary of execution of the
Volcoro Option Agreement; and (iii) third expenditure of $1,250,000 are to be
incurred on or before the 36-month anniversary of execution of the Volcoro
Option Agreement.
Under further terms of the Volcoro Option Agreement: (i) St. Elias will be the
operator of the Vilcoro Properties and will receive an 8% operator fee on all
exploration expenditures; (ii) once we exercise the Volcoro Option, we agree to
pay 100% of all on-going exploration, development and production costs until
commercial production (the "Production Costs"); and (iii) we have the right to
receive 100% of any cash flow from commercial production of the Volcoro
Properties until we have recouped the Production Costs after which the cash flow
will be allocated 66% to us and 34% to St. Elias.
PHASE I EXPLORATION PROGRAM. As of the date of this Quarterly Report, we are
engaged in our Phase I exploration program. A total of 256 channel samples and
28 check samples have been collected from outcrops, trenches and underground
workings, which sample preparation and analytical work was undertaken at ALS
Chemex SA Laboratory (an ISO-certified facility) in Lima Peru, using standard
industry practice fire assay with an atomic absorption finish. Most of the
channel samples were three to five meters long. This work has defined two
mineralized trends referred to as the Main Trend and the South Trend. Six
individual mineralized zones (Zones 1 through 6) have been identified within the
Main Trend and three individual mineralized zones (Zones A through C) have been
identified within the South Trend. The South Trend lies approximately 200 meters
to the south of the Main Trend and comprises an east-west alignment (parallel to
the Main Trend) of mineralized hydrobreccia occurrences in three zones.
Management is pleased with the evidence of disseminated mineralization on the
Vilcoro Properties with grades that are comparable to what is presently being
mined at the giant Yanacocha Mine (average ore grade 0.8 g/t), and is continuing
fieldwork at Vilcoro Properties with emphasis on additional trenching between
the individual zones on the Main Trend.
NIGERIA PROPERTY
Effective April 30, 2007, we entered into a property financing and operating
agreement (the "Operating Agreement") with Allied Minerals, a company
incorporated under the laws of the Federal Republic of Nigeria ("Allied
Minerals"). Pursuant to the Operating Agreement, Allied Minerals granted us the
exclusive right and option (the "Option"), to acquire an initial and undivided
65% beneficial and economic interest in and to certain mineral licenses, claims,
concessions or reservations situated in Nigeria (collectively, the "Nigeria
Property").
Under the terms of the Operating Agreement, we were granted a forty-five (45)
day due diligence period (the "Due Diligence Period") starting on the effective
date of the Operating Agreement, which has been subsequently extended thrice on
June 12, 2007, August 7, 2007 and September 18, 2007, respectively. During the
Due Diligence Period, we have access to Allied Mineral's books, records and
properties to make such investigation as we consider advisable to enable us to
determine whether to proceed with the Option. On or before the last day of the
Due Diligence Period, we could elect in writing to proceed with the Option (the
"Notice to Proceed"). If we do not provide Allied Minerals with the Notice to
Proceed, the Operating Agreement will be treated as terminated and of no further
force and effect.
If we subsequently provide Allied Minerals with the Notice to Proceed, under the
terms of the Agreement, we will be deemed to have exercised the Option (the
"Exercise"), and shall be entitled to an undivided initial 65% beneficial and
economic interest in and to the Nigeria Property, provided that we: (i) grant to
Allied Minerals, within five business days of the date of the Notice to Proceed
(subject to the prior receipt of all required regulatory requirements and/or
approvals, if any, as set forth in the Operating Agreement), 300,000 stock
options (the "Options") to acquire an equivalent number of our shares of common
stock, with the Options being exercisable for a period of three years from the
grant date at an exercise price equal to the five-day average trading price of
our shares of common stock on the NASD over-the-counter bulletin board preceding
the date of delivery of the Notice to Proceed; and (ii) fund certain
expenditures on the Nigeria Property totaling not less than $3,000,000
commencing after the Notice to Proceed is given.
