10-Q 1 s11198010q.txt FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2008. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 FORM 10-Q [X] Quarterly report pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934. For the quarterly period ended September 30, 2008. [_] Transition report pursuant to Section 13 or 15(d) of the Exchange Act for the transition period from ____________to____________. Commission File Number: 0-32477 EAST DELTA RESOURCES CORP. (Exact name of registrant as specified in charter) DELAWARE 98-0212726 -------- ---------- (State of or other jurisdiction of (IRS Employer I.D. No.) incorporation or organization) 447 St. Francois Xavier St. Montreal, Quebec, Canada H2Y 2T1 (Address of Principal Executive Offices) (514) 845-6448 (Registrant's Telephone Number, Including Area Code) Check whether the registrant: (1) has filed all reports required to be filed by Section by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [_] Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer [_] Accelerated filer [_] Non-accelerated filer [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] Indicate the number of shares outstanding of each of the issuer's classes of stock as of November 14, 2008 70,648,842 Common Shares Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer [_] Accelerated filer [_] Non-accelerated filer [_] Smaller reporting company [X] EAST DELTA RESOURCES CORP. (A Development Stage Company) INDEX TO FORM 10-Q

PART I - FINANCIAL INFORMATION Item 1. EAST DELTA RESOURCES CORP. (A Development Stage Company) CONSOLIDATED BALANCE SHEETS (unaudited)

1 EAST DELTA RESOURCES CORP. (A Development Stage Company) CONSOLIDATED STATEMENTS OF OPERATIONS Three and nine months ended September 30, 2008 and 2007 and Period from March 4, 1999 (inception) through September 30, 2008 (unaudited)

2 EAST DELTA RESOURCES CORP. (A Development Stage Company) CONSOLIDATED STATEMENTS OF CASH FLOWS Nine months ended September 30, 2008 and 2007 and Period from March 4, 1999 (inception) through September 30, 2008 (unaudited)

3 EAST DELTA RESOURCES CORP. (A Development Stage Company) CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) Nine months ended September 30, 2008 and 2007 and Period from March 4, 1999 (inception) through September 30, 2008 (unaudited)

4 EAST DELTA RESOURCES CORP. (a Development Stage Company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) NOTE 1 - BASIS OF PRESENTATION The accompanying unaudited interim financial statements of East Delta Resources Corp. have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited consolidated financial statements and notes thereto contained in East Delta's latest Annual Report filed with the SEC on Form 10-KSB. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the consolidated financial statements which would substantially duplicate the disclosure contained in the audited financial statements for the most recent fiscal year as reported in Form 10-KSB have been omitted. NOTE 2 - GOING CONCERN East Delta is in the development stage and will require a significant amount of capital to proceed with its business plan. East Delta's ability to continue as a going concern is ultimately contingent upon its ability to attain profitable operations through the successful development of its business model and/or the integration of an operating business. As shown in the accompanying consolidated financial statements, East Delta incurred losses of $910,366 and $2,225,558 for the three and nine months ended September 30, 2008 and has an accumulated deficit and working capital deficit of $30,064,306 and $2,243,865, respectively as of September 30, 2008.These conditions raise substantial doubt as to East Delta's ability to continue as a going concern. Management's plans include obtaining additional capital through debt or equity financing. The consolidated financial statements do not include any adjustments that might be necessary if East Delta is unable to continue as a going concern. NOTE 3 - NOTES PAYABLE During the period between March 15, 2006 and May 2, 2006, East Delta issued an aggregate of 980,000 Euros, or approximately $1,193,565 on the date of issuance, in convertible debentures denominated in Euros. The notes were issued at a price of 1 Euro per debenture. The debentures are 6% senior secured convertible notes, convertible at the option of the note holders into shares of the East Delta's common stock, at a conversion price of 0.80 Euros. The maturity date for these notes was March 31, 2008. The notes were not paid upon maturity and were in default as of March 31, 2008. East Delta has extended the due date of notes, totaling 816,000 Euros in principal, to March 31, 2009 by issuing one share of common stock for each Euro of debt as full payment for the interest due and outstanding and one warrant with a conversion price of $.25 per share, at anytime until April 15, 2012. During the third quarter, East Delta negotiated an extension on these notes to March 31, 2009. The debt-holders were issued, in aggregate, 980,000 common shares as payment for the interest owed to March 31, 2008. In January 2008, East Delta borrowed $25,000 under a term loan from a related party. This note was due on March 15, 2008, bears interest at 6% per annum. During the third quarter, East Delta extended the note for an additional six months. In March 