U.S.
SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Form
10-Q
|
Mark
One
[
X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
For
the period ended March 31, 2010
[ ] TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
For
the transition period from ______ to _______
Commission
File No. 333-138332
Trilliant Exploration
Corporation
(Name
of small business issuer in its charter)
|
|
|
Nevada
(State
or other jurisdiction of incorporation
or
organization)
|
20-0936313
(I.R.S.
Employer Identification No.)
|
|
|
1404 Roadman Street, Hollywood, Florida
33020
(Address
of principal executive offices)
|
|
|
(786) 323-1650
(Issuer’s
telephone number)
|
545 Eighth Avenue, Suite 401, New York, New York
10018
(Previous address if changed from last
report)
|
|
|
Securities
registered pursuant to Section
12(b)
of the Act:
|
Name
of each exchange on which
registered:
|
None
|
|
|
|
Securities
registered pursuant to Section 12(g) of the Act:
|
Common Stock, $0.001
|
|
(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 check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (Section 229.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files.
Yes
[ ] No[ X ]
Indicate
by check mark whether the registrant is a large accelerated filed, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.
Large
accelerated filer
[ ] Accelerated
filer [ ]
Non-accelerated
filer
[ ] Smaller
reporting company [X]
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 the issuer’s classes of common
stock, as of the most practicable date:
Class
|
Outstanding
as of May 24, 2010
|
Common
Stock, $0.001
|
87,231,500*
|
*93,131,500
shares issued, 87,231,500 outstanding (considering 5,900,000 shares of treasury
stock repurchased by the Company)
TRILLIANT
EXPLORATION CORPORATION
Form
10-Q
Part
1.
|
FINANCIAL
INFORMATION
|
|
|
|
|
Item
1.
|
Financial Statements
|
|
|
Balance
Sheets
|
|
|
Statements
of Operations
|
|
|
Statements
of Cash Flows
|
|
|
Notes
to Financial Statements
|
|
|
|
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
|
|
|
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
|
|
|
|
Item
4.
|
Controls
and Procedures
|
|
|
|
|
Part
II.
|
OTHER
INFORMATION
|
|
|
|
|
Item
1.
|
Legal
Proceedings
|
|
|
|
|
Item
1A.
|
Risk
Factors
|
|
|
|
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
|
|
|
|
Item
3.
|
Defaults
Upon Senior Securities
|
|
|
|
|
Item
4.
|
Removed
and Reserved
|
|
|
|
|
Item
5.
|
Other
Information
|
|
|
|
|
Item
6.
|
Exhibits
|
|
|
|
|
PART
I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL
STATEMENTS
The
accompanying condensed unaudited financial statements of Trilliant Exploration
Corporation, a Nevada corporation, are condensed and, therefore, do not include
all disclosures normally required by accounting principles generally accepted in
the United States of America. These statements should be read in
conjunction with the Company’s most recent annual financial statements for the
year ended December 31, 2009 included in our Annual Report on Form 10-K filed
with the U.S. Securities and Exchange Commission (“SEC”) on April 15,
2010. In the opinion of management, all adjustments necessary for a
fair presentation have been included in the accompanying condensed financial
statements and consist of only normal recurring adjustments. The
results of operations presented in the accompanying condensed financial
statements for the period ended March 31, 2010 are not necessarily indicative of
the operating results that may be expected for the full year ending December 31,
2010.
Trilliant
Exploration Corporation
CONSOLIDATED
FINANCIAL STATEMENTS
(UNAUDITED)
For
the Three Months Ended
March
31, 2010 and 2009
TABLE
OF CONTENTS
Consolidated
Balance Sheets as of March 31, 2009 (unaudited) and December 31,
2009
Consolidated
Statements of Operations for the Three Months ended March 31, 2010 and March 31,
2008 (unaudited) and from inception to March 31, 2010
Consolidated
Statements of Cash Flows for the Three Months ended March 31, 2009 and March 31,
2009 (unaudited) and from inception to March 31, 2010
Notes to the Condensed Consolidated
Financial Statements (unaudited)
Trilliant Exploration
Corporation
Trilliant
Exploration Corporation
(A
Pre-Exploration Stage Company)
Condensed
Consolidated Balance Sheets
(unaudited)
|
|
March
31,
|
|
December
31,
|
|
|
2010
|
|
2009
|
|
|
(unaudited)
|
|
|
ASSETS
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
Cash
and cash equivalents
|
$
|
-
|
$
|
-
|
Accounts
receivable
|
|
-
|
|
-
|
Prepaid
expenses (Note 7)
|
|
4,643
|
|
22,433
|
Total
Current Assets
|
|
4,643
|
|
22,433
|
|
|
|
|
|
OTHER
ASSETS
|
|
|
|
|
Investments
(Note 3)
|
|
1,009,125
|
|
2,389,200
|
Notes
receivable - related party (Note 5A)
|
|
-
|
|
-
|
Bond
issue costs, net - related party (Note 5C)
|
|
84,566
|
|
92,585
|
Deposits
|
|
3,426
|
|
5,646
|
Total
Other Assets
|
|
1,097,117
|
|
2,487,431
|
TOTAL
ASSETS
|
$
|
1,101,760
|
$
|
2,509,864
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
LIABILITIES
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
Accounts
payable
|
$
|
68,595
|
$
|
56,269
|
Accounts
payable - related party (Note 6B)
|
|
56,818
|
|
24,589
|
Convertible
notes payable, current (Note 3)
|
|
2,018,250
|
|
2,389,200
|
Convertible
notes payable–related party, current (Note 5A)
|
|
665,000
|
|
665,000
|
Bonds
payable, convertible and secured–related party (Note 5C)
|
|
2,062,000
|
|
2,057,032
|
Accrued
interest, convertible bonds payable–related party (Note
5C)
|
|
124,708
|
|
47,983
|
Accrued
interest, convertible note payable (Note3)
|
|
-
|
|
143,325
|
Accrued
interest, convertible notes payable–related party (Note
5A)
|
|
230,945
|
|
35,897
|
Short-term
notes payable–related party (Note 5B)
|
|
32,495
|
|
32,495
|
Total
Current Liabilities
|
|
5,258,811
|
|
5,451,790
|
|
|
|
|
|
Total
Liabilities
|
|
5,258,811
|
|
5,451,790
|
|
|
|
|
|
STOCKHOLDERS'
DEFICIT (Note 4)
|
|
|
|
|
Preferred
stock, par value $.001, 200,000,000 shares authorized,
|
|
10,200
|
|
10,200
|
10,200,000
issued and outstanding
|
|
-
|
|
-
|
Common
stock, par value $.001, 1,000,000,000 shares authorized,
|
|
|
|
|
93,131,500
issued and 87,231,500 outstanding, March 31, 2010;
93,031,500
|
|
|
|
|
shares
issued and outstanding December 31, 2009
|
|
93,132
|
|
93,132
|
Additional
paid-in capital
|
|
10,706,521
|
|
10,706,521
|
Accumulated
other comprehensive income
|
|
275,500
|
|
5,787
|
Deficit
accumulated during the pre-exploration stage
|
|
(5,042,404)
|
|
(3,557,566)
|
Total
Stockholder's equity (deficit) (before treasury stock)
|
|
6,042,950
|
|
7,258,074
|
Treasury
Stock (5,900,000 shares at $1.73 per share) (Note 6)
|
|
(10,200,000)
|
|
(10,200,000)
|
|
|
|
|
|
Total
Stockholders' (Deficit)
|
|
(4,157,051)
|
|
(2,941,926)
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
$
|
1,101,760
|
$
|
2,509,864
|
The
accompanying notes are an integral part of the unaudited financial
statements.
Trilliant
Exploration Corporation
(A
Pre-Exploration Stage Company)
Condensed
Consolidated Statements of Operations
(unaudited)
|
|
|
|
|
|
Cumulative
Totals
|
|
|
|
|
|
|
from
December 29,
|
|
|
|
|
|
|
2003
(Inception)
|
|
|
Three
Months ended March 31,
|
|
to
March 31, 2010
|
|
|
2010
|
|
2009
|
|
|
Revenues
|
$
|
-
|
$
|
-
|
$
|
0
|
|
|
|
|
|
|
0
|
Operating
Expenses
|
|
|
|
|
|
0
|
Organizational
expenses
|
|
-
|
|
-
|
|
1,200
|
Depreciation
|
|
-
|
|
-
|
|
-
|
Professional
fees
|
|
41,700
|
|
127,520
|
|
677,686
|
Salaries
and wages
|
|
3,000
|
|
86,292
|
|
173,185
|
Advertising
and promotion
|
|
12,600
|
|
-
|
|
81,350
|
Insurance
|
|
5,190
|
|
-
|
|
16,862
|
Other
general and administrative
|
|
2,075
|
|
14,336
|
|
342,262
|
Total
Operating Expenses
|
|
64,565
|
|
228,148
|
|
1,292,545
|
|
|
|
|
|
|
|
Operating
Loss
|
|
(64,565)
|
|
(228,148)
|
|
(1,292,545)
|
|
|
|
|
|
|
|
Other
Income (Expense)
|
|
|
|
|
|
|
Interest
income
|
|
-
|
|
22,633
|
|
37,587
|
Loss
on investment
|
|
(1,242,600)
|
|
-
|
|
(1,242,600)
|
Currency
exchange loss
|
|
-
|
|
-
|
|
(9)
|
Miscellaneous
other income
|
|
-
|
|
50
|
|
50
|
Interest
expense
|
|
(177,673)
|
|
(39,922)
|
|
(580,201)
|
Total
Other Income (Expenses)
|
|
(1,420,273)
|
|
(17,239)
|
|
(1,785,173)
|
|
|
|
|
|
|
|
LOSS
FROM CONTINUING OPERATIONS
|
|
(1,484,838)
|
|
(245,387)
|
|
(3,077,718)
|
Provision
for income taxes
|
|
-
|
|
-
|
|
-
|
NET
LOSS FROM DISCONTINUED OPERATIONS
|
|
0
|
|
(89,379)
|
|
(1,964,686)
|
Net
Loss applicable to Common Shares
|
$
|
(1,484,838)
|
$
|
(334,766)
|
$
|
(5,042,404)
|
BASIC
AND DILUTED LOSS PER COMMON SHARE:
|
|
|
|
|
|
|
Net
loss per share, continuing operations
|
|
(0)
|
|
(0)
|
|
|
Net
loss per share, discontinued operations
|
$
|
0
|
$
|
(0)
|
|
|
Total
net loss per share
|
|
(0)
|
|
(0)
|
|
|
Weighted
Average Number of
|
|
|
|
|
|
|
Common
Shares Outstanding (Basic)
|
|
93,131,500
|
|
91,940,000
|
|
|
|
|
|
|
|
|
|
Weighted
Average Number of
|
|
|
|
|
|
|
Common
Shares Outstanding (Diluted)
|
|
1,172,568,139
|
|
94,040,000
|
|
|
The
accompanying notes are an integral part of the unaudited financial
statements.