Under further terms of the Operating Agreement, after Exercise: (i) we will be
the operator of the Nigeria Property; (ii) together with Allied Minerals we will
establish a management committee to determine overall policies, objectives,
procedures, methods and actions under the Operating Agreement with a view to
bringing the Nigeria Property into commercial production as a mine; and (iii) we
will each have the right to appoint one representative to the board of directors
of the other party. With effect from Exercise until the commencement of
commercial production of the Nigeria Property, if any, we will be required to
contribute 100% of all costs with respect to the Nigeria Property. Following
commencement of commercial production, if any, the net profit interests will be
35% for Allied and 65% for us until such time as we have recouped 175% of our
pre-production and production costs, after which we shall be entitled to receive
52% of all cash flow from the Nigeria Property and Allied Minerals shall be
entitled to receive 48% of all cash flow from the Nigeria Property. In addition,
if and when we have recouped 175% of our costs as set forth above and commercial
production reaches 250 tons of mineral product per day, we will issue to Allied
Minerals 250,000 shares of our common stock.
EXTENSION OF OPTION AND DUE DILIGENCE PERIOD. We extended the Option term in the
Operating Agreement and our Due Diligence Period from its original forty-five
day to a new term of seventy-five (75) days. Our management requested the
extensions in order to complete our sampling and grade testing program on the
Allied Mineral Properties located in the Wase area of Plateau State, Nigeria. As
of the date of this Quarterly Report, we have completed the sampling and grade
testing process of the most easterly side of the Nigeria Property. In the
Jawando area on the east die of the Nigeria Property, copper ore was recovered
from trenches cut in a wide spread, multi-vein sequence. Assays on samples taken
indicated Cu at 31.27% and Pb at 8.97%. To the south of the copper vein sequence
in the Gimbi area of the Nigeria Property, zinc ore was recovered from a trench
cut in another view sequence. Assays indicated Za at 60.29%. Our geological team
attempted to acquire copper ore samples from the western side of the Nigeria
Property in the Mavo area. Although a great deal of overburden was pushed aside,
the area believed to contain a copper-bearing ore body was not exposed because
of the very hard cap rock encountered.
We intend to utilize the extended Option term and Due Diligence Period to
attempt a blast and trench sampling program on the west side of the Nigeria
Property. In the event this fails to get beyond the cap rock into the potential
copper-bearing vein beneath, a core rig will be mobilized to accomplish the
task. It is anticipated that during this time frame, our geological team will
also carry out additional trenching delineation work on the major zinc vein
encountered in the Gimbi area.
RESULTS OF OPERATION
THREE-MONTH PERIOD ENDED AUGUST 31, 2007 COMPARED TO THREE-MONTH PERIOD ENDED
AUGUST 31, 2006.
The summarized consolidated financial data set forth in the tables below and
discussed in this section should be read in conjunction with our consolidated
financial statements and related notes for the three-month period ended August
31, 2007 and 2006, which financial statements are included elsewhere in this
Quarterly Report.
___________________________________________________________________________________________________
THREE-MONTH PERIOD ENDED THREE-MONTH PERIOD ENDED
AUGUST 31, 2007 AUGUST 31, 2006
(UNAUDITED) (UNAUDITED)
___________________________________________________________________________________________________
REVENUE -0- -0-
___________________________________________________________________________________________________
DIRECT COSTS -0- -0-
___________________________________________________________________________________________________
GROSS MARGIN -0- -0-
___________________________________________________________________________________________________
GENERAL AND ADMINISTRATIVE EXPENSES
___________________________________________________________________________________________________
Office and general 30,174 335
___________________________________________________________________________________________________
Consulting fees 15,000 -0-
___________________________________________________________________________________________________
Marketing expenses -0- -0-
___________________________________________________________________________________________________
Management fees 60,000 -0-
___________________________________________________________________________________________________
Mineral property expenditures 180,834 -0-
___________________________________________________________________________________________________
Professional fees 55,105 17,531
___________________________________________________________________________________________________
NET LOSS ($341,113) ($17,866)
___________________________________________________________________________________________________
Our net loss during the three-month period ended August 31, 2007 was
approximately ($341,113) compared to a net loss of ($17,866) for the three-month
period ended August 31, 2006 (an increase of $323,247).
