Volcan Holdings, Inc. - FORM 10-Q

Attached files

file	filename
EX-31.1 - SECTION 302 CERTIFICATION BY THE PRINCIPAL EXECUTIVE OFFICER - Volcan Holdings, Inc.	f10q0310ex31i_volcan.htm
EX-10.1 - EPFC LETTER AGREEMENT - Volcan Holdings, Inc.	f10q0310ex10i_volcan.htm
EX-32.1 - SECTION 906 CERTIFICATION BY THE PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL ACCOUNTING OFFICER - Volcan Holdings, Inc.	f10q0310ex32i_volcan.htm
EX-31.2 - SECTION 302 CERTIFICATION BY THE PRINCIPAL ACCOUNTING OFFICER - Volcan Holdings, Inc.	f10q0310ex31ii_volcan.htm
EX-10.2 - EPFC FORM OF WARRANT - Volcan Holdings, Inc.	f10q0310ex10ii_volcan.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2010

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ____________

Commission file number 333-141505

	VOLCAN HOLDINGS, INC.
	(Exact Name of Registrant as Specified in Its Charter)
Delaware		98-0554790
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

	Level 34, 50 Bridge Street Sydney, Australia		2000
	(Address of Principal Executive Offices)		(Zip Code)

	+61-2-8216-0777
	(Registrant’s Telephone Number, Including Area Code)

	(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

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. Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o	Smaller reporting company x

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [ X ]

As of May 19, 2010, 106,595,765 shares of the issuer’s common stock, $0.001 par value per share, were outstanding.

VOLCAN HOLDINGS, INC.

Table of Contents

		Page
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements	F-1
	Condensed Consolidated Balance Sheets	F-2
	Condensed Consolidated Statements of Operations (Unaudited)	F-3 - F-4
	Consolidated Statement of Stockholders’ Equity	F-5
	Condensed Consolidated Statements of Cash Flows	F-6
	Notes to Condensed Consolidated Financial Statements (Unaudited)	F-7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1
Item 4T.	Controls and Procedures	8
PART II	OTHER INFORMATION
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	8
Item 6.	Exhibits	9

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

Volcan Holdings, Inc.

(An Exploration Stage Company)

March 31, 2010 and 2010

Index to Consolidated Financial Statements

Contents	Page(s)

Consolidated Balance Sheets at March 31, 2010 (Unaudited) and June 30, 2009	F-2

Consolidated Statements of Operations for the Nine Months Ended March 31, 2010 and 2009 and for the Period from May 12, 2006 (Inception) through March 31, 2010 (Unaudited)	F-3

Consolidated Statements of Operations for the Three Months Ended March 31, 2010 and 2009 (Unaudited)	F-4

Consolidated Statement of Stockholders’ Equity for the Period from May 12, 2006 (Inception) through March 31, 2010 (Unaudited)	F-5

Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2010 and 2009 and for the Period from May 12, 2006 (Inception) through March 31, 2010 (Unaudited)	F-6

Notes to the Consolidated Financial Statements (Unaudited)	F-7 to F-18

F-1

VOLCAN HOLDINGS, INC.

(An Exploration Stage Company)

Consolidated Balance Sheets

	March 31,			June 30,
	2010			2009
	(Unaudited)
ASSETS
Current Assets:

Cash and cash equivalents	$	100,525		$	92,062
General sales tax receivables		221,553			131,602
Deposit		132,258			115,080
Total current assets		454,336			338,744

Intangible assets		2,216,328			1,473,189

TOTAL ASSETS	$	2,670,664		$	1,811,933

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
Accounts payable	$	2,261,538		$	1,564,199
Advances from stockholder		229,322			86,258
Common stock to be issued		13,300			13,300
Total current liabilities		2,504,160			1,663,757

Stockholders' Equity:
Common stock: $0.001 par value; 300,000,000 shares authorized; 103,995,765 shares issued and outstanding,		103,996			103,996
Additional paid-in capital		1,588,953			1,588,953
Deferred compensation		-			(87,500	)
Deficit accumulated during the exploration stage		(1,533,121	)		(1,433,240	)
Accumulated other comprehensive income (loss):
Foreign currency translation gain (loss)		6,676			(24,033	)
Total stockholder’s equity		166,504			148,176

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	2,670,664		$	1,811,933

See accompanying notes to the consolidated financial statements.

F-2

VOLCAN HOLDINGS, INC.