Trilliant
Exploration Corporation
(A
Pre-Exploration Stage Company)
Condensed
Consolidated Statements of Other Comprehensive Loss
(unaudited)
|
|
Three
Months ended March 31,
|
|
Cumulative
Totals from December 29, 2003 (Inception) to March 31,
2010
|
|
|
2009
|
|
2008
|
|
|
Net
loss
|
$
|
(1,484,838)
|
$
|
(334,766)
|
$
|
(5,042,404)
|
Other
comprehensive loss, net of tax
|
|
|
|
|
|
|
Foreign
currency translation adjustment
|
|
269,714
|
|
0
|
|
269,714
|
Comprehensive
income
|
$
|
(1,215,125)
|
$
|
(334,766)
|
$
|
(4,772,691)
|
The
accompanying notes are an integral part of the unaudited financial
statements.
Trilliant
Exploration Corporation
(A
Pre-Exploration Stage Company)
Condensed
Consolidated Statements of Cash Flows
(unaudited)
|
|
|
|
Cumulative
Totals
|
|
|
|
|
from
December 29,
|
|
|
Three
months
|
|
2003
(Inception)
|
|
|
Ended
March 31,
|
|
to
March 31,
|
|
|
2010
|
|
2009
|
|
2010
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
Net
Loss
|
$
|
(1,484,838)
|
$
|
(334,766)
|
$
|
(5,042,404)
|
Adjustments
to reconcile net loss to net cash
|
|
|
|
|
|
|
used
in operations:
|
|
|
|
|
|
|
Impariment
on investment
|
|
1,242,600
|
|
-
|
|
1,242,600
|
Forgiveness
of notes recievable
|
|
-
|
|
-
|
|
990,000
|
Depreciation
|
|
|
|
26,193
|
|
226,955
|
Amortization
of bond issue costs - related party
|
|
8,018
|
|
6,130
|
|
84,566
|
Common
stock issued for services
|
|
-
|
|
-
|
|
255,250
|
Vesting
of warrants for services
|
|
-
|
|
-
|
|
219,853
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
(Increase)
Decrease in:
|
|
|
|
|
|
|
Accounts
Receivable
|
|
-
|
|
(1,564)
|
|
-
|
Interest
receivable, notes receivable - related party
|
|
-
|
|
(22,633)
|
|
-
|
Other
current assets
|
|
-
|
|
1,039
|
|
-
|
Foreign
tax credits
|
|
-
|
|
1,940
|
|
-
|
Prepaid
expenses
|
|
17,790
|
|
49,950
|
|
(4,643)
|
Deposits
|
|
2,220
|
|
(1,923)
|
|
(3,426)
|
Increase
(Decrease) in:
|
|
|
|
|
|
|
Accounts
payable
|
|
(12,263)
|
|
61,008
|
|
72,603
|
Accounts
payable - relate parties
|
|
56,818
|
|
-
|
|
56,818
|
Accrued
interest, convertible bonds payable - related party
|
|
76,726
|
|
-
|
|
124,709
|
Accrued
interest, convertible notes payable
|
|
38,318
|
|
4,542
|
|
181,643
|
Accrued
interest convertible notes payable - related party
|
|
13,405
|
|
-
|
|
49,302
|
Foreign
tax liabilities
|
|
-
|
|
(440)
|
|
-
|
Foreign
payroll tax liabilities
|
|
-
|
|
1,393
|
|
-
|
Payroll
liabilities
|
|
-
|
|
40,109
|
|
-
|
Accrued
officer compensation
|
|
-
|
|
67,932
|
|
-
|
Net
Cash Used In Operating Activities
|
|
(41,207)
|
|
(101,090)
|
|
(1,546,174)
|
CASH
FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
Net
cash received in acquisition of subsidiary
|
|
-
|
|
2,009
|
|
-
|
Issuance
of notes receivable - related party
|
|
-
|
|
(205,000)
|
|
(1,195,000)
|
Payments
on notes receivable - related party
|
|
-
|
|
0
|
|
0
|
Net
Cash Used In Investing Activities
|
|
-
|
|
(202,991)
|
|
(1,195,000)
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
Proceeds
from notes payable - related party
|
|
-
|
|
-
|
|
39,513
|
Payments
on notes payable - related party
|
|
-
|
|
-
|
|
(7,019)
|
Proceeds
from convertible bonds payable - related party
|
|
4,968
|
|
-
|
|
1,919,180
|
Proceeds
from convertible notes payable - related party
|
|
-
|
|
185,000
|
|
740,000
|
Payments
made on convertible notes payable - related party
|
|
-
|
|
-
|
|
(75,000)
|
Foreign
currency adjustments
|
|
36,239
|
|
|
|
|
Refunds
for rescission of common stock
|
|
-
|
|
-
|
|
(1,250)
|
Net
proceeds from sale of common stock
|
|
-
|
|
-
|
|
125,750
|
Net
Cash Provided By Financing Activities
|
|
41,207
|
|
185,000
|
|
2,741,174
|
NET
INCREASE (DECREASE) IN CASH
|
|
-
|
|
(119,081)
|
|
-
|
CASH
AT BEGINNING OF PERIOD
|
|
-
|
|
179,223
|
|
-
|
CASH
AT END OF PERIOD
|
$
|
-
|
$
|
60,142
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
CASH FLOW INFORMATION:
|
|
|
|
|
|
|
Cash
paid for interest
|
$
|
-
|
$
|
29,250
|
$
|
19,500
|
Cash
paid for income taxes
|
$
|
-
|
$
|
-
|
$
|
-
|
SCHEDULE
OF NON-CASH INVESTING AND FINANCING ACTIVITIES
|
|
|
|
|
|
|
Forgiveness
of related party debt
|
$
|
-
|
$
|
-
|
$
|
(10,000)
|
Purchase
of investment with convertible note payable, net of $466,950 foreign
currency translation adjustment
|
$
|
-
|
$
|
-
|
$
|
2,018,250
|
Issuance
of 10,200,000 shares of preferred stock at $1 per share in exchange for
5,900,000 shares of treasury stock at $1.73 per share
|
$
|
-
|
$
|
-
|
$
|
10,200,000
|
Net
assets acquired in acquisition of subsidiary
MuluncayGoldCorp
|
$
|
-
|
$
|
1,430,131
|
$
|
-
|
|
|
|
|
|
|
|
The accompanying notes
are an integral part of the unaudited financial statements.
Trilliant
Exploration Corporation
(A
Pre-Exploration Stage Company)
Notes to
Condensed Consolidated Financial Statements (unaudited)
Three
Months Ended March 31, 2010 and 2009, and the
Period of
December 29, 2003 (Inception) to December 31, 2010
NOTE 1 -
ORGANIZATION AND BASIS OF PRESENTATION
Trilliant
Exploration Corporation, (the “Company”) was incorporated as Project Development
Pacific, Inc. on December 29, 2003, under the laws of the State of
Nevada. The business purpose of the Company was originally to assist
Canadian citizens to access health care services from private
providers. On November 26, 2007, the Company changed its name to
Trilliant Exploration Corporation, with a purpose to acquire and develop mineral
properties. The Company has elected a fiscal year end of December
31.
On March
30, 2009 (Date of Acquisition), Trilliant Exploration Corporation (the Parent)
acquired a 100% interest in MuluncayGoldCorp (a Subsidiary)
(Muluncay). The transaction was accounted for as a purchase pursuant
to ASC Topic No. 805.
On June
29, 2009 (Date of Formation), the Company established a wholly-owned Trilliant
Diamonds Limited (a Subsidiary) (Trilliant Diamonds), a private limited England
and Wales Company, to facilitate the Company’s diamond
exploration. Trilliant Diamonds has been inactive since
formation. The only asset of Trilliant Diamonds is an investment in
Global Diamond Resources (GDR), a Gibraltar, Spain entity. On July 1, 2009,
Trilliant Diamonds acquired 10,000,000 shares of GDR, representing 3.2% of the
outstanding shares of GDR stock, for $2,485,200. The investment was
obtained via issuance of a note payable in the amount of
$2,485,200. The investment and note payable are denominated in
British Pounds, as of December 31, 2009 the investment and note payable are
adjusted to $2,389,250 after currency translation adjustments of $466,950. The
investment was further adjusted to $1,009,125 at March 31, 2010 for
impairment.
On July
1, 2009 the Company acquired 799 of 800 shares of AyapampaGold S.A (AYA) (a
Subsidiary) at $1 per share for a purchase price of $799. AYA was formed in
mid-2007 as a shell and has been inactive since inception.
On
February 11, 2010, Minera Del Pacifico (the seller of MuluncayGoldCorp)
exercised its rights retroactive to December 31, 2009 to terminate the purchase
of MuluncayGoldCorp. The activity of MuluncayGoldCorp from the Date
of Acquisition through December 31, 2009 is reported as discontinued operations
pursuant to ASC Topic 205.
The
accompanying consolidated financial statements for the Three Months ended March
31, 2010 include the operations of the Subsidiaries’ activity from the dates of
Acquisition and Formation through December 31, 2009. Inter- company
transactions have been eliminated upon consolidation. The Parent and
Subsidiaries are collectively referred to as “the Company.”
The
unaudited interim financial statements of Trilliant Exploration Corporation were
prepared in accordance with accounting principles generally accepted in the
United States of America (“GAAP”) and reflect all adjustments (including normal
recurring accruals) which, in the opinion of management, are considered
necessary for the fair presentation of the results for the periods presented.
These statements should be read in conjunction with the audited consolidated
financial statements and notes thereto included in the Company’s Annual Report
on Form 10-K for the year ended December 31, 2009.
NOTE 2 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Pre-Exploration
Stage Company
The
Company is considered to be in the pre-exploration stage as defined in ASC 915
(SFAS No. 7), “
Accounting and
Reporting by Development Stage Enterprises
” as interpreted by the
Securities and Exchange Commission for mining companies in Industry Guide
7. The Company is devoting substantially all of its efforts to the
execution of its business plan.
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from
those estimates. Significant estimates that may change in the near
future include value of goodwill, impairment of long-lived assets acquired, and
value of investments.
Cash
and Cash Equivalents
Cash and
cash equivalents consists principally of currency on hand, demand deposits at
commercial banks, and liquid investment funds having a maturity of three months
or less at the time of purchase. The Company had $
0 and $0 in cash and cash equivalents
as of March 31, 2010 and December 31, 2009, respectively. In
December 2009, the Company closed both of its bank accounts.
Comprehensive
Income
Comprehensive income
consists
of net income and other gains and losses affecting shareholders’ equity that,
under generally accepted accounting principles are excluded from net income. For
the Company, such items consist primarily of unrealized gains and losses on
marketable securities and foreign currency translation gains and
losses.
Revenue
Recognition
The
Company recognizes revenues when a sale agreement has been made, when there are
no restrictions or repurchase agreements on the transaction, when collection is
reasonably certain, and when the goods or services have been delivered to the
buyer.
Mineral
Acquisition and Exploration Costs
Mineral
property exploration costs are expensed as incurred. When it has been
determined that a mineral property can be economically developed as a result of
establishing proven reserves, the costs incurred to develop such property are
capitalized. Such costs will be amortized using the
units-of-production method.
Property,
Plant, and Equipment
Property
and equipment are stated at cost. The Company acquired certain property, plant,
and equipment in the acquisition of MuluncayGoldCorp. Depreciation and
amortization are determined using the straight-line method over estimated useful
lives of the assets. All property, plant, and equipment were disposed of and any
gains and losses on the disposal are included in discontinued operations as
disclosed in Note 12. As of December 31, 2009, the Company held no
property, plant or equipment.
Goodwill
and Other Intangibles
As of
December 31, 2009, the Company held no Goodwill. The Company possesses no other
intangible assets.
Net
Income or (Loss) Per Share of Common Stock
The
Company has adopted ASC Topic No. 260 concerning earnings per share (EPS), which
requires presentation of basic and diluted EPS on the face of the income
statement for all entities with complex capital structures and requires a
reconciliation of the numerator and denominator of the basic EPS computation to
the numerator and denominator of the diluted EPS computation. The
reconciliation of unamortized convertible bond issuance costs and interest
expense on convertible bonds and convertible notes payable to net income, and
addition of shares assuming conversion of notes and bonds and exercise of
warrants, resulted in a nominal anti-dilutive effect on loss per
share.
|
|
Three
months ended March 31,
|
|
|
2010
|
|
2009
|
BASIC
|
|
|
|
|
Net
loss
|
$
|
(1,484,838)
|
$
|
(334,766)
|
Weighted
average common shares outstanding
|
|
93,001,500
|
|
91,940,000
|
Net
loss per share (Basic)
|
$
|
(0.016)
|
$
|
(0.00)
|
|
|
|
|
|
DILUTED
|
|
|
|
|
Net
loss (Basic)
|
$
|
(1,484,838)
|
$
|
(334,766)
|
Convertible
bond and note interest
|
|
76,725
|
|
39,922
|
Unamortized
convertible bond issuance costs
|
|
(84,566)
|
|
(51,084)
|
Net
loss (Diluted)
|
$
|
(1,492,679)
|
$
|
(345,928)
|
|
|
|
|
|
Weighted
average common shares outstanding (Basic)
|
|
93,001,500
|
|
91,940,000
|
Convertible
preferred shares
|
|
809,523,810
|
|
2,100,000
|
Convertible
bonds and notes
|
|
270,042,829
|
|
-
|
Options
|
|
-
|
|
-
|
Warrants
|
|
-
|
|
-
|
Weighted
average common shares outstanding (Diluted)
|
|
1,172,568,139
|
|
91,040,000
|
|
|
|
|
|
Net
loss per share (Diluted)
|
$
|
(0.00)
|
$
|
(0.00)
|
On June
30, 2009, the Company exchanged 5,900,000 shares of common stock held by
Trafalgar Capital Specialized Investment Fund FIS (“Trafalgar”) (a significant
stockholder of the Company) for 10,200,000 of designated Series I preferred
stock, which is convertible to common stock based on the average closing price
of the five days preceding conversion. The 5,900,000 common shares
were acquired at $1.73 per share and the preferred stock was issued at $1.00 per
share. The transaction resulted in treasury stock of $10,200,000, and
an increase to Additional Paid in Capital of $10,189,800. The effects
of this transaction have been included in the above dilution
computation.
Recently
Issued Accounting Pronouncements
In
January 2010, the FASB issued revised guidance intended to improve disclosures
related to fair value measurements. This guidance requires new disclosures as
well as clarifies certain existing disclosure requirements. New disclosures
under this guidance require separate information about significant transfers in
and out of Level 1 and Level 2 and the reason for such transfers, and also
require purchases, sales, issuances, and settlements information for Level 3
measurement to be included in the rollforward of activity on a gross basis. The
guidance also clarifies the requirement to determine the level of disaggregation
for fair value measurement disclosures and the requirement to disclose valuation
techniques and inputs used for both recurring and nonrecurring fair value
measurements in either Level 2 or Level 3. This accounting guidance is effective
for the Company beginning in the third quarter of fiscal 2010, except for the
rollforward of activity on a gross basis for Level 3 fair value measurement,
which will be effective for the Company in the first quarter of fiscal 2012. The
Company is currently evaluating the impact that the adoption of this guidance
will have on its financial statement disclosures.
In
June 2009, the FASB issued revised guidance for the accounting of transfers
of financial assets. This guidance eliminates the concept of a qualifying
special-purpose entity; removes the scope exception for qualifying
special-purpose entities when applying the accounting guidance related to the
consolidation of variable interest entities; changes the requirements for
derecognizing financial assets; and requires enhanced disclosure. This
accounting guidance is effective for the Company beginning in the first quarter
of fiscal 2011. The Company is currently evaluating the impact that the adoption
of this guidance will have on its consolidated financial
statements.
In June
2009, the FASB issued revised guidance for the accounting of variable interest
entities. This revised guidance replaces the quantitative-based risks and
rewards approach with a qualitative approach that focuses on identifying which
enterprise has the power to direct the activities of a variable interest entity
that most significantly impact the entity’s economic performance and has the
obligation to absorb losses or the right to receive benefits from the entity
that could be potentially significant to the variable interest entity. The
accounting guidance also requires an ongoing reassessment of whether an
enterprise is the primary beneficiary and requires additional disclosures about
an enterprise’s involvement in variable interest entities. This accounting
guidance is effective for the Company beginning in the first quarter of fiscal
2011. The Company is currently evaluating the impact that the adoption of this
guidance will have on its consolidated financial statements.
Management
does not expect any financial statement impact from any recently-issued
pronouncements.
Currency Risk and Foreign
Currency Translations
The
functional currency of the Company is the United States Dollar
(USD). In accordance with ASC Topic No. 830, realized gains or losses
on expenses incurred in denominations other than USD are recognized in earnings
on the transaction date. At such time as there are any foreign
denominated assets or liabilities, the Company will report changes in valuation
in a Statement of Other Comprehensive Income or (Loss) due to the changes in
cumulative adjustments from foreign currency translation.
NOTE 3 –
INVESTMENTS
On July
1, 2009, the Company entered into a convertible loan agreement under the laws of
England and Wales for the price of ₤1,500,000. Based on the July 1, 2009
Interbank exchange rate of 1.6568, the loan was initially valued and recorded at
$2,485,200. The note bears interest of 12% and is payable on or
before June 24, 2010. The loan and interest are convertible into the
Company’s common stock at $.45 per share. Interest is accrued
quarterly but may be paid at maturity on June 24, 2010. Early
payments must be in intervals of ₤100,000. Accrued interest and
interest expense for the three months ended March 31, 2010 was $38,318 after
currency adjustments of $42,023. Accrued interest as of and for the Year Ended
December 31, 2009 totaled $143,325 after currency translation adjustments of
$5,787 recorded to accumulated other comprehensive income. Total
accrued interest and interest expense of were $181,645 after currency
adjustments of $42,023 as of March 31, 2010.
On July
1, 2009, Trilliant Diamonds (a wholly-owned subsidiary of the Company) used the
funds to acquire 10,000,000 shares of Global Diamond Resources PLC (GDR) at ₤
.15 per share for total purchase price of ₤1,500,000, representing a 3.2%
ownership interest in GDR. GDR is located in Gibraltar, Spain and
primarily engages in diamond mining. GDR is a private
company, so the stock value is difficult to determine. Management has
determined that based on level three inputs the value of the investment has
declined by 50%, and recorded a loss on investment of $1,242,600 as of March 31,
2010.
In
determining the Level three inputs and fair value of Global Diamond Resources
PLC, management considered the investment would provide sufficient funds to
allow GDR to resume operations and maintained the fair value of the investment
at cost until March 31, 2010. At that time, Management considered the
lack of operation in GDR to be significant and adjusted the fair value of the
investment. Management will continue to monitor the value of the
investment and seek additional response from GDR. Management may
further decrease the value of the investment to based on fair value
determinations.
As of
December 31, 2009 the currency translation adjustment of the investment based on
the Interbank exchange rate of 1.5928 as of December 31, 2009 is $96,000,
resulting in the devaluation of the investment and the note payable down to
$2,389,200. As of March 31, 2010, the investment was determined to be impaired
by 50% of the original investment ($1,242,600). The currency
translation adjustment after impairment is based on the Interbank
exchange rate of 1.3455 is ($233,475). On March 31, 2010 the value of
the investment is $1,009,125 after impairment of $1,242,600 and total currency
adjustments of ($329,475).