During the three-month periods ended August 31, 2007 and 2006, respectively, we
did not generate any revenue. During the three-month period ended August 31,
2007, we incurred general and administrative expenses in the aggregate amount of
$341,113 compared to $17,866 incurred during the three-month period ended August
31, 2006 (an increase of $323,247). The operating expenses incurred during the
three-month period ended August 31, 2007 consisted of: (i) mineral property
expenditures of $180,834 (2006: $-0-); (ii) office and general of $30,174 (2006:
$335); (iv) consulting fees of $15,000 (2006: $-0-); (v) management fees of
$60,000 (2006: $-0-); and (vi) professional fees of $55,105 (2006: $17,531). The
increase in expenses incurred during the three-month period ended August 31,
2007 compared to the three-month period ended August 31, 2006 resulted primarily
from the increase in mineral property expenditures, marketing expenses and
management fees based upon the increase in scale and scope of exploratory and
acquisition programs and an increase in overall office and general expenses.
The increase in net loss during the three-month period ended August 31, 2007
compared to the three-month period ended August 31, 2006 is attributable
primarily to the increase in mineral property expenditures and management,
professional and consulting fees relating to the increase in the scale and scope
of acquisition and exploratory programs. Consulting, management and professional
fees incurred during the three-month period ended August 31, 2007 increased
pertaining to the increase in acquisition and development of our mineral
properties and related contracted services. General and administrative expenses
generally include corporate overhead, financial and administrative contracted
services, marketing and consulting costs.
Our net loss during the three-month period ended August 31, 2007 was ($341,113)
or ($0.00) per share compared to a net loss of ($17,866) or ($0.00) per share
for the three-month period ended August 31, 2006. The weighted average number of
shares outstanding was 41,200,000 at August 31, 2007 compared to 67,200,000 at
August 31, 2006.
LIQUIDITY AND CAPITAL RESOURCES
THREE-MONTH PERIOD ENDED AUGUST 31, 2007
Our financial statements have been prepared assuming that we will continue as a
going concern and, accordingly, do not include adjustments relating to the
recoverability and realization of assets and classification of liabilities that
might be necessary should we be unable to continue in operation.
As at the three-month period ended August 31, 2007, our current assets were
$104,536 and our current liabilities were $1,530,301, resulting in a working
capital deficit of $1,425,765. As at the three-month period ended August 31,
2007, our total assets were $104,536 consisting of current assets only compared
to total assets of $5,749 at fiscal year ended May 31, 2007. As at the
three-month period ended August 31, 2007, our current liabilities were
$1,530,301 compared to current liabilities of $1,490,401 at fiscal year ended
May 31, 2007. Our current liabilities consisted of: (i) $894,301 in accounts
payable and accrued liabilities; (ii) $528,500 in shareholder's loan; and (iii)
$107,500 due to related parties. The slight increase in current liabilities was
primarily due to the increase in shareholder's loan and amounts due to related
parties relating to the increased scale and scope of business activity.
Stockholders' deficit decreased from ($1,484,652) as at May 31, 2007 to
($1,425,765) as at August 31, 2007.
We have not generated positive cash flows from operating activities. For the
three-month period ended August 31, 2007, net cash flow used in operating
activities was ($426,217) compared to net cash flow used in operating activities
of ($10,280) for the three-month period ended August 31, 2006. Net cash flow
used in operating activities during the three-month period ended August 31, 2007
consisted primarily of a net loss of ($343,113) adjusted by ($60,000) due to
related party and ($37,248) in accounts payable and accrued liabilities, and an
increase of $12,148 in accrued interest on shareholder's loan.
During the three-month period ended August 31, 2007, net cash flow provided by
financing activities was $525,000 compared to net cash flow from financing
activities of $-0- for the three-month period ended August 31, 2006. Net cash
flow provided from financing activities during the three-month period ended
August 31, 2007 pertained primarily to $400,000 received as proceeds for shares
to be issued and $125,000 as proceeds from shareholder advances.
PLAN OF OPERATION
Existing working capital, further advances and possible debt instruments,
anticipated warrant exercises, further private placements, and anticipated cash
flow are expected to be adequate to fund our operations over the next six
months. We have no lines of credit or other bank financing arrangements.
Generally, we have financed operations to date through the proceeds of the
private placement of equity and debt securities. In connection with our business
plan, management anticipates that administrative expenses will decrease as a
percentage of revenue as our revenue increases over the next twelve months.
Additional issuances of equity or convertible debt securities will result in
dilution to our current shareholders. Further, such securities might have
rights, preferences or privileges senior to our common stock. Additional
financing may not be available upon acceptable terms, or at all. If adequate
funds are not available or are not available on acceptable terms, we may not be
able to take advantage of prospective new business endeavors or opportunities,
which could significantly and materially restrict our business operations.
The report of the independent registered public accounting firm that accompanies
our fiscal year end May 31, 2007 and May 31, 2006 audited financial statements
contains an explanatory paragraph expressing substantial doubt about our ability
to continue as a going concern. The financial statements have been prepared
"assuming that we will continue as a going concern," which contemplates that we
will realize our assets and satisfy our liabilities and commitments in the
ordinary course of business.
MATERIAL COMMITMENTS
As of the date of this Annual Report and other than as disclosed below, we do
not have any material commitments for fiscal year 2008.
VOLCORO OPTION AGREEMENT
Under the terms of the Volcoro Option Agreement and in order to exercise the
Volcoro Option, we are required to make the following non-refundable cash
payments to St. Elias aggregating $350,000 as follows: (i) $50,000 within five
business days from the execution of the Volcoro Option Agreement which, as of
the date of this Annual Report, has been paid; (ii) $100,000 due on or before
the 12-month anniversary of execution of the Volcoro Option Agreement; and (iii)
$200,000 due on or before the 24-month anniversary of execution of the Volcoro
Option Agreement. In accordance with further terms and provisions of the Volcoro
Option Agreement, we are further required to incur costs totally $2,5000,000 as
follows: (a) first expenditure of $500,000 to be incurred on or before the
12-month anniversary of execution of the Volcoro Option Agreement, (b) second
expenditure of $750,000 to be incurred on or before the 24-month anniversary of
execution of the Volcoro Option Agreement; and (iii) third expenditure of
$1,250,000 to be incurred on or before the 36-month anniversary of execution of
the Volcoro Option Agreement.
PETAQUILLA OPTION AGREEMENT
Under the terms of the Petaquilla Option Agreement, we are required to: (i) pay
to Petaquilla the aggregate sum of $600,000 (of which $100,000 was paid on
approximately November 17, 2006); and (ii) incur or cause to be incurred
directly or indirectly and pay for an aggregate of $6,000,000 in cumulative
exploration expenditures as follows: (a) the sum of $100,000, which has been
paid to Petaquilla); (b) issue 4,000,000 shares of restricted common stock,
which have been issued to Petaquilla; (c) payment of an additional $200,000 and
incurrence and payment of exploration expenditures of not less than $1,000,000
on or before May 31, 2007, which has not been paid due to the alleged rescission
by Petaquilla of the Petaquilla Option Agreement; (d) payment of an additional
$300,000 and incurrence and payment of exploration expenditures of not less than
$3,000,000 on or before May 31, 2008; and (e) incurrence and payment of
cumulative exploration expenditures of not less than $6,000,000 on or before May
31, 2009.
SHAREHOLDER LOAN
On November 14, 2006, one of our shareholders advanced to Petaquilla an
aggregate of $100,000 on our behalf. Additional advances of $303,500 were
received during fiscal year ended May 31, 2007. These amounts are unsecured and
accrue interest at 10% per annum and have no established terms of repayment.
During the three-month period ended August 31, 2007, an additional $125,000 was
advanced to us by the same shareholder under the same terms and conditions. The
total outstanding as of August 31, 2007 including accrued interest is $551,538.
ITEM 3. CONTROLS AND PROCEDURES
An evaluation was conducted under the supervision and with the participation of
our management, including Marcus Johnson, our President/Chief Executive Officer
("CEO") and D. Bruce Horton, our Chief Financial Officer ("CFO"), of the
effectiveness of the design and operation of our disclosure controls and
procedures as of August 31, 2007. Based on that evaluation, Messrs. Johnson and
Horton concluded that our disclosure controls and procedures were effective as
of such date to ensure that information required to be disclosed in the reports
that we file or submit under the Exchange Act, is recorded, processed,
summarized and reported within the time periods specified in SEC rules and
forms. Such officers also confirmed that there was no change in our internal
control over financial reporting during the three-month period ended August 31,
2007 that has materially affected, or is reasonably likely to materially affect,
our internal control over financial reporting.
AUDIT COMMITTEE
The Board of Directors has established an audit committee. The members of the
audit committee are Mr. Marcus Johnson, and Mr. Steven Jewett. One of the two
members of the audit committee are "independent" within the meaning of Rule
10A-3 under the Exchange Act. The audit committee was organized on October 20,
2006 and operates under a written charter adopted by our Board of Directors.
The audit committee has reviewed and discussed with management our unaudited
financial statements as of and for the three-month period ended August 31, 2007.
The audit committee has also discussed with Dale Matheson Carr-Hilton LaBonte
LLP the matters required to be discussed by Statement on Auditing Standards No.
61, Communication with Audit Committees, as amended, by the Auditing Standards
Board of the American Institute of Certified Public Accountants. The audit
committee has received and reviewed the written disclosures and the letter from
Dale Matheson Carr-Hilton LaBonte LLP required by Independence Standards Board
Standard No. 1, Independence Discussions with Audit Committees, as amended, and
has discussed with Dale Matheson Carr-Hilton LaBonte LLP their independence.
Based on the reviews and discussions referred to above, the audit committee has
recommended to the Board of Directors that the unaudited financial statements
referred to above be included in our Quarterly Report on Form 10-QSB for the
three-month period ended August 31, 2007 filed with the Securities and Exchange
Commission.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On February 27, 2007, we received notice pursuant to a news release from
Petaquilla that the board of directors of Petaquilla resolved to rescind the
Petaquilla Option Agreement. We are current in our obligations under the
Petaquilla Option Agreement and dispute the alleged rescission and have advised
Petaquilla that the Option is in good standing.
Therefore, in accordance with the terms and provisions of the Petaquilla Option
Agreement, we filed a notice with the British Columbia International Commercial
Arbitration Centre (the "BCICAC") seeking arbitration. On March 5, 2007, we
filed a Statement of Claim with the BCICAC seeking specific performance of the
Petaquilla Option Agreement and damages. On April 10, 2007, Petaquilla filed a
Statement of Defense.
We have instructed counsel to vigorously pursue all claims against Petaquilla on
our behalf. As of the date of this Quarterly Report, we are awaiting formal
arbitration proceedings and accordingly the outcome of the arbitration is
presently not determinable. While the result of arbitration is difficult to
predict, we believe we have a significant likelihood of prevailing or
successfully pursuing our claims against Petaquilla.