2008, East Delta borrowed $100,000 under a term loan. This note is due on October 1, 2008 and converts to a sinking fund to be repaid in three installments, consisting of $30,000, $30,000, and $40,000 payable on the first day of each succeeding month, that is, November 1, 2008, December 1, 2008 and January 1, 2009. The loan bears an interest rate of 25% of the face value of the loan, payable as 15% in common stock valued at $0.12 per share, due and to be issued upon receipt of funds by EDLT and 10% in cash, due and to be paid January 1, 2009. The lender has the option to convert the cash portion of the interest payment into common shares of EDLT at a cost of $0.12 per share. The company was unable to make the first payment due on November 1, 2008 and is seeking to extend the loan for another six months on similar terms. In March 2008, East Delta financed their D & O insurance in the amount of $17,401. The note is to be repaid in eight monthly installments in the amount of $2,075, bears a finance charge in the amount of $1,073, and is due in October 2008. Principal paid as of September 30, 2008 was $15,123, leaving a balance of $2,278 as of September 30, 2008. 5 In July 2008, East Delta. borrowed $20,000 under a term loan. This note is due on December 31, 2008 and the loan and the interest can be converted, in whole or part, to common shares of stock at a price no greater than $0.20 per share. The loan bears interest at a rate of 10% per annum and is fully guaranteed by East Delta. In July 2008, Sino Canadian Metals Inc. borrowed $20,000 under a term loan. This note is due on November 30, 2008 and the loan and the interest can be converted, in whole or part, to common shares of stock at a price no greater than $0.50 per share. The loan bears interest at a rate of 12% per annum and is fully guaranteed by East Delta. NOTE 4 - COMMON STOCK During the nine months ended September 30, 2008, East Delta issued 14,803,000, shares of common stock for accrued but unpaid interests, services performed during the nine months ended September 30, 2008 and prior period services accrued. These shares were recorded at their fair value of $2,164,350. NOTE 5 - WARRANTS AND OPTIONS In June 2008, East Delta granted fifteen note holders an aggregate 806,000 warrants to purchase East Delta's common stock in return for the extension of their notes from March 31, 2008 to March 31, 2009. These warrants are exercisable immediately at $0.25 per share and expire on April 15, 2012. The warrants were valued using the Black-Scholes Method with the following assumptions: i) Expected share price volatility of 94.78%; ii) Risk free interest rate of 3.38%; iii) Expected weighted average life - 4 years; and iv) No dividend yield. East Delta recorded $71,300 of interest expense related to these warrants. In September 2008, East Delta granted thirteen note holders an aggregate 4,230,000 warrants to purchase East Delta's common stock in return for the extension of their notes from March 31, 2008 to March 31, 2009. These warrants are exercisable immediately at $0.25 per share and expire on April 15, 2012. The warrants were valued using the Black-Scholes Method with the following assumptions: i) Expected share price volatility of 99.26%; ii) Risk free interest rate of 2.44%; iii) Expected weighted average life - 4 years; and iv) No dividend yield. East Delta recorded $303,728 of interest expense related to these warrants. 6 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OR PLAN OF OPERATIONS The following discussion of our financial condition and results of operations should be read in conjunction with the accompanying financial statements and the related footnotes thereto. Forward-Looking Statements Some of the statements contained in this report discuss future expectations, contain projections of results of operations or financial condition, or state other "forward-looking" information. The words "believe," "intend," "plan," "expect," "anticipate," "estimate," "project," "goal" and similar expressions identify such statement was made. These statements are subject to known and unknown risks, uncertainties, and other factors that could cause the actual results to differ materially from those contemplated by the statements. The forward-looking information is based on various factors and is derived using numerous assumptions. Factors that might cause or contribute to such a discrepancy include, but are not limited to the risks discussed in this and our other SEC filings. We do not promise to update forward-looking information to reflect actual results or changes in assumptions or other factors that could affect those statements. Future events and actual results could differ materially from those expressed in, contemplated by, or underlying such forward-looking statements. The following discussion and analysis of our financial condition is as of September 30, 2008. Our results of operations and cash flows should be read in conjunction with our un-audited financial statements and notes thereto included elsewhere in this report and the audited financial statements and the notes thereto included in our Form 10-KSB for the year ended December 31, 2007. Overview East Delta Resources Corp., ("we", or the "Company" or "EDLT"), a Delaware corporation, was incorporated on March 4, 1999. We are a start-up, development stage company and have