NOTE 4 -
PROVISION FOR INCOME TAXES
The
Company recognizes the tax effects of transactions in the year in which such
transactions enter into the determination of net income regardless of when
reported for tax purposes. Deferred taxes provided for under ASC
Topic No. 740 give effect to the temporary differences which may arise from
differences in the bases of fixed assets, depreciation methods, and allowances
based on the income taxes expected to be payable in future
years. Deferred tax assets arising as a result of net operating loss
carry-forwards and other temporary differences such as impairment of investments
have been offset completely by a valuation allowance due to the uncertainty of
their utilization in future periods. Operating loss carry-forwards of
$5,042,404 generated since inception through March 31, 2010, will begin to
expire in 2024. Accordingly, deferred tax assets of
approximately $1,764,842 were completely offset by the valuation allowance,
which increased by $519,693 and $117,168 during the three months ending March
31, 2010 and 2009, respectively, based on the U.S. Statutory rate of
35%.
|
|
|
|
|
Three
Months Ended March 31, 2009
|
|
|
|
|
|
2010
|
|
2009
|
Net
operating income (loss)
|
$
|
(1,484,838)
|
$
|
(334,766)
|
Statutory
U.S. Income tax rate
|
|
|
35%
|
|
35%
|
|
|
|
|
|
|
|
|
Current
Provision
|
|
|
|
|
|
|
Domestic
|
|
|
|
|
|
|
|
Federal
|
|
|
(519,693)
|
|
|
|
|
State
& Local
|
|
|
|
|
|
|
Foreign
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
(benefit) provision
|
|
|
|
|
|
|
Domestic
|
|
|
|
|
|
|
|
Federal
|
|
|
|
|
(117,168)
|
|
|
State
& Local
|
|
|
|
|
|
|
Foreign
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax
Benefit
|
|
|
(519,693)
|
|
(117,168)
|
Valuation
allowance
|
|
|
519,693
|
|
117,168
|
|
|
|
|
|
|
|
|
Net
Benefit
|
|
$
|
0
|
$
|
0
|
NOTE 5-
RELATED PARTY TRANSACTIONS
A
– Convertible Notes Payable
The
Company has entered into multiple convertible notes payable agreements with an
investment firm that is also a minority stockholder of the
Company. Each note carries a separately dated promissory note that
bears interest of 8% and is payable on or before August 31, 2010, with each
funding due one year from original date of receipt. Principal and
interest are convertible at the option of the note-holder into shares of the
Company’s common stock at the rate of 80% of the average of the five daily
volume weighted average price preceding the conversion date. Several
Notes are in default and status of default is indicated in the following
table. The Notes carry no penalty or change in interest rate for
default.
Accrued
interest and interest expense on the convertible notes payable as of March 31,
2010 totaled $13,300, and for the year ended December 31, 2009 totaled $35,319.
Due to the contingent nature of the conversion price, no beneficial conversion
feature was noted.
The
convertible promissory notes with the investment firm are summarized as
follows:
Convertible
Notes
|
Interest
expense
|
|
Issue
date
|
Maturity
|
Principal
|
Interest
rate
|
Date
of Default
|
As
of March 31, 2010
|
2009
|
(A)
|
12/31/2008
|
1/5/2010
|
90,000
|
8.00%
|
1/5/2010
|
1,800
|
7,220
|
(A)
|
1/16/2009
|
1/5/2010
|
100,000
|
8.00%
|
1/5/2010
|
2,000
|
7,649
|
(A)
|
1/23/2009
|
1/5/2010
|
50,000
|
8.00%
|
1/5/2010
|
1,000
|
3,748
|
(A)
|
2/2/2009
|
1/5/2010
|
25,000
|
8.00%
|
1/5/2010
|
500
|
1,830
|
(A)
|
3/9/2009
|
1/5/2010
|
10,000
|
8.00%
|
1/5/2010
|
200
|
671
|
(B)
|
4/8/2009
|
4/8/2010
|
50,000
|
8.00%
|
4/8/2010
|
1,000
|
2,800
|
(C)
|
4/27/2009
|
4/27/2010
|
75,000
|
8.00%
|
|
0
|
533
|
(D)
|
4/27/2009
|
4/27/2010
|
(75,000)
|
8.00%
|
|
0
|
|
|
6/23/2009
|
6/23/2010
|
25,000
|
8.00%
|
|
500
|
1,039
|
|
7/1/2009
|
7/1/2010
|
100,000
|
8.00%
|
|
2,000
|
4,000
|
|
7/6/2009
|
7/6/2010
|
20,000
|
8.00%
|
|
400
|
778
|
|
8/26/2009
|
8/31/2010
|
195,000
|
8.00%
|
|
3,900
|
5,051
|
|
|
Totals
|
665,000
|
|
|
13,300
|
35,319
|
(A), Amounts
borrowed were part of a master note agreement totaling
$195,000
(c) and (D), The
company borrowed $75,000on April 27, 2009, and subsequently repaid this note on
May 29, 2009
B
– Short-Term Notes Payable
The
Company has borrowed funds from stockholders for working capital purposes from
time to time. The loans are non-interest bearing, payable on demand
and, consequently, reported as current liabilities. The Company has
received $49,764 in advances since inception was forgiven
$10,000, and made repayments of $7,019 in cash, resulting in a payable balance
of $32,745 as of March 31, 2010 and December 31, 2009. The Company
also has related party payables of $56,818 and $24,589 as of March 31, 2010 and
December 31, 2010, respectively, for reimbursable expenses incurred in the
normal course of business.
C
– Bonds Payable, Convertible & Secured
The
Company has entered into multiple convertible bond agreements with an investment
firm that is also a minority stockholder of the Company. Each bond
carries a separately dated promissory note that bears interest of 9% and is
payable on or before January 1, 2010. Upon default, the interest rate
is increased to 18%. The stockholder incurred bond issuance costs
which are being amortized to interest expense on a straight-line basis over the
term of the bond. The carrying amount of the bond issuance costs at
March 31, 2010 and December 31, 2009 was $84,566 and $92,585 respectively net of
$17,955 and $79,836, respectively, in amortization. Interest payments
for Bonds (A) and (B) are payable mid-month and Bond (C) and (D) payable on
January 2, 2010 and February 3, 2010 respectively, resulting in bond interest
payable of $124,708 and $47,983 as of March 31, 2010 and December 31, 2009
respectively. The Company did not make the December mid-month
interest payment and is considered in default on Bonds (A) and (B) as of Jan 15,
2010.
The bonds
have an optional conversion feature whereby the stockholder is entitled to
convert the bonds and accrued interest at any time based on the lesser of the
stock price on the bonds’ inception (the ‘Fixed Price,’ which was determined to
be $.61 per share) or the lowest daily closing volume weighted average price
during the five days preceding conversion. If the common stock price
drops below the Fixed Price, the Company has the option to redeem the bonds,
provided it pays a 16% redemption premium on the amount redeemed. If
the bonds are not converted, the Company is required to make interest-only
payments for a period of one year following the bonds’
inception. Thereafter, the Company shall continue making monthly
interest payments, in addition to quarterly principal payments of $325,000 and
quarterly 16% redemption premium payments that amount to $52,000 per quarter
($208,000 total). Due to the contingent nature of the conversion
price, no beneficial conversion feature was recorded.
The
convertible bonds with the investment firm are summarized as
follows:
Convertible
Bonds
|
Debt
issue costs
|
Interest
expense
|
|
Issue
date
|
Maturity
|
Principal
|
Interest
rate
|
Default
rate
|
Date
of Default
|
As
of March 31, 2010
|
2009
|
As
of March 31, 2010
|
2009
|
(A)
|
10/15/2008
|
10/15/2010
|
$1,300,000
|
9.00%
|
18.00%
|
1/15/2010
|
$6,130
|
$24,519
|
$58,500
|
$117,000
|
(B)
|
4/30/2009
|
10/31/2010
|
$ 300,000
|
9.00%
|
18.00%
|
1/15/2010
|
$6,857
|
$18,286
|
$13,500
|
$18,000
|
(C)
|
10/12/2009
|
1/12/2010
|
$ 252,000
|
9.00%
|
9.00%
|
1/13/2010
|
$4,968
|
$37,032
|
$4,725
|
$5,690
|
(D)
|
11/3/2009
|
2/3/2010
|
$ 210,000
|
9.00%
|
9.00%
|
2/3/2010
|
$0
|
$0
|
$4,725
|
$2,993
|
|
Totals
|
|
$2,062,000
|
|
|
|
$17,955
|
$79,836
|
$81,450
|
$143,683
|
NOTE 6 –
STOCKHOLDERS’ DEFICIT
Article
Amendment
Effective
December 1, 2008, the Company amended its Articles of Incorporation thereby
increasing its authorized common and preferred stock to 1,000,000,000 and
200,000,000 shares, respectively. The par value for preferred and
common stock is $.001. This change has been reflected in the
accompanying financial statements.
Stock
Splits
On
November 9, 2007, the Company affected a 2 for 1 forward split on its common
stock. On November 14, 2008, the Company affected another 2 for 1
forward stock split. Par value remained at $.001, and both splits
have been retroactively applied to the earliest period presented in the
accompanying financial statements.
Preferred
Stock and Treasury Stock
On June
30, 2009, the Company issued to Trafalgar Capital Specialized Investment Fund
FIS (“Trafalgar”) (a significant stockholder of the Company), 10,200,000 shares
of designated Series I Preferred Stock (par value $.001), in exchange for
5,900,000 shares of the Company’s own common stock previously held by
Trafalgar. The 5,900,000 common shares were acquired at $1.73 per
share and the preferred stock was issued at $1.00 per share. The
transaction was recorded using the Cost Method, resulting in treasury stock of
$10,200,000 and an increase to Additional Paid in Capital of
$10,189,800.
Series I
preferred stockholders do not receive interest or dividends separately from
common stock shareholders. Series I shall participate in dividends
when and if declared in the same proportion as common stock
shareholders. Series I preferred stock is convertible into common
shares at the lowest volume weighted average price of the common shares in the
five days preceding conversion.
Common
Stock
The
Company had 93,131,500 and 93,131,500 shares of common stock issued and
87,231,500 and 93,131,500 outstanding at March 31, 2010 and December 31, 2009,
respectively. The Company’s common stock is thinly traded with a
limited market. As of March 31, 2010, the stock was trading at a
market price of $.012 per share.
Following
are the Company’s stock transactions on a post-2007 and 2008 stock split
basis:
In May
2009, the Company issued 25,000 shares to an independent investor at $.25 per
share for signing a letter of intent for funding. As of December 31,
2009, the letter of intent had not yet been finalized and consideration for the
stock had not yet been received, resulting in a stock subscription receivable of
$6,250 reported in the stockholders’ deficit section of the balance
sheet. Management considers these funds unlikely to be received and
has expensed $6,250 as consulting fees as of December 31, 2009.
During
June 2009, the Company sold to four independent investors, 184,000 shares of
common stock at a price of $.25 per share for $46,000 cash.
On July
20, 2009, the Company sold to independent investors 40,000 shares of restricted
common stock at $.25 per share for $10,000 cash.