Other than as disclosed above, management is not aware of any legal proceedings
contemplated by any governmental authority or any other party involving us or
our properties. As of the date of this Quarterly Report, no director, officer or
affiliate is (i) a party adverse to us in any legal proceeding, or (ii) has an
adverse interest to us in any legal proceedings. Management is not aware of any
other legal proceedings pending or that have been threatened against us or our
properties.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS FOR A VOTE TO SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
RESIGNATION OF DIRECTOR
We received a letter from Stacey Kivel dated October 1, 2007 (the "Resignation
Letter"), tendering her resignation as one of our director. Ms. Kivel did not
serve on any committees of the Board of Directors.
In the Resignation Letter, Ms. Kivel alleges that she is resigning because we
had taken illegal actions in the conduct of our affairs and in our unfair
treatment of her during her tenure and ultimate termination as our President and
Chief Executive Officer on July 12, 2007. Ms. Kivel itemized eight separate
actions of alleged wrongdoing, the most serious of which consisted of an
allegation that certain members of our Board of Directors acted to terminate Ms.
Kivel as our President and Chief Executive Officer for various spurious and
insupportable reasons in retaliation for her efforts to comply with rulemaking
promulgated pursuant to the Sarbanes-Oxley Act of 2002 and the laws of the
United States.
Our Board of Directors had resolved to terminate Ms. Kivel's employment as our
officer at the Board of Director meeting held on July 12, 2007. Ms. Kivel
received notice of and participated in that meeting by way of conference
telephone. Our Board of Directors believes that the allegations of wrongdoing
contained in the Resignation Letter are unsupported and self-serving, and are
essentially a reiteration of certain allegations of misconduct that Ms. Kivel
did not raise until after her termination as our President and Chief Executive
Officer. Given the seriousness of the earlier allegations, our Board of
Directors formed a Special Committee in July 2007 to investigate Ms. Kivel's
complaints and to report back to the Board of Directors.
The Special Committee delivered its report to our Board of Directors on
September 29, 2007 (the "Special Committee Report"), having concluded that the
allegations of misconduct made by Ms. Kivel were baseless, and that there
appeared to be justification for the termination of her employment as an officer
for cause.
CERTAIN FINDINGS OF THE SPECIAL COMMITTEE
Given the Special Committee's earlier investigation into Ms. Kivel's complaints,
our Board of Directors instructed the Special Committee to review the
Resignation Letter. The Special Committee's findings on Ms. Kivel's more serious
allegations as to corporate and director misconduct are set forth below:
(1) As indicated above, Ms. Kivel has alleged that certain members of our Board
of Directors acted to terminate her as our President and Chief Executive Officer
in retaliation for her efforts to comply with rulemaking promulgated pursuant to
the Sarbanes-Oxley Act of 2002 and the laws of the United States. The only
reasons that the Special Committee is aware of for Ms. Kivel's termination as an
officer are documented in the Special Committee Report. Those reasons are
founded on the fact we had received information from a variety of sources which
impugned the competence and business ethics of Ms. Kivel. The Special Committee
believes that this decision was made in our best interests.
(2) Ms. Kivel has alleged that she was expressly denied access to our internal
financial records and accounts, and that the Board of Directors commenced its
efforts to remove her when she requested this material both orally and in
writing. The Special Committee is aware of no evidence that would suggest any
members of our Board of Directors had an ulterior motive for the decision to
terminate Ms. Kivel's employment as our officer. In addition, there is e-mail
correspondence between Ms. Kivel and our personnel that refutes the allegation
that she was denied access to our financial records. For example, by e-mail
message dated June 27, 2007, from our controller, offered to send our financial
records to Ms. Kivel, and explained to her that our most recent quarterly
financial statements were available on our corporate website as well as EDGAR.
(3) The Special Committee has inquired into the allegation that Ms. Kivel was
somehow prevented from calling meetings of our Board of Directors. In an e-mail
message dated June 27, 2007 to Marcus M. Johnson, one of our directors, Ms.
Kivel advised Mr. Johnson that she was proposing to schedule a Board meeting in
the "near future". This suggests to the Special Committee that Ms. Kivel, as our
President and Chief Executive Officer, as well as a director, believed it was up
to her to schedule the Board meeting and that she was planning to do so
(although there is no record of her following through and actually setting the
meeting date). There is no indication in Ms. Kivel's e-mail correspondence with
our personnel, or in any other of our records, which suggests that the other
Board members were refusing to meet with her.
(4) The Special Committee has found no evidence in support of Ms. Kivel's
allegations to the effect that we are majority owned and managed by an
undisclosed Canadian individual. In particular, Ms. Kivel has previously
asserted that Mr. Johnson acts as a nominee registered shareholder for that
individual, but the Special Committee has not found any evidence in support of
Ms. Kivel's allegation.
(5) Ms. Kivel has alleged that the Board meeting of July 12, 2007 was conducted
illegally. That meeting was an extension of an earlier meeting held on July 9,
2007. The Special Committee found that the Board meetings of July 9, 2007 and
12, 2007 were each validly constituted and properly conducted in accordance with
Nevada law and our Articles of Incorporation and Bylaws.
(6) Ms. Kivel alleges that when she was appointed as Chief Executive Officer,
she was advised by certain directors and shareholders that we were undertaking
to raise capital by way of a private placement of stock, as well as a
disposition of assets, without her input, and without any Board action or input.
The Special Committee is not aware of any private placement or disposition of
assets that have been undertaken without appropriate corporate authority and
Board of Director approval.
(7) Ms. Kivel has alleged that we have no Audit Committee, Compensation
Committee and no Governance Committee. This allegation is inaccurate. The Audit
Committee, consisting of Marcus Johnson, Steve Jewett and Alan Sedgwick, was
duly appointed by Board of Director resolution of April 25, 2006.
The balance of Ms. Kivel's allegations relate to what appears to be the real
basis for her grievances with us, namely, her disagreement with our Board of
Director's decision to terminate her employment as an officer for cause.
RESPONSE FROM STACEY KIVEL
On October 4, 2007, we provided Ms. Kivel's counsel with a copy of the
disclosures we were making in response to Item 5.02 in the Current Report on
Form 8-K dated October 1, 2007 as filed with the Securities and Exchange
Commission on October 5, 2007, and provided Ms. Kivel with the opportunity to
furnish a letter stating whether she agrees with the statements made in the
Current Report on Form 8-K. See "Item 6. Exhibits" below.
ITEM 6. EXHIBITS
The following exhibits are filed with this Quarterly Report on Form 10-QSB:
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
99.1 Resignation letter from Stacey Kivel dated October 1, 2007 (1)
99.2 Report of the Special Committee of Directors dated September 29, 2007.
(1)
99.3 Response letter from Stacey Kivel dated October 5, 2007. (1)
31.1 Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) or
15d-14(a) of the Securities Exchange Act.
31.2 Certification of the Chief Financial Officer Pursuant to Rule
13a-14(a) or 15d-14(a) of the Securities Exchange Act
32.1 Certification of Chief Executive Officer and Chief Financial officer
Under Section 1350 as Adopted Pursuant to Section 906 of the
Sarbane-Oxley Act.
(1) Filed as an Exhibit to the Company's Current Report on Form 8-K filed with
the Securities and Exchange Commission on October 5, 2007 and incorporated
herein by this reference.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
GENEVA RESOURCES INC.
Dated: October 9, 2007 By: /s/ MARCUS JOHNSON
________________________________
Marcus Johnson, President/Chief
Executive Officer
Dated: October 9, 2007 By: /s/ D. BRUCE HORTON
_______________________________
D. Bruce Horton, Chief Financial
Officer