not yet generated or realized any revenues from our new business operations. Since inception, we have sold our equity to raise money for property acquisitions, corporate expenses and to repay outstanding indebtedness. Our current business strategy focuses on gold exploration and mining development in main land China. There is little historical financial information about our company upon which to base an evaluation of our performance. We have never generated any revenues from our mining operations. Accordingly, comparisons with prior periods are not meaningful. We are subject to risks inherent in the establishment of a new business enterprise, including limited capital resources, possible delays in the exploration of our properties, and possible cost overruns due to price and cost increases in services. Our primary activity, once we become operational, will be in gold exploration, mining development and production. We also plan to participate in other mineral exploration and mining, specifically, nickel, zinc and lead. The geographic focus is in growth mining regions in Southeast Asia, primarily in China. Our goal is to establish ourselves, in these areas, as a major force in the mining industry by bringing together a network of financing sources, management expertise, the latest mining technology and extensive local industry contacts. 7 Results of Operations and Financial Condition The following selected financial data for the three and six months ended September 30, 2008 and 2007 and the period from inception March 4, 1999 to September 30, 2008 is derived from the financial statements included elsewhere herein. The following data should be read in conjunction with the financial statements of the Company.

Our operations have been fairly minimal to date, and have not generated any revenues. Accordingly, we are considered to be in the development stage as defined in Financial Accounting Standards Board Statement No. 7. Revenues We had no revenues during the nine months ended September 30, 2008 and 2007. Operating expenses and net losses Our total operating expenses for the three and nine months ended September 30, 2008 were $734,890 and $1,795,073, respectively, compared to $137,036 and $1,268,179 for the three and nine months ended September 30, 2007, respectively. The increase is primarily due to stock issued to consultants for services. No officer and director compensation was paid for the three and nine months ended September 30, 2008 and 2007. Liquidity and Capital Resources During the three and nine months ending September 30, 2008 and 2007, we incurred an operating loss of $734,890 and $1,795,073, respectively, as compared to an operating loss of $137,036 and $1,268,179 for the three and nine months ending September 30, 2007, respectively. As of September 30, 2008, we have a deficit accumulated during the development stage of $30,064,306. Liquidity and Capital Resources Balance Sheet Data: As of September 30, 2008 ------------------------ Working capital deficit $(2,243,865) Total assets 253,052 Total liabilities 2,452,660 Stockholders' deficit (2,274,784) 8 As of September 30, 2008, our cash position was $36,863 and we had a working capital deficit of $2,243,865. We are of the opinion that we need to obtain additional funds for the next 12 months to further develop our major property, Bake and to integrate at least one acquisition of an additional property into our operations. And the subsequent progress on this acquisition and on any additional acquisitions will depend on our ability to find financing in the order of several million dollars. East Delta is in the development stage and will require a significant amount of capital to proceed with its business plan. East Delta's ability to continue as a going concern is ultimately contingent upon its ability to attain profitable operations through the successful development of its business model and/or the integration of an operating business. As shown in the accompanying consolidated financial statements, East Delta incurred losses of $910,366 and $2,225,558 for the three and nine months ended September 30, 2008 and has an accumulated deficit and working capital deficit of $30,064,307 and $2,243,865, respectively as of September 30, 2008. These conditions raise substantial doubt as to East Delta's ability to continue as a going concern. Management's plans include obtaining additional capital through debt or equity financing. The consolidated financial statements do not include any adjustments that might be necessary if East Delta is unable to continue as a going concern. Plan of Operations Overall, during the latter half of 2008 and first quarter of 2009, the Company's emphasis will be to: o Undertake a financing campaign of minimum $500,000. o Prepare and implement (subject to levels of funding) a new drilling plan at the core property (Bake) based on results to date; Further, although the acquisition at Huaqiao has not been closed as yet, management has decided to proceed as if it has and has begun to do the following, as funds permit: Finalize the acquisition of the of the Huaqiao mine o complete tunneling to lower levels and re-start mining operations, with ore extraction from Level 6 of the mine; o Re-commence mill operations, processing 20-25 T/day initially, with the intention of a ramp-up to full 100-125 T capacity by mid-year. o Continue exploration activities at lower levels of the mine. At Qinghai, o As we have successfully tested our Ni-Cu plant, we plan to commence operations by the year end subject to financing, and eventually ramping-up to our capacity of 50T/day. o Feasibility study and cost analysis to double or triple capacity at the plant to 150T/day. Additional plans, in general, are: o Complete ongoing property acquisitions and seek other acquisitions; o Consolidate the acquisitions by integrating them into the Company's Chinese operations. More specifically details for each project: Bake Surface mapping has been completed for an 8 square kilometer area of interest lying within the 85 square kilometer Bake-Jiaoyun concession. The objective of the next phase is to focus activities on the most promising of the many mineralization zones that have been mapped within different sectors of the mapped portions of the property, while completing the surface mapping of the remaining 2 square kilometer area of interest. The Company will conduct geophysical analysis as well as trenching and drilling campaigns to determine/verify the grades and thickness of the zones that are predicted in resource models and preliminary exploration results. Upon successful raising of funds as indicated earlier, the Company intends to continue a program commenced earlier to: a) assess and prioritize the potential of known mineralized zones by drilling at least 20 drill holes of lengths varying between 200 to 500 meters; b) continue to explore the high priority deposits near Zone 1 and Zone 2; 9 c) hiring independent "western" qualified geologists to prepare resource estimates to US/Canadian standards. Huaqiao Project The acquisition of Huaqiao has not as yet been closed, nevertheless management has decided to proceed with various activities related to this project that would be beneficial to us upon closing. The work involves general planning and budgeting, refurbishment and modernization of an existing mill on the property, and further resource determination. As most planned activities planned in the first nine months of 2008 were not completed to lack of funds, East Delta intends to do the following in next six months, again depending on the success of financing activities: Exploration o Create new computerized geologic model for resource/reserve estimation o Based on results from the mapping, model and sampling, plan drill holes. Production o Contract an expatriate mine manager to oversee all operations at the mine; o Address tailings disposal concerns; o Complete construction of new labor living quarters; o Cost analysis study and installation of backup electrical generators o Purchase additional ore hoppers o Purchase and install additional production equipment as required; and o Assess and streamline management reporting structure. The above activities should build upon the estimated mine-able gold on this property offering the option to increase future ore production from 125-150 tonne/day (t/d) to 300 t/d or more. Qinghai Hua Long Ding Shun Nickel Project The property has not been explored by any western company. The initial work planned for last year was not undertaken due to lack of available funding. The Company however has carried these plans over to 2009. Exploration results from precious work in the area will be collected, translated, and compiled. A geologic management team will be assembled to oversee and perform the work. A baseline geologic survey will be completed. Target areas for geophysical analysis will be determined with intent to prioritize targets Underground tunnels will be mapped and sampled. All surface occurrences will be trenched and sampled. Drill targets will be identified Resource estimates completed for known mineralization by late 2009. 10 Huang Yuan Plant We have made the necessary arrangements to purchase Ni-Cu ore from a low grade Nickel Copper mine within a radius of 100 kilometers of the plant. The grades from this mine tested in the range from 0.5 to 0.87% of Nickel and 1% to 1.8% of Copper. With the current elevated price of Ni and Cu, and the quality of our Ni-Cu concentrate product, our 50 ton/day plant has been estimated to have the potential to generate net profit of approximately US$1,000,000 annually. Production is scheduled to commence by the end of December 2008. The plant will produce an intermediate product, iced Nickel-Copper (Ni-CU) Aggregate, or Nickel-Copper Aggregate. Ni-Cu alloys are widely used for marine applications due to their excellent resistance to seawater corrosion, high inherent resistance to bio-fouling and good fabric ability. The major refinery can further process them to separate them into Nickel, Copper and other trace metals found in the alloy. Our main supplier of the raw ore is located about 85 kilometers from the plant. The particular exided Ni-Cu ore that we are purchasing is relatively inexpensive due the fact very few producers have the experience in handling the particular type of ore mixture. In addition, this particular low grade deposit also contains gold, silver, platinum, palladium and cobalt. Our customer-refinery will test each production run and will likely credit us for additional metals extractable from our product. The plant is to be operated twenty-four hours per day, in three shifts. The process will mix the raw nickel ore with other materials, such as limestone, coal, sulfur and iron ore and then be fed into the furnace. Upon reaching target temperatures the process will generate a small amount of the Nickel-Copper aggregate and residue material. The residue will be sold to the cement plants, as it contains rich iron and other minerals that are used to enhance the strength of the cement. We have lined up four major Nickel Copper Producers as potential customers of our plant output: 1. Jin Chuan non-ferrous Metals Group Company. 2. Xin Jiang Non-Ferrous Metals Company, Ltd. 3. Cheng Du Electric Treatment Factory 4. Jilin Nickel Industry Company Ltd. Our partner, Professor Liu Jiang is currently finalizing agreements as to pricing, payment methods, delivery schedule and other related details. 11 CAUTIONARY STATEMENT This Form 10-Q, press releases and certain information provided periodically in writing or orally by our officers or our agents contain statements which constitute forward-looking statements within the meaning of Section 27A of the Securities Act, as amended and Section 21E of the Securities Exchange Act of 1934. The words expect, anticipate, believe, goal, plan, intend, estimate and similar expressions and variations thereof if used are intended to specifically identify forward-looking statements. Those statements appear in a number of places in this Form 10-Q and in other places, particularly, Management's Discussion and Analysis or Results of Operations, and include statements regarding the intent, belief or current expectations us, our directors or our officers with respect to, among other things: (i) our liquidity and capital resources; (ii) our financing opportunities and plans and (iii) our future performance and operating results. Investors and prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those projected in the forward-looking statements as a result of various factors. The factors that might cause such differences include, among others, the following: (i) any material inability to successfully internally develop our products; (ii) any adverse effect or limitations caused by Governmental regulations; (iii) any adverse effect on our positive cash flow and ability to obtain acceptable financing in connection with our growth plans; (iv) any increased competition in business; (v) any inability to successfully conduct our business in new markets; and (vi) other risks including those identified in our filings with the Securities and Exchange Commission. We undertake no obligation to publicly update or revise the forward looking statements made in this Form 10-Q to reflect events or circumstances after the date of this Form 10-Q or to reflect the occurrence of unanticipated events. 12 ITEM 3 - QUANTITIVE AND QUALITATIVE ABOUT MARKET RISK Not applicable ITEM 4 - CONTROLS AND PROCEDURES (a) Evaluation of Disclosure Controls and Procedures Management has evaluated, with the participation of our Chief Executive Officer / Chief Financial Officer, the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) as of the end of the period covered by this report and concluded that our disclosure controls and procedures were not effective to ensure that all material information required to be disclosed in this Quarterly Report on Form 10-Q has been made known to them in a timely fashion. We are in the process of improving our internal control over financial reporting in an effort to remediate these deficiencies through improved supervision and training of our accounting staff. These deficiencies have been disclosed to our Board of Directors. We believe that this effort is sufficient to fully remedy these deficiencies and we are continuing our efforts to improve and strengthen our control processes and procedures. Our Chief Executive Office, Chief Financial Officer and directors will continue to work with our auditors and other outside advisors to ensure that our controls and procedures are adequate and effective. (b) Changes in Internal Control over Financial Reporting There have been no significant changes in our internal controls over financial reporting that occurred during the fiscal quarter covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 13 PART II. - OTHER INFORMATION Item 1. Legal Proceedings NONE Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During the quarter ending September 30, 2008, we issued 6,387,000 shares of our common stock to various consultants for services rendered to us, to note holders in lieu of interest, to various directors and employees as compensation, and for rent. The stock was issued in transactions exempt from registration either under section 4(2) to U.S. persons or under Regulation S to non-U.S persons as promulgated under the Securities Act of 1933, 1933, as amended (the "Securities Act"). No commissions were paid. Item 3. Defaults Upon Senior Securities NONE Item 4. Submission of Matters to a Vote of Securities Holders NONE Item 5. Other Information NONE Item 6. Exhibits 31.1 Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rules 13a-14 and 15d-14 of the Exchange Act) 32.1 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) 14 SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: November 19, 2008 By: /s/ Victor Sun ------------------ Victor I.H. Sun Chief Executive Officer, Chief Operating Officer, and Chief Financial Officer 15

EAST DELTA RESOURCES CORP. 10-Q