In July
2009, the Company issued an additional 500,000 shares of restricted stock to an
independent investor at $.25 per share for signing a letter of intent for
funding. This established a deposit of $125,000 and additional paid
in capital of $124,500. As of December 31, 2009 the letter of intent
had not been finalized and uncertainty exists in the ability of the investor to
complete the transaction. Management considers the deposit of
$125,000 unlikely to be received, and issued orders to the transfer agent to
cancel the stock certificate. The Company retains the right and
obligation of not lifting the restriction on the stock and has requested the
investor return the restricted stock certificate. The deposit of
$125,000 was expensed as consulting fees as of December 31, 2009.
On July
20, 2009, the Company issued to a consultant 2,500 shares at $.40 per share for
services totaling $1,000.
On August
5, 2009, the Company sold to an independent investor, 40,000 shares of common
stock at a price of $.25 per share for $10,000.
On August
26, 2009, the Company issued to three consultants a total of 100,000 shares of
common stock at $.18 per share ($18,000 value) and 150,000 warrants at $.17 per
share ($25,500 value) for services totaling $43,500. The
Black-Scholes Option Pricing Model was used to determine the fair value of the
warrants using the following assumptions: On August 26, 2009 the
closing price was $.18 per share and the risk free rate on 3 year treasuries was
1.57%, options expire in three years, immediate vesting, no dividends, and stock
volatility of 260%.
On
September 9, 2009, the Company issued to a consultant 200,000 shares of common
stock at $.15 per share for services totaling $30,000. The contract
term is six months, resulting in $12,600 expensed as of December 31, 2009 and
$12,600 recorded as services prepaid with stock in the stockholders’ equity
(deficit) section of the balance sheet.
On
December 15, 2009, the Company issued 100,000 shares of common stock to an
officer at $.75 per share for total value of $75,000. The issuance
was pursuant to an employment agreement whereby the officer would receive a
stock bonus should he serve out his term as specified in the agreement (see Note
6D).
On
December 21, 2009, the Company entered into an agreement with Questas Global Ltd
(Questas) by which the Company issued 10,000,000 warrants on common stock at
$.003 per share in exchange for office space and services provided to
the Company president over the past year for a total of
$194,353. Terms of the warrant allow for Questas to purchase up to
10,000,000 shares of common stock under a cashless purchase after six months at
.003 cents per share, and the warrants expire five years from the date of the
contract. As a cashless exchange, if the fair market value of the
common stock is greater than the exercise price, Questas may elect to receive
shares equal to the value of the warrants. The exercise of warrants
is restricted such that Questas may not obtain beneficial ownership of more the
4.99% of the outstanding shares of common stock (see Note 7).
The
Company had 93,131,500 and 93,131,500 shares of common stock issued and
outstanding, respectively (taking into consideration the 5,900,000 shares of
treasury stock) at March 31, 2010 and December 31, 2009
respectively. The Company’s common stock is thinly traded with a
limited market. As of March 31, 2010, the stock was trading at a
market price of $.012 per share.
NOTE 7 -
OTHER MATERIAL CONTRACTS
In June
2009, the Company acquired a one year insurance policy with total premium of
$20,760. As of March 31, 2010 total payments of $20,760 were made and
$16,117 of the total premium has been amortized, resulting in a balance of
$4,643 as of March 31, 2010.
In
September 2009, the company entered into a marketing contract for total expense
of $25,200 for a six month period. The company amortized $12,600 as of December
31, 2009, and $25,200 as of March 31, 2010.
NOTE 8 -
GOING CONCERN
The
accompanying financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America, which
contemplate continuation of the Company as a going concern. The
Company has accumulated an operating deficit since its
inception. Additionally, current economic conditions in the United
States and globally create significant problems attaining sufficient
funding. Accordingly, management has encountered significant
difficulties in obtaining financing. These items raise substantial
doubt about the Company’s ability to continue as a going concern. In
view of these matters, realization of the assets of the Company is dependent
upon the Company’s ability to meet its financial requirements through equity
financing, borrowing, and the success of future operations. These
financial statements do not include adjustments relating to the recoverability
and classification of recorded asset amounts and classification of liabilities
that might be necessary should the Company be unable to continue in
existence.
NOTE 9 -
SUBSEQUENT EVENTS
As
discussed in Note 5 The Company is unable to meet payment deadlines on notes and
bonds payable. Subsequent to March 31, 2010, the company has
defaulted on the April 8, 2009 convertible note payable in the amount of $50,000
which was payable April 8, 2010.
The
Company has evaluated events from December 31, 2009, through the date whereupon
the financial statements were issued and has determined that there are no
additional items to disclose.
NOTE 10 –
DISCONTINUED OPERATIONS
As of
December 31, 2009, the Company was in default on credit arrangements for the
purchase of MuluncayGoldCorp. The Company received a letter on
February 11, 2010 in which Minera Del Pacifico informed the Company of the
intent to enforce its rights under the agreements, and terminated all
contractual agreements between the two companies effective December 31,
2009. Management, in the interest of the Company and lacking
financial means to further pursue contractual agreements, acknowledged the
letter from Minera Del Pacifico and released all claims on mining assets and
rights attached to previous agreements.
Effective
December 31, 2009, the Company disposed of its Muluncay Subsidiary and
recognized a Net Loss from Discontinued Operations of $1,964,636, consisting of
a $1,773,141 loss on disposal and $191,495 loss from operations for the period
of March 30, 2009 through December 31, 2009. The Company was released
from all obligations and released all claims on assets primarily because it has
incurred significant operating losses since acquisition and the Company could
not attract operating capital to meet contractual obligations since the
acquisition of MuluncayGoldCorp. The assets lost consisted primarily
of accounts receivable, inventories, property and equipment, and other assets.
Minera Del Pacifico also assumed certain accounts payable and accrued
liabilities.
The
following is a summary of the significant net assets lost and discharge of
liabilities as determined at December 31, 2009:
ASSETS
|
|
|
|
LIABILITIES
|
|
|
Current
Assets
|
|
|
|
Current
Liabilities
|
|
|
Checking/Savings
|
$
|
4,501
|
|
Accounts
payable - trade
|
$
|
57,940
|
Accounts
receivable trade
|
|
86,788
|
|
Bank
overdrafts
|
|
14,323
|
Employee
loans
|
|
3,957
|
|
Loan
payable - related party
|
|
644,985
|
Accounts
receivable - rel. party
|
|
472,598
|
|
Unearned
income
|
|
3,500
|
Accounts
Receivable - Other
|
|
186,920
|
|
Loans
payable
|
|
11,000
|
Foreign
tax credits
|
|
16,078
|
|
Foreign
taxes payable
|
|
120,736
|
Inventory
|
|
91,949
|
|
Payroll
liabilities
|
|
91,975
|
Fixed
Assets
|
|
|
|
Mortgage
liabilities, net
|
|
403,620
|
Land
|
|
16,000
|
|
Total
Liabilities
|
$
|
1,348,079
|
Plant
|
|
1,915,809
|
|
|
|
|
Machinery
and equipment
|
|
105,213
|
|
Net
assets/loss on disposal
|
$
|
1,773,141
|
Computer
equipment
|
|
614
|
|
Operating
loss, 3/30-12/31/09
|
|
191,495
|
Electrical
equipment
|
|
10,476
|
|
Net
loss, discontinued operations
|
$
|
1,964,636
|
Tools
|
|
4,351
|
|
|
|
|
Accumulated
depreciation
|
|
(206,622)
|
|
|
|
|
Other
Assets
|
|
|
|
|
|
|
Mineral
rights
|
|
412,588
|
|
|
|
|
Total
Assets
|
$
|
3,121,220
|
|
|
|
|
FORWARD
LOOKING STATEMENTS
Except for statements of historical fact,
certain information contained herein constitutes “forward-looking statements”
within the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are usually identified by our use of certain
terminology, including “will,” “believes,” “may,” “expects,” “should,” “seeks,”
“anticipates,” or “intends,” or by discussions of strategy or intentions. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause our actual results or achievements to be
materially different from any future results or achievements expressed or
implied by such forward-looking statements. Such factors include, among others,
our history of operating losses and uncertainty of future profitability; our
lack of working capital and uncertainty regarding our ability to continue as a
going concern; uncertainty of access to additional capital; risks inherent in
mineral exploration; environmental liability claims and insurance; dependence on
consultants and third parties as well as those factors discussed in the sections
entitled “
Risk
Factors
,” “
Business
,” and “
Management’s Discussion and
Analysis of Financial Condition and Results of Operations
.” If
one or more of these risks or uncertainties materializes, or if underlying
assumptions prove incorrect, our actual results may vary materially from those
expected, estimated, or projected. Forward-looking statements in this document
are not a prediction of future events or circumstances, and those future events
or circumstances may not occur. Given these uncertainties, users of the
information included herein, including investors and prospective investors are
cautioned not to place undue reliance on such forward-looking statements. We do
not assume responsibility for the accuracy and completeness of these
statements.
The
United States Securities and Exchange Commission permits U.S. mining companies,
in their filings with the SEC, to disclose only those mineral deposits that a
company can economically and legally extract or produce. The Company is an
exploration stage company and its properties have no known body of ore. U.S.
investors are cautioned not to assume that the Company has any mineralization
that is economically or legally mineable.
All
references in this Quarterly Report on Form 10-K to the terms “we,” “our,” “us,”
“TTXP,” and the “Company” refer to Trilliant Exploration
Corporation.
ITEM
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Trilliant
Exploration Corporation was incorporated under the laws of the State of Nevada
on December 29, 2003 under the name Project Development Pacific Inc. We were
previously engaged in the business of assisting Canadian citizens to access
health care services from private providers. On November 26, 2007, we changed
our name to Trialliant Exploration Corporation with a business purpose to
acquire and develop mineral properties. During 2007, we began acquiring
interests in mining properties.
CURRENT
BUSINESS OPERATIONS
We are
engaged in the evaluation, acquisition, exploration and advancement of mining
projects. Although we were considered to have exited the
pre-exploration stage with the Muluncay acquisition, the disposal of Muluncay
necessitates that we re-enter the pre-exploration stage effective December 31,
2009. As of the date of this Quarterly Report, we are devoting
substantially all of our efforts to the execution of our business operations.
Through fiscal 2009, funding to acquire and explore gold properties and for
operational purposes was acquired through private financings.
Muluncay Project
On
October 15, 2008, we entered into an asset purchase agreement (the “Asset
Purchase Agreement”) with Compania Minera Del Pacifico S.A., an Ecuadorian
corporation (“Del Pacifico”) for the purchase of the Muluncay Project.
Subsequently, on March 30, 2009, we entered into a share transfer agreement (the
“Share Transfer Agreement”) with Del Pacifico and its wholly owned subsidiary,
Compania Muluncaygold Corp. S.A. (“Muluncay”). The Share Transfer
Agreement superseded in its entirety the terms of the Asset Purchase
Agreement.
In
accordance with the terms and provisions of the Share Transfer Agreement, we
acquired 100% of the total issued and outstanding shares of common stock of
Muluncay and its assets, which includes certain customer receivables, foreign
tax credit, equipment, fixtures, improvements, all contracts, operations and
mining rights and interests in certain mining properties located in Muluncay,
Ecuador (the “Controlling Assets”). The total purchase price for the shares of
common stock and Controlling Assets was a $3,600,000 contingent note payable,
which was to be paid in installments and in accordance with a promissory note in
the principal amount of $3,600,000 between us and Muluncay (the “Muluncay
Promissory Note”), which bears interest at 4.5% per annum. Repayment of the
Muluncay Promissory Note was to begin only upon Muluncay reaching production of
400 tons per day in their operation using 26 day average in a 30-day calendar
month (the “Minimum Operations”). Beginning thirty days from the date of first
reaching Minimum Operations, we were to make four quarterly payments to Pacifico
of $200,000 each. After making the first four quarterly payments, we were to
continue to make quarterly payments in the minimum amount of $300,000 until all
principal and interest in fully paid. As additional consideration for the
purchase of Muluncay, we released Del Pacifico from a debt due and owing to us
in the principal amount of $1,195,000 plus interest.
In
further accordance with the terms and provisions of the Share Transfer
Agreement, we also agreed to transfer to Muluncay an aggregate of $1,800,000 as
follows: (i) an initial payment of $800,000 within ninety day of March 30, 2009;
and (ii) the balance of $1,000,000 within 180 days of March 30,
2009.
As of
December 11, 2009, we were in default for the purchase of Muluncay. We received
a letter on February 11, 2010 in which Del Pacifico informed us of its intent to
enforce its rights under the Share Transfer Agreement and terminated all
contractual agreements between us and Del Pacifico effective December 31, 2009.
In the interest of our shareholders and lacking financial funds to further
pursue contractual agreements with Del Pacifico, we acknowledged the letter from
Del Pacifico and released all claims on the Controlling Assets and rights under
the terms of the Share Purchase Agreement.
Effective
December 31, 2009, Del Pacifico terminated the agreement due to our inability to
provide the $1,800,000 investment pursuant to the contract
terms. Thus, we determined to discontinue operations through our
Muluncay subsidiary. We were released from all obligations and released all
claims on the Controlling Assets primarily because we had incurred significant
operating losses since acquisition and we could not attract operating capital to
meet contractual obligations since the acquisition of Muluncay. On December 31,
2009, we completed the loss recognition for a total loss of
$1,964,636.
RESULTS
OF OPERATION
STATEMENT
OF OPERATIONS
|
Three
Month Periods Ended March 31, 2010 and March 31,
2009
|
For
the Period from December 29, 2003 (inception) to March 31,
2010
|
|
|
|
|
Revenue
|
-0-
|
-0-
|
-0-
|
|
|
|
|
Operating
Expenses
|
|
|
|
Organizational
expenses
|
-0-
|
-0-
|
1,200
|
Professional
fees
|
41,700
|
127,500
|
677,686
|
Salaries
and wages
|
3,000
|
86,292
|
173,185
|
Advertising
and promotion
|
12,600
|
-0-
|
81,350
|
Insurance
|
5,190
|
-0-
|
16,862
|
Other
general and administrative expenses
|
2,075
|
14,336
|
342,262
|
Total
Operating Expenses
|
64,565
|
228,148
|
1,292,545
|
|
|
|
|
Operating
Loss
|
(64,565)
|
(228,148)
|
(1,292,545)
|
|
|
|
|
Other
Income (Expense)
|
|
|
|
Interest
income
|
-0-
|
22,633
|
37,857
|
Loss
in investment
|
(1,242,600)
|
|
(1,242,600)
|
Currency
exchange loss
|
-0-
|
(9)
|
(9)
|
Miscellaneous
other income
|
-0-
|
50
|
50
|
Interest
expense
|
(177,673)
|
(39,922)
|
(580,201)
|
Total
Other Income (Expense)
|
(177,673)
|
(17,239)
|
(1,785,173)
|
|
|
|
|
Loss
before Income Taxes
|
(1,484,838)
|
(245,387)
|
(3,077,718)
|
Net
Loss From Discontinued Operations
|
-0-
|
(89,379)
|
(1,964,686)
|
|
|
|
|
Net
Loss Applicable to Common Shares
|
(1,484,838)
|
(334,766)
|
(5,042,404)
|
|
|
|
|
BALANCE
SHEET DATA
|
|
|
|
Total
Assets
|
1,101,760
|
2,509,864
|
|
Total
Liabilities
|
5,258,811
|
5,451,790
|
|
|
Total
Stockholders’ Equity (Deficit)
|
(4,157,051)
|
(2,941,926)
|
|
RESULTS
OF OPERATION
Three
Month Period Ended March 31, 2010 Compared to Three Month Period Ended March 31,
2009.
Our net
loss for the three month period ended March 31, 2010 was ($1,484,838) compared
to a net loss of ($334,766) during the three month period ended March 31, 2009,
a decrease of $1,150,072. During the three month periods ended March 31, 2010
and 2009, we did not generate any revenue from continuing
operations.
During
the three month period ended March 31, 2010, we incurred operating expenses of
$64,565 compared to $228,148 incurred during the three month period ended March
31, 2009, a decrease of $163,583. The decrease in operating expenses was
primarily attributable to the following items: (i) professional fees of $41,700
(2009: $127,520) and (ii) salaries and wages of $3,000 (2009: $86,292. Operating
expenses decreased due to the decreased scope and scale of our business
operations. General and administrative expenses generally include corporate
overhead, financial and administrative contracted services, marketing, and
consulting costs.
Other
income (expense) was incurred during the three month period ended March 31, 2010
of ($1,420,273) (2009: ($17,239)). Other income (expense) during the three month
period ended March 31, 2010 consisted of: (i) loss on investment of ($1,242,600)
compared to loss on investment of $-0- during the three month period ended March
31, 2009; and (ii) interest expense of ($177,673) compared to ($39,922) during
the three month period ended March 31, 2009. Other income (expense) incurred
during the three month period ended March 31, 2009 consisted of $22,633 in
interest income and $50 in miscellaneous other income. A net loss from
discontinued operations of $-0- was incurred during the three month period ended
March 31, 2010 compared to a net loss from discontinued operations of ($89,379)
incurred during the three month period ended March 31, 2009. This resulted in a
loss before discontinued operations during the three month period ended March
31, 2010 of ($1,484,838) compared to a loss before discontinued operations
during the three month period ended March 31, 2009 of ($334,766).
During
the three month period ended March 31, 2009, we incurred a net loss from
discontinued operations of ($89,379). We determined to discontinue operations
with our Muluncay subsidiary, a mining operation in Ecuador effective December
31, 2009. Net loss applicable to common shares during the three month period
ended March 31, 2010 was ($1,484,838) as compared to a net loss applicable to
common shares during the three month period ended March 31, 2009 of
($334,766). The basic weighted average number of shares outstanding
was 93,001,500 for the three month period ended March 31, 2010 compared to
91,940,000 for the three month period ended March 31, 2009.
LIQUIDITY
AND CAPITAL RESOURCES
Three
Month Period Ended March 31, 2010
As at
March 31, 2010, our current assets were $4,643 and our current liabilities were
$5,258,811, which resulted in a working capital deficit of ($5,254,168) As of
March 31, 2010, current assets were comprised of $4,643 in prepaid expenses. As
of March 31, 2010, current liabilities were comprised of: (i) $68,595 in
accounts payable; (ii) $56,818 in accounts payable – related party; (iii)
$2,018,250 in convertible notes payable, current; (iv) $665,000 in convertible
notes payable – related party, current; (v) $2,062,000 in bonds payable,
convertible and secured – related party; (vi) $124,708 in accrued interest,
convertible bonds payable – related party; (vii) $230,945 in accrued interest,
convertible notes payable – related party; and (viii) $32,495 in short term
notes payable. See “ – Material Commitments.”
As of
March 31, 2010, our total assets were $1,101,760 comprised of: (i)
$4,643 in current assets; (ii) $1,009,125 in investments, which represents our
interest in Global Diamond Resources; (iii) $84,566 in bond issue costs, net –
related party; and (iv) $3,426 in deposits. The decrease in total assets during
the three month period ended March 31, 2010 from fiscal year ended December 31,
2009 was primarily due to our investment in Global Diamond
Resources.
As at
March 31, 2010, our total liabilities were $5,258,811 comprised entirely of
current liabilities. The decrease in liabilities during the three month period
ended March 31, 2010 from fiscal year ended December 31, 2009 was primarily due
to the issuance of convertible notes payable.
Stockholders’
deficit increased from ($2,941,926) for fiscal year ended December 31, 2009 to
($4,157,051) for the three month period ended March 31, 2010.
Cash
Flows from Operating Activities
We have
not generated positive cash flows from operating activities. For the three month
period ended March 31, 2010, net cash flows used in operating activities was
($41,207) consisting primarily of a net loss of $1,484,838 adjusted by $8,018 in
amortization of bond issue costs – related party. Net cash flows used in
operating activities was further affected by changes of increases of $17,790 in
prepaid expenses, $2,220 in deposits, $56,818 in accounts payable – related
parties, $76,726 in accrued interest, convertible bonds payable – related party,
$38,318 in accrued interest, $13,405 in accrued interest convertible notes
payable – related party and ($12,263) in interest payable, and a decrease of
($12,263) in accounts payable.
Cash
Flows from Investing Activities
We did
not engage in any investing activities during the three month period ended March
31, 2010.
Cash
Flows from Financing Activities
We have
financed our operations primarily from debt or the issuance of equity
instruments. For the three month period ended March 31, 2010, net cash flows
provided from financing activities was $4,968 compared to $185,000 for the three
month period ended March 31, 2009. Cash flows from financing activities for the
three month period ended March 31, 2010 consisted of $4,968 in proceeds from
convertible bonds payable – related party.
PLAN
OF OPERATION AND FUNDING
A
substantial portion of fiscal year ended December 31, 2009 was dedicated to the
Muluncay mining project and financing. As at March 31, 2010, our cash and cash
equivalents were $-0-. For the three month period ended March 31, 2010, we
incurred a net loss of $1,484,838. Net cash provided by financing
activities for the three month period ended March 31, 2010 of $4,968, which was
attributed to the issuance of convertible bonds and notes payable. The
accumulated deficit increased by $3,557,5665 as at March 31, 2010 due to losses
incurred on the disposal of Muluncay and increases in general &
administrative costs, salaries and wages, note and bond interest, and
professional fees. The orchestration and execution of our
business acquisitions resulted in increased professional fees and the need for
funding. As such, during fiscal year ended December 31, 2009, we
entered into various note and bond payable agreements to finance our
acquisitions and Muluncay operations, which increased our interest
expense. In addition, we entered into management and consulting
agreements with our officers and directors, which contributed to the increased
salaries and wages.
We will
need additional further advances and issuance of debt instruments to fund our
operations over the next six months. In connection with our future business
plan, management anticipates additional increases in operating expenses and
capital expenditures relating to acquisition of further interests in gold mining
concessions. We would finance these expenses with further issuances of
securities and debt issuances. We expect we would need to raise additional
capital and generate revenues to meet long-term operating requirements.
Additional issuances of equity or convertible debt securities would result in
dilution to our current shareholders. Further, such securities may have rights,
preferences or privileges senior to our common stock. Additional financing may
not be available upon acceptable terms, or at all.
MATERIAL
COMMITMENTS
As of the
date of this Quarterly Report, we have the following material commitments as
described below.
Contractual
Obligations
|
|
Total
|
|
Less
than one year
|
|
1 –
3 Years
|
|
3 –
5 Years
|
|
More
than 5 Years
|
|
|
|
|
|
|
|
|
|
|
|
Debt
Obligations (1A)
|
$
|
1,300,000.00
|
$
|
1,300,000.00
|
$
|
-
|
$
|
|
$
|
|
Debt
Obligation (1B)
|
|
300,000.00
|
|
300,000.00
|
|
-
|
|
|
|
|
Notes
payable (2. a-e)
|
|
2,608,250.00
|
|
2,608,250.00
|
|
|
|
|
|
|
Debt
Obligation (3)
|
|
252,000.00
|
|
252,000.00
|
|
|
|
|
|
|
Debt
Obligation (4)
|
|
210,000.00
|
|
210,000.00
|
|
|
|
|
|
|
IR
Pro (5)
|
|
-
|
|
-
|
|
|
|
|
|
|
Camponi
Insurance (6)
|
|
5,136.00
|
|
5,136.00
|
|
|
|
|
|
|
Reich
Brothers (7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
4,675,386.00
|
$
|
4,675,386.00
|
$
|
-
|
$
|
-
|
$
|
-
|
(1A). On October 15, 2009, we
entered into a convertible secured bond debenture in the principal amount
of $1,300,000. Interest accrues monthly at the rate of 9% APR and is
payable monthly. Unless converted, principal is payable in full on October
15, 2010. Upon default, the interest rate is increased to 18%. Interest payments
are made mid-month resulting in bond interest payable of $14,990 at March 31,
2010. Interest payments are made at month end resulting in bond interest payable
of $6,130 at March 31, 2010. Bond interest expense was $58,500 for the three
month period ended March 31, 2010. The bond has an optional conversion feature
whereby the bond holder is entitled to convert the bond and accrued interest at
any time based on the lesser of the stock price on the bonds’ inception (the
“Fixed Price”), which was determined to be $0.61 per share) or the lowest daily
closing volume weighted average price during the five days preceding conversion.
If the common stock price drops below the Fixed Price, we have the option to
redeem the bond provided we pay a 16% redemption premium on the amount redeemed.
If the bond is not converted, we are required to make interest only payments for
a period of one year following the bonds’ inception. Thereafter, we shall
continue making month interest payments, in addition to quarterly principal
payments of $325,000 and quarterly 16% redemption premium payments that amount
to $52,000 per quarter ($208,000 total).
(1B). On
April 30, 2009, we entered into a convertible secured bond debenture in the
principal amount of $300,000. Interest accrues monthly at the rate of 9% APR and
is payable monthly. Unless converted, principal is payable in full on
October 31, 2010. Upon default, the interest rate is increased to 18%. Interest
payments are made at month end resulting in bond interest payable or $2,464 at
March 31, 2010. Interest payments are made at month end resulting in bond
interest payable of $6,857 at March 31, 2010. Bond interest expense was $13,500
for the three month period ended March 31, 2010. The bond has an optional
conversion feature whereby the bond holder is entitled to convert the bond and
accrued interest at any time based on the lesser of the stock price on the
bonds’ inception (the “Fixed Price”), which was determined to be $0.61 per
share) or the lowest daily closing volume weighted average price during the five
days preceding conversion. If the common stock price drops below the Fixed
Price, we have the option to redeem the bond provided we pay a 16% redemption
premium on the amount redeemed. If the bond is not converted, we are required to
make interest only payments for a period of one year following the bonds’
inception. Thereafter, we shall continue making month interest payments, in
addition to quarterly principal payments of $75,000 and quarterly 16% redemption
premium payments that amount to $12,000 per quarter ($48,000
total).
(1C). On
October 12, 2009, we entered into a convertible secured bond debenture in the
principal amount of $210,000. Interest accrues monthly at the rate of 9% APR and
is payable monthly. Unless converted, principal is payable in full on
January 12, 2010 or upon completion of any new investments in us exceeding
$1,500,000. Upon default, the interest rate is increased to 18% and we may
convert all bonds held by the bond holder without
restriction. We incurred bond issuance
costs of $42,000, which are being accrued to bonds payable on a straight-line
basis over the term of the bond.
Interest payments are made at month end
resulting in bond interest payable of $4,968 at March 31, 2010. Bond interest
expense was $4,725 for the three month period ended March 31, 2010. The bond has
an optional conversion feature whereby the bond holder is entitled to convert
the bond and accrued interest at any time based on the lesser of the stock price
on the bonds’ inception (the “Fixed Price”), which was determined to be $0.07
per share) or the lowest daily closing volume weighted average price during the
five days preceding conversion. If the common stock price drops below the Fixed
Price, we have the option to redeem the bond provided we pay a 16% redemption
premium on the amount redeemed. Limitations on conversion prevent the number of
shares issued from exceeding 9.99%. The bonds carry a currency rate conversion
clause wherein if the Euro to US dollar exchange rate is lower than the rate of
October 12, 2009, then the number of shares to be issued shall be increased by
an equal percentage of the decline in the exchange rate.
(1D). On
November 3, 2009, we entered into a convertible secured bond debenture in the
principal amount of $210,000. Interest accrues monthly at the rate of 9% APR and
is payable monthly. Unless converted, principal is payable in full on
January 12, 2010 or upon completion of any new investments in us exceeding
$1,500,000. Upon default, the interest rate is increased to 18% and we may
convert all bonds held by the bond holder without restriction. Bond interest
expense was $4,725 for the three month period ended March 31, 2010. The bond has
an optional conversion feature whereby the bond holder is entitled to convert
the bond and accrued interest at any time based on the lesser of the stock price
on the bonds’ inception (the “Fixed Price”), which was determined to be $0.07
per share) or the lowest daily closing volume weighted average price during the
five days preceding conversion. If the common stock price drops below the Fixed
Price, we have the option to redeem the bond provided we pay a 16% redemption
premium on the amount redeemed. Limitations on conversion prevent the number of
shares issued from exceeding 9.99%. The bonds carry a currency rate conversion
clause wherein if the Euro to US dollar exchange rate is lower than the rate of
October 12, 2009, then the number of shares to be issued shall be increased by
an equal percentage of the decline in the exchange rate.
2(A) We
entered into an arrangement with Charms Investments to obtain $275,000 of
financing payable on or before January 5, 2010. The note accrues
interest at the rate of 8%. On April 29, 2009 the agreement was
amended to increase amounts loaned to $350,000. All amounts are
payable on or before June 23, 2010.
2(B) On
July 1, 2009, we entered into an arrangement with Charms investments to obtain
$100,000 of financing payable on or before July 1, 2010. The note
accrues interest at the rate of 8%.
2(C) On
July 6, 2009, we entered into an arrangement with Charms Investments to obtain
$20,000 of financing payable on or before July 6, 2010. The note
accrues interest at the rate of 8%.
2(D) We
entered into an arrangement with Charms Investments to obtain $500,000 of
financing payable on or before August 30, 2010. The loan is issued in
installments with $195,000 issued as of September 30, 2009. The note
accrues interest at the rate of 8%.
2(E) We
entered into an arrangement with Benbrack Charkit Limited (a foreign investor)
to obtain a note for $2,485,200 (1,500,000 British pounds). The note
accrues interest at a rate of 12%. All amounts are payable on or
before June 24, 2010. The note is convertible at $.45 per share of
common stock. Proceeds of the loan were used to acquire 10,000,000
shares of Global Diamond Resources held through Trilliant Diamonds, our
subsidiary.
OFF-BALANCE
SHEET ARRANGEMENTS
As of the
date of this Quarterly Report, we do not have any off-balance sheet arrangements
that have or are reasonably likely to have a current or future effect on our
financial condition, changes in financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or capital resources that
are material to investors.
GOING
CONCERN
The
independent auditors' report accompanying our December 31, 2009 and December 31,
2008 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.
ITEM
III. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Market
risk represents the risk of loss that may impact our financial position, results
of operations or cash flows due to adverse change in foreign currency and
interest rates.
Exchange
Rate
Our
reporting currency is United States Dollars (“USD”). In the event we
acquire any properties outside of the United States, the fluctuation of exchange
rates may have positive or negative impacts on our results of operations.
However, since all of our properties are currently located within the United
States, any potential revenue and expenses will be denominated in U.S. Dollars,
and the net income effect of appreciation and devaluation of the currency
against the U.S. Dollar would be limited to our costs of acquisition of
property.
Interest
Rate
Interest
rates in the United States are generally controlled. Any potential future loans
will relate mainly to acquisition of properties and will be mainly
short-term. However our debt may be likely to rise in connection with
expansion and if interest rates were to rise at the same time, this could become
a significant impact on our operating and financing activities. We have not
entered into derivative contracts either to hedge existing risks for speculative
purposes.
ITEM
IV. CONTROLS AND PROCEDURES
EVALUATION
OF DISCLOSURE CONTROLS AND PROCEDURES
We maintain “disclosure controls and
procedures,” as such term is defined in Rule 13a-15(e) under the Securities
Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that
information required to be disclosed in our Exchange Act reports is recorded,
processed, summarized, and reported within the time periods specified in the
Securities and Exchange Commission rules and forms, and that such information is
accumulated and communicated to our management, including our Chief Executive
Officer and Chief Financial Officer, as appropriate, to allow timely decisions
regarding required disclosure. We conducted an evaluation (the
“Evaluation”), under the supervision and with the participation of our Chief
Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the
effectiveness of the design and operation of our disclosure controls and
procedures (“Disclosure Controls”) as of the end of the period covered by this
report pursuant to Rule 13a-15 of the Exchange Act. Based on this
Evaluation, our CEO and CFO concluded that our Disclosure Controls were
effective as of the end of the period covered by this report.
Changes
in Internal Controls
We have
also evaluated our internal controls for financial reporting, and there have
been no significant changes in our internal controls or in other factors that
could significantly affect those controls subsequent to the date of their last
evaluation.
Limitations on the Effectiveness of
Controls
Our
management, including our CEO and CFO, does not expect that our Disclosure
Controls and internal controls will prevent all errors and all fraud. A control
system, no matter how well conceived and operated, can provide only reasonable,
not absolute, assurance that the objectives of the control system are met.
Further, the design of a control system must reflect the fact that there are
resource constraints, and the benefits of controls must be considered relative
to their costs. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, within the Company have been detected. These
inherent limitations include the realities that judgments in decision-making can
be faulty, and that breakdowns can occur because of a simple error or mistake.
Additionally, controls can be circumvented by the individual acts of some
persons, by collusion of two or more people, or by management or board override
of the control.
The
design of any system of controls also is based in part upon certain assumptions
about the likelihood of future events, and there can be no assurance that any
design will succeed in achieving its stated goals under all potential future
conditions; over time, controls may become inadequate because of changes in
conditions, or the degree of compliance with the policies or procedures may
deteriorate. Because of the inherent limitations in a cost-effective control
system, misstatements due to error or fraud may occur and not be
detected.
CEO
and CFO Certifications
Appearing
immediately following the Signatures section of this report there are
Certifications of the CEO and the CFO. The Certifications are required in
accordance with Section 302 of the Sarbanes-Oxley Act of 2002 (the Section 302
Certifications). This Item of this report, which you are currently reading is
the information concerning the Evaluation referred to in the Section 302
Certifications and this information should be read in conjunction with the
Section 302 Certifications for a more complete understanding of the topics
presented.
AUDIT
COMMITTEE REPORT
We have a
separately-designated audit committee of the board. Audit committee functions
are performed by our board of directors. Our director is not deemed independent.
All directors also hold positions as our officers. Our audit committee is
responsible for: (1) selection and oversight of our independent accountant; (2)
establishing procedures for the receipt, retention, and treatment of complaints
regarding accounting, internal controls, and auditing matters; (3) establishing
procedures for the confidential, anonymous submission by our employees of
concerns regarding accounting and auditing matters; (4) engaging outside
advisors; and, (5) funding for the outside auditory and any outside advisors
engagement by the audit committee. .
AUDIT
COMMITTEE FINANCIAL EXPERT
None of
our directors or officers has the qualifications or experience to be considered
a financial expert. We believe the cost related to retaining a financial expert
at this time is prohibitive. Further, because of our limited operations, we
believe the services of a financial expert are not warranted.
PART
II. OTHER INFORMATION
ITEM
1. LEGAL PROCEEDINGS
No report
required.
ITEM
1A. RISK FACTORS
No report
required.
ITEM
2. UNREGISTERED SALES OF SECURITIES AND USE OF PROCEEDS
No report
required.
ITEM
3. DEFAULTS UPON SENIOR SECURITIES
No report
required.
ITEM
4. Removed and Reserved
ITEM
5. OTHER INFORMATION
No report
required.
ITEM 6.
EXHIBITS AND REPORTS ON FORM 8-K
The
following exhibits are filed as part of this Annual Report.
|
|
|
|
Incorporated by
reference
|
|
|
|
|
|
|
|
|
|
|
Filed
|
Exhibit
|
|
Document Description
|
|
Form
|
|
Date
|
|
Number
|
|
herewith
|
|
|
|
|
|
|
|
|
|
|
|
3.1
|
|
Articles
of Incorporation of Registrant
|
|
SB-2
|
|
10-31-06
|
|
3.1
|
|
|
3.1.1
|
|
Certificate of Incorporation of Trilliant Diamonds Limited
|
|
8-K
|
|
07-09-09
|
|
3.1.1
|
|
|
3.1.2
|
|
Memorandum
and Articles of Association for Trilliant Diamonds
|
|
8-K
|
|
07-09-09
|
|
3.1.2
|
|
|
3.1.3
|
|
Certificate
of Designation of Series I Preferred Stock
|
|
8-K
|
|
07-09-09
|
|
3.1.3
|
|
|
3.1.4
|
|
Amendment
to Designation of Series I Preferred Stock
|
|
8-K
|
|
07-09-09
|
|
3.1.4
|
|
|
3.2
|
|
Bylaws
|
|
SB-2
|
|
10-31-06
|
|
3.2
|
|
|
10.1
|
|
Share
Transfer Agreement Registrant, Pacifico and Muluncygold
|
|
10-K
|
|
04-15-09
|
|
10.1
|
|
|
10.2
|
|
Muluncay
Project Report Prepared by Exploration Alliance Ltd.
|
|
10-K
|
|
04-15-09
|
|
10.2
|
|
|
10.3
|
|
Geological
Report of the Mulcaney Deposit
|
|
10-K
|
|
04-15-09
|
|
10.3
|
|
|
10.4
|
|
Report
on Exploration Potential – Muluncay Project
|
|
10-K
|
|
04-15-09
|
|
10.4
|
|
|
10.5
|
|
Ecuador
Mining Law
|
|
10-k
|
|
04-15-09
|
|
10.5
|
|
|
10.6
|
|
Diagram
of Current 40 Ton Plant
|
|
10-K
|
|
04-15-09
|
|
10.6
|
|
|
10.7
|
|
Loan
Agreement and Note between Registrant and Charms Investments
Ltd.
|
|
10-K
|
|
04-15-09
|
|
10.7
|
|
|
10.8
|
|
Stock
Purchase Agreement between Registrant and Trafalgar Capital Specialized
Investment Fund
|
|
8-K
|
|
04-20-09
|
|
10.8
|
|
|
10.9
|
|
Redeemable
Debenture issued to Trafalgar Capital Specialized Investment
Fund
|
|
8-K
|
|
04-20-09
|
|
10.9
|
|
|
10.10
|
|
Global
Diamond Subscription Agreement
|
|
8-K
|
|
07-09-09
|
|
10.10
|
|
|
10.11
|
|
Trilliant
Diamonds Charge of Shares
|
|
8-K
|
|
07-09-09
|
|
10.11
|
|
|
10.12
|
|
Loan
Note Instrument/Convertible Debenture
|
|
8-K
|
|
07-09-09
|
|
10.12
|
|
|
10.13
|
|
Registrant
Loan Note Certificate
|
|
8-K
|
|
07-09-09
|
|
10.13
|
|
|
10.14
|
|
Stock
Purchase Agreement between Registrant and Samazo Limited
|
|
8-K
|
|
07-23-09
|
|
10.14
|
|
|
10.15
|
|
Order
of the Eastern Caribbean Supreme Court
|
|
8-K
|
|
09-25-09
|
|
10.15
|
|
|
10.16
|
|
Sale
and Purchase Agreement
|
|
8-K
|
|
09-30-09
|
|
10.16
|
|
|
10.17
|
|
Extrajudicial
Complaint
|
|
8-K
|
|
10-08-09
|
|
10.17
|
|
|
10.18
|
|
Securities
Purchase Agreement between Registrant and Trafalgar Capital Specialized
Investment Fund
|
|
8-K
|
|
10-13-09
|
|
10.18
|
|
|
10.19
|
|
Redeemable
Debenture
|
|
8-K
|
|
10-13-09
|
|
10.19
|
|
|
10.20
|
|
Securities
Purchase Agreement between Registrant and Trafalgar Capital Specialized
Investment Fund
|
|
8-K
|
|
11-12-09
|
|
10.20
|
|
|
10.21
|
|
Redeemable
Debenture
|
|
8-K
|
|
11-12-09
|
|
10.21
|
|
|
|
|
|
|
|
|
|
14.1
|
|
Code of
Ethics
|
|
10-K
|
|
04-15-09
|
|
14.1
|
|
|
99.1
|
|
Audit Committee Charter
|
|
10-K
|
|
04-15-09
|
|
99.1
|
|
|
99.2
|
|
Disclosure Committee
Charter
|
|
10-K
|
|
04-15-09
|
|
99.2
|
|
|
|
|
|
|
|
|
|
31.1
|
|
Certification of Chief Executive
Officer pursuant to 15d-15(e), promulgated under the Securities and
Exchange Act of 1934, as amended.
|
|
|
|
X
|
|
|
|
|
|
|
|
31.2
|
|
Certification of Chief Financial
Officer pursuant to 15d-15(e), promulgated under the Securities and
Exchange Act of 1934, as amended.
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
32.1
|
|
Certification pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (Chief Executive
Officer)
|
|
|
|
X
|
|
|
|
|
|
|
|
32.2
|
|
Certification pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (Chief Financial
Officer)
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
TRILLIANT
EXPLORATION CORPORATION
SIGNATURES
Pursuant
to the requirements of the Exchange Act, the registrant caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
|
TRILLIANT
EXPLORATION CORPORATION
|
|
|
|
|
|
Dated:
May 24, 2010
|
By:
|
/s/ JEFFREY
STERNBERG
|
|
|
|
Jeffrey
|
|
|
|
SternbergPresident/Chief
Executive Officer
|
|
|
|
|
|
Dated:
May 24, 2010
|
By:
|
/s/
JEFFREY STERNBERG
|
|
|
|
Jeffrey
Sternberg
Chief
Financial Officer
|
|
30
Trilliant Exploration (CE) (USOTC:TTXP)
Historical Stock Chart
From Jun 2024 to Jul 2024
Trilliant Exploration (CE) (USOTC:TTXP)
Historical Stock Chart
From Jul 2023 to Jul 2024