(An Exploration Stage Company)

Consolidated Statements of Operations

(Unaudited)


							For The
							Period From
	For The			For The			June 11, 2008
	Nine Months			Nine Months			(Inception)
	Ended			Ended			Through
	March 31,			March 31,			March 31,
	2010			2009			2010

Officers’ compensation	$	-		$	420,000		$	420,000
Professional fees		298,562			297,202			832,976
General and administrative		278,406			348,426			766,334
Total operating expenses		576,968			1,065,628			2,019,310

Loss from operations		(576,968)			(1,065,628)			(1,533,121)

Other (income) expenses:
(Gain) loss on foreign exchange		(7,829	)		1			(11,373	)
Interest income		(4,158	)		(4,316	)		(9,716	)
Option fee income		(465,100	)		-			(465,100	)

Loss before income taxes		(99,881	)		(1,061,313	)		(1,533,121	)

Income tax		-			-			-
Net loss	$	(99,881	)	$	(1,061,313	)	$	(1,533,121	)
Net loss per common share - basic and diluted	$	(0.00	)	$	(0.01	)	$	(0.01	)

Weighted average number of common shares outstanding – basic and diluted		103,995,765			102,423,800			103,995,765

See accompanying notes to the consolidated financial statements.

F-3

VOLCAN HOLDINGS, INC.

(An Exploration Stage Company)

Consolidated Statements of Operations

(Unaudited)




	For The			For The
	Three Months			Three Months
	Ended			Ended
	March 31,			March 31,
	2010			2009
Professional fees	$	57,514		$	43,530
General and administrative		82,661			149,424
Total operating expenses		140,175			192,954

Loss from operations		(140,175)			(192,954)

Other (income) expenses:
(Gain) loss on foreign exchange		(5,159	)		(118,611	)
Interest income		(1,435	)		(205	)
Option fee income		(19,950	)		-

Loss before income taxes		(113,631	)		(74,138	)

Income tax		-			-
Net loss	$	(113,631	)	$	(74,138	)

Net loss per common share - basic and diluted	$	(0.00	)	$	(0.00	)

Weighted average number of common shares outstanding – basic and diluted		103,995,765			103,667,000

See accompanying notes to the consolidated financial statements.

F-4

VOLCAN HOLDINGS, INC.

(An Exploration Stage Company)

Consolidated Statement of Stockholders’ Equity (Deficit)

For the Period from June 11, 2008 (Inception) through March 31, 2010

(Unaudited)

													Deficit			Other Comprehensive Income (Loss)
	Common Shares			Amount			Additional Paid-in Capital			Deferred Compensation			Accumulated During the Exploration Stage			Foreign Currency Translation Gain (Loss)			Total Stockholders’ Equity (Deficit)
Balance, June 11, 2008 (inception)		5,620,000		$	5,620		$	19,380		$	-		$	-		$	-		$	25,000

Effect of 1 for 6.1728395 forward stock split		29,071,358			29,071			(29,071	)											-

Issuance of common stock in connection with reverse acquisition		90,000,000			90,000			(114,904	)											(24,904	)

Cancellation of common stock in connection with reverse acquisition		(24,691,358	)		(24,691	)		24,691												-

Comprehensive loss
Net loss														(214,909	)					(214,909	)
Foreign currency translation loss																	(3,345	)		(3,345	)
Total comprehensive loss																				(218,254	)

Balance June 30, 2008		100,000,000			100,000			(99,904	)		-			(214,909	)		(3,345	)		(218,158	)

Issuance of common stock for cash (net of costs of $125,666)		3,745,765			3,746			1,145,038												1,148,784

Issuance of warrants in connection with common stock								36,569												36,569

Options issued for services								420,000												420,000

Common stock issued for Future services		250,000			250			87,250			(87,500	)								-

Comprehensive loss
Net loss														(1,218,331	)					(1,218,331	)
Foreign currency translation loss																	(20,688	)		(20,688	)
Total comprehensive loss																				(1,239,019	)

Balance, June 30, 2009		103,995,765			103,996			1,588,953			(87,500	)		(1,433,240	)		(24,033	)		148,176

Amortization of deferred compensation											87,500									87,500

Comprehensive income
Net income														(99,881	)					(99,881	)
Foreign currency translation gain																	30,709			30,709
Total comprehensive income																				(69,172	)

Balance, March 31, 2010		103,995,765		$	103,996		$	1,588,953		$	-		$	(1,533,121	)	$	6,676		$	166,504

See accompanying notes to the consolidated financial statements.

F-5

VOLCAN HOLDINGS, INC.

(An Exploration Stage Company)

Condensed Consolidated Statements of Cash Flows

(Unaudited)

							For The
							Period From
	For The			For The			June 11, 2008
	Nine Months			Nine Months			(Inception)
	Ended			Ended			Through
	March 31,			March 31,			March 31,
	2010			2009			2010
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	(99,881	)	$	(1,061,313	)	$	(1,533,121	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities
Stock compensation		87,500			420,000			507,500
Changes in operating assets and liabilities
Deposit		(17,178	)		(27,824	)		(132,258	)
Other receivables		(89,951	)		42,568			(244,804	)
Accounts payable		697,339			(393,143	)		1,418,690
Common stock to be issued		-			-			13,300
Net Cash Provided By (Used In) Operating Activities		577,829			(1,019,712	)		29,307

CASH FLOWS FROM INVESTING ACTIVITIES

Exploration and prospecting		(743,139	)		(23,211	)		(1,311,284	)
Net Cash Used In Operating Activities		(743,139	)		(23,211	)		(1,311,284	)

CASH FLOWS FROM FINANCING ACTIVITIES
Sale of common stock, net of offering costs		-			1,185,353			1,185,353
Loan payable - shareholder		143,064			74,188			229,322
Net Cash Provided By Financing Activities		143,064			1,259,541			1,414,675

EFFECT OF EXCHANGE RATE CHANGES ON CASH		30,709			(119,777	)		(32,173	)

NET CHANGE IN CASH		8,463			96,841			100,525

CASH AT BEGINNING OF PERIOD		92,062			96			-
CASH AT END OF PERIOD	$	100,525		$	96,937		$	100,525

See accompanying notes to consolidated financial statements

F-6

VOLCAN HOLDINGS, INC.

(An Exploration Stage Company)

March 31, 2010 and 2009

Notes to the Consolidated Financial Statements

(Unaudited)

NOTE 1 - ORGANIZATION AND OPERATIONS

Volcan Holdings, Inc. (formerly Dunn Mining, Inc.) (the “Company”) was incorporated on April 4, 2006 in the State of Nevada, for the purpose of acquiring and exploring mineral properties for economically recoverable reserves. On September 11, 2008, Dunn Mining was merged with and into Volcan Holdings, Inc., a Delaware corporation (the "Company"), for the purpose of changing its state of incorporation to Delaware from Nevada, changing its name and effectuating a 1-for-6.1728395 forward stock-split, all pursuant to a Certificate of Ownership and Merger and Articles of Merger, each dated September 11, 2008 and approved by stockholders on September 11, 2008.

On September 12, 2008, the Company entered into a Share Exchange Agreement (the "Exchange Agreement") by and among the Company, Volcan Australia Corporation Pty Ltd, an Australian proprietary company ("VAC"), and L'Hayyim Pty Ltd as trustee for The L'Hayyim Trust, the holder of all of the outstanding capital stock of VAC (the "VAC Shareholder"). Upon closing of the transaction contemplated under the Exchange Agreement (the "Share Exchange"), on September 12, 2008, the VAC Shareholder transferred all of the issued and outstanding capital stock of VAC to the Company in exchange for 90,000,000 newly issued shares of common stock of the Company and a right to receive $1,500,000 in cash at the end of any fiscal quarter in which the Company has cash on hand of at least $5,000,000. Such Share Exchange caused VAC to become a wholly owned subsidiary of the Company.

Following the Share Exchange, under the terms of an Agreement of Conveyance, Transfer and Assignment of Assets and Assumption of Obligations, the Company transferred all of its pre-Share Exchange assets and liabilities to its wholly owned subsidiary, Dunn Mining Holdings, Inc., a Delaware corporation ("SplitCo"). Thereafter, pursuant to a stock purchase agreement, the Company transferred all of the outstanding capital stock of SplitCo to its former president in exchange for cancellation of an aggregate of 24,691,358 shares of the Company’s common stock held by such person (the "Split-Off").

As a result of the ownership interest of the former shareholder of VAC, for financial statement reporting purposes, the merger between the Company and VAC has been treated as a reverse acquisition with VAC deemed the accounting acquirer and the Company deemed the accounting acquiree under the purchase method of accounting in accordance with paragraph 805-40-05-2 of the FASB Accounting Standards Codification. The reverse merger is deemed a capital transaction and the net assets of VAC (the accounting acquirer) are carried forward to the Company (the legal acquirer and the reporting entity) at their carrying value before the combination. The acquisition process utilizes the capital structure of the Company and the assets and liabilities of VAC which are recorded at historical cost. The equity of the Company is the historical equity of VAC retroactively restated to reflect the number of shares issued by the Company in the transaction.

F-7

VAC is an exploration stage company and its principal operation is the conducting of exploration for Bauxite and other minerals in Australia. The current focus is on the exploration for bauxite and other mineral deposits on tenements near Inverell and Cooma in New South Wales, Australia. VAC has not determined whether these tenements contain reserves that are economically recoverable. The recoverability of costs incurred for acquisition and exploration of the property will be dependent upon the discovery of economically recoverable reserves, confirmation of VAC’s interests in the underlying properties, the ability of VAC to obtain the necessary financing to satisfy the expenditure requirements and to complete the development of the property and upon future production or proceeds for the sale thereof.

As a result of the Share Exchange and Split Off, the Company succeeded to the business of VAC as its sole line of business.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The accompanying unaudited interim financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and with the rules and regulations of the United States Securities and Exchange Commission (“SEC”) to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. Unaudited interim results are not necessarily indicative of the results for the full year. These unaudited interim financial statements should be read in conjunction with the financial statements of the Company for the fiscal year ended June 30, 2009 and notes thereto contained in the information filed as part of the Company’s Annual Report on Form 10-K filed on August 7, 2009.

The consolidated financial statements include all the accounts of the Company and VAC as of March 31, 2010 and 2009 and for the interim periods then ended. All inter-company balances and transactions have been eliminated.

Exploration stage company

The Company is an exploration stage company as defined by section 915-10-20 of the FASB Accounting Standards Codification. The Company is still devoting substantially all of its efforts on establishing the business and its planned principal operations have not commenced. All losses accumulated since inception have been considered as part of the Company’s exploration stage activities.

F-8

Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Fiscal year end

The Company elected June 30 as its fiscal year ending date.

Cash equivalents

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

Mineral property and related mineral rights - bauxite claims

The Company follows topic 930 and subtopic 720-15 of the FASB Accounting Standards Codification for its mineral property and related mineral rights - bauxite claims. Mineral property and related mineral rights acquisition costs are capitalized pending determination of whether the drilling has found proved reserves. If a mineral ore body is discovered, capitalized costs will be amortized on a unit-of-production basis following the commencement of production. Otherwise, capitalized acquisition costs are expensed when it is determined that the mineral property has no future economic value. Exploration costs, including rights of access to lands for geophysical work and salaries, equipment, and supplies for geologists and geophysical crews are expensed as incurred. When it is determined that a mining deposit can be economically and legally extracted or produced based on established proven and probable reserves, further exploration costs and development costs as well as interest costs relating to exploration and development projects that require greater than six (6) months to be readied for their intended use incurred after such determination will be capitalized. The establishment of proven and probable reserves is based on results of final feasibility studies which indicate whether a property is economically feasible. Upon commencement of commercial production, capitalized costs will be transferred to the appropriate asset categories and amortized on a unit-of-production basis. Capitalized costs, net of salvage values, relating to a deposit which is abandoned or considered uneconomic for the foreseeable future will be written off. Upon becoming fully amortized, the related cost and accumulated amortization are removed from the accounts. The sale of a partial interest in a proved property is accounted for as a cost recovery and no gain or loss is recognized as long as this treatment does not significantly affect the unit-of-production amortization rate. A gain or loss will be recognized for all other sales of proved properties and will be classified in other operating revenues. Maintenance and repairs are charged to expense, and renewals and betterments are capitalized to the appropriate property and equipment accounts.

F-9

The provision for depreciation, depletion and amortization (“DD&A”) of mineral properties is calculated on a property-by-property basis using the unit-of-production method. Taken into consideration in the calculation of DD&A are estimated future dismantlement, restoration and abandonment costs, which are net of estimated salvage values.

Impairment of long-lived assets

The Company has adopted paragraph 360-10-35-17 of the FASB Accounting Standards Codification for its long-lived assets. The Company’s long-lived assets, which include mineral property and related mineral rights, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

The Company assesses the recoverability of its long-lived assets by comparing the projected undiscounted net cash flows associated with the related long-lived asset or group of long-lived assets over their remaining estimated useful lