Scienture Holdings - 10-Q quarterly report FY

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

Quarterly Report Under Section 13 or 15 (d) of

Securities Exchange Act of 1934

For the quarterly period ended June 30, 2008

Commission File Number:  333-143767

(Exact Name of Issuer as Specified in Its Charter)

Telephone:  604-488-7608

 (Address and Telephone Number of Issuer's Principal Executive Offices)

(Name, Address, and Telephone Number of Agent)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed 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.   Yesx        Noo

 

 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.

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES x   NOo

Check whether the registrant filed all documents and reports required to be filed by Section 12, 13, 15(d) of the Exchange Act after the distribution of the securities under a plan confirmed by a court.      YES     NO

Indicate the number of shares outstanding of each of the issuer's classes of common stock at the latest practicable date. As of August 6, 2008, the registrant had 13,220,000 shares of common stock, $0.0001 par value, issued and outstanding.

Transitional Small Business Disclosure Format (Check one):    YESo    NOx

PART I - FINANCIAL INFORMATION

THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES SUCH AS THE DEPENDENCE OF THE COMPANY ON FUNDING AND THE ADEQUACY OF CASH FLOWS. THESE FORWARD-LOOKING STATEMENTS AND OTHER STATEMENTS MADE ELSEWHERE IN THIS REPORT ARE MADE IN RELIANCE ON THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.

Item 2. Management's Discussion and Analysis of Financial Condition and Plan of Operations.

We intend to commence operations as an exploration stage company. We will be engaged in the exploration of mineral properties with a view to exploiting any mineral deposits we discover.  We own an option to acquire an undivided 100% beneficial interest in two mineral claims in the Nelson Mining Division, located due south of Nelson, British Columbia, Canada. There is no assurance that a commercially viable mineral deposit exists on the claims.  We do not have any current plans to acquire interests in additional mineral properties, though we may consider such acquisitions in the future.  

Mineral property exploration is typically conducted in phases.  Each subsequent phase of exploration work is recommended by a geologist based on the results from the most recent phase of exploration.  We have not yet commenced the initial phase of exploration on the claims.  Once we have completed each phase of exploration, we will make a decision as to whether or not we proceed with each successive phase based upon the analysis of the results of that program.  Our director will make this decision based upon the recommendations of the independent geologist who oversees the program and records the results.

Our plan of operation is to conduct exploration work on the claim in order to ascertain whether it possesses economic quantities of copper, nickel and cobalt.  There can be no assurance that an economic mineral deposit exists on the claims until appropriate exploration work is completed.

Even if we complete our proposed exploration programs on the claims and we are successful in identifying a mineral deposit, we will have to spend substantial funds on further drilling and engineering studies before we will know if we have a commercially viable mineral deposit.

The claims are part of the Bluebird mineral claim group located 9 kilometers due south of Nelson, British Columbia, in the Nelson Mining Division. The claims enclose 810 hectares from Apex Creek across the summit of Evening Ridge to Highway 6 between the towns of Nelson and Salmo.  The center of claim 512465 is located at 117*13’43”W, 49*25’24”N.  The center of claim 512466 is located at 117*11’41” W, 49*25’30”N.  Coordinates are within National Topographic System (NTS) map-area 082F06W and the Terrain Resources Integrated Management (TRIM) maps 082F044 and 082F045.  Locations are given as National Topographic System coordinates using a Universal Transverse Mercator (UTM) grid and the North American Datum of 1983 (NAD83); the area lies entirely within Zone 11U of the grid.

The property is accessed directly from Highway 6 between Nelson and Salmo, 9 kilometers south of Nelson, and also by a well-maintained gravel road which leads to the Apex Ski Resort.  Access to the claims is on foot via an overgrown logging road up the right bank of Apex Creek.

The Bluebird claim group is located in the western Kootenai Mountains of southeastern British Columbia, in an area of moderate, locally steep topography with elevations ranging from 920 meters above sea level near Highway 6 to as much as 1850 meters above sea level on Midnight Ridge.  Despite the locally steep slopes, nearly all of the property is accessible on foot, with proper caution.

The climate is characterized by warm summers, cool equinoxes and mild winters.  Annual precipitation is 730 centimeters, of which roughly a third falls as snow during the winter months of November through March.  Moderate, locally thick growth of subalpine conifers and alder occurs on north-facing slopes.  Logging roads are lined by poplar, aspen and alder.

To date, the Company has not been successful in raising adequate funding to conduct any operations.  In fact, over the course of the previous three months the Company has been required to take advances from a shareholder in the amount of $5,166 USD and a loan from a third party, which is payable on demand in the amount of $19,333 USD in order to pay the expenses relating to maintaining it status as a reporting company with the Securities and Exchange Commission (SEC).  As such the following details relating to the Company’s proposed operation are highly speculative and fully dependant upon raising adequate financing, which it has previously been unsuccessful with.

Based on historical studies done on the area, the Company plans to undertake an initial exploration program consisting of two phases.  The first phase would consist of geological mapping, prospecting and geochemical sampling. Geological mapping involves plotting previous exploration data relating to a property on a map in order to determine the best property locations to conduct subsequent exploration work. Prospecting involves analyzing rocks on the property surface with a view to discovering indications of potential mineralization.  Geochemical sampling involves gathering rock and soil samples from property areas with the most potential to host economically significant mineralization.  All samples gathered are sent to a laboratory where they are crushed and analyzed for metal content.

The first phase is estimated to cost $8,500 as described below.

                   Budget – Phase I

The second phase would consist of a follow-up of the initial stage geological mapping and include a detailed geophysical survey.  As much of the property remains unmapped, the entire claim block would be flown by airborne magnetic and electromagnetic surveys.  Horizontal loop electromagnetic (HLEM) surveying should be carried out over the entire claim block wherever possible.  This will help determine the probability of sulphide mineralization occurring within the claim block.  Also HLEM surveying and ground magnetic surveying would need to be carried out over any areas of positive results from airborne surveying.

The second phase would cost approximately $36,500 as outlined below.    

                   Budget – Phase II

If the proceeds are available we plan to commence the phase one exploration program on the two mineral claims within the Bluebird group in the third or fourth quarter of 2008.  The program and follow-up report should take approximately one month to complete. We will then undertake the phase two work program during the first quarter of 2009.  This program will take approximately one month to complete.  We do not have any verbal or written agreement regarding the retention of any qualified engineer or geologist for either of these exploration programs.  In addition we anticipate administrative costs in the amount of $16,000 over the next twelve months.

 

 

 

 

Total expenditures over the next 12 months are therefore expected to be $61,000.

We will require additional funding in order to proceed with the exploration on the two mineral claims within the Bluebird group and satisfy the option agreement by and between Mr. Wells and the Company.  We anticipate that additional funding will be in the form of equity financing from the sale of our common stock or from director loans.  We do not have any arrangements in place for any future equity financing or loans.

As of June 30, 2008, we have $773 of cash available.  We have current liabilities of $32,829.  From the date of inception (July 15, 2005) to June 30, 2008 the Company has recorded a net loss of $51,156, which were expenses relating to the initial development of the Company, filing its Registration Statement on Form SB-2 (deemed effective July 9, 2007),  and expenses relating to maintaining reporting company status with the Securities and Exchange Commission.  We will require additional capital investments or borrowed funds to meet cash flow projections and carry forward our business objectives. There can be no guarantee or assurance that we can raise adequate capital from outside sources to fund the new proposed business direction.

On April 23, 2008, the Company received proceeds in the amount of $19,333, which was the result of a non-secured shareholder loan.  However, the failure to secure additional adequate outside funding immediately or within the next 30-60 days would have an adverse affect on our plan of operation and a direct negative impact on shareholder liquidity, which would likely result in a complete loss of any funds invested in the common stock and may result in the business failing.

The Company recently received approval for the quotation of its common stock on the Over-The-Counter Bulletin Board (OTCBB.)  However, to date there has been no trades of its common stock. There can be no guarantee or assurance that a market will ever develop for the Company’s common stock. Failure to create a market for the Company’s common stock would result a complete loss of any investment made into the Company.

As of the date of this Quarterly Report, other than the below described “Bluebird Claim Purchase Agreement,” the Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company's financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. The term "off-balance sheet arrangement" generally means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with the Company is a party, under which the Company has (i) any obligation arising under a guarantee contract, derivative instrument or variable interest; or (ii) a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets.

On August 4, 2006, Bluebird Exploration Company (“the Company”) entered into an Option to Purchase Agreement with Peter Lawrence Wells, our officer and director, who is the sole beneficial owner of 100% of the two mineral claims identified by Tenure Numbers 512465 and 512466 located 9 kilometers due south of Nelson, British Columbia, Canada, in the Nelson Mining Division. The agreement grants the Company the exclusive right and option to acquire an undivided 100% of the right, title and interest in and to the claims upon satisfying certain terms and conditions.  On September 25, 2007 this agreement was amended by the parties.

 

 

 

The option to acquire the claims is contingent on the Company incurring exploration costs on the claims of a minimum of $7,084CAD ($7,000USD) on or before September 30, 2008; as well as the Company incurring exploration costs on the claims of a further $25,301CAD ($25,000USD) (for aggregate minimum exploration costs of $32,385CAD ($32,000USD)) on or before September 30, 2009.  Upon exercise of the option, the Company agrees to pay the seller, Peter Lawrence Wells, our officer and director, the sum of $25,301CAD ($25,000USD) per annum, commencing January 1, 2010, for so long as the Company holds any interest in the claims.

The Company does not anticipate any costs or expenses to be incurred for product research and development within the next twelve months.

There are no employees of the Company, excluding the current President and Director, Peter Lawrence Wells, of the corporation.

Not Applicable.

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting, as required by Sarbanes-Oxley (SOX) Section 404 A. The Company's internal control over financial reporting is a process designed under the supervision of the Company's Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company's financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

As of June 30, 2008 management assessed the effectiveness of the Company's internal control over financial reporting based on the criteria for effective internal control over financial reporting established in SEC guidance on conducting such assessments. Based on that evaluation, they concluded that, during the period covered by this report, such internal controls and procedures were not effective to detect the inappropriate application of US GAAP rules as more fully described below. This was due to deficiencies that existed in the design or operation of our internal control over financial reporting that adversely affected our internal controls and that may be considered to be material weaknesses.

The matters involving internal controls and procedures that the Company's management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: (1) lack of a functioning audit committee and lack of a majority of outside directors on the Company's board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; (2) inadequate segregation of duties consistent with control objectives; (3) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements; and (4) ineffective controls over period end financial disclosure and reporting processes. The aforementioned material weaknesses were identified by the Company's Chief Financial Officer in connection with the review of our financial statements as of June 30, 2008 and communicated the matters to our management.

 

 

 

Management believes that the material weaknesses set forth in items (2), (3) and (4) above did not have an affect on the Company's financial results. However, management believes that the lack of a functioning audit committee and lack of a majority of outside directors on the Company's board of directors, may result in ineffective oversight in the establishment and monitoring of required internal controls and procedures.

We are committed to improving our financial organization. As part of this commitment, we will create a position to segregate duties consistent with control objectives and will increase our personnel resources and technical accounting expertise within the accounting function when funds are available to the Company: i) Appointing one or more outside directors to our board of directors who shall be appointed to the audit committee of the Company resulting in a fully functioning audit committee who will undertake the oversight in the establishment and monitoring of required internal controls and procedures; and ii) Preparing and implementing sufficient written policies and checklists which will set forth procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements.

Management believes that the appointment of one or more outside directors, who shall be appointed to a fully functioning audit committee, will remedy the lack of a functioning audit committee and a lack of a majority of outside directors on the Company's Board. In addition, management believes that preparing and implementing sufficient written policies and checklists will remedy the following material weaknesses (i) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements; and (ii) ineffective controls over period end financial close and reporting processes. Further, management believes that the hiring of additional personnel who have the technical expertise and knowledge will result in proper segregation of duties and provide more checks and balances within the department. Additional personnel will also provide the cross training needed to support the Company if personnel turn over issues within the department occur. This coupled with the appointment of additional outside directors will greatly decrease any control and procedure issues the Company may encounter in the future.

We will continue to monitor and  evaluate  the  effectiveness  of our  internal controls and procedures and our internal controls over financial reporting on an ongoing  basis and are  committed  to taking  further  action  and  implementing additional enhancements or improvements, as necessary and as funds allow.

There were no significant changes in the Company's internal controls or, to the Company's knowledge, in other factors that could significantly affect these controls subsequent to the date of their evaluation.

 

 

The Company is not a party to any pending legal proceedings, and no such proceedings are known to be contemplated.

No director, officer, or affiliate of the Company and no owner of record or beneficial owner of more than 5.0% of the securities of the Company, or any associate of any such director, officer or security holder is a party adverse to the Company or has a material interest adverse to the Company in reference to pending litigation.

None.

None.

None.

None.

3.1  Articles of Incorporation*

3.2  By-Laws*

31.1 Rule 13(a)-14(a)/15(d)-14(a) Certification of Chief Executive Officer and Chief Financial Officer

32.1 Section 1350 Certification of Chief Executive Officer and Chief Financial Officer

*Filed previously as an exhibit to the Company’s registration statement with the Commission on June 15, 2007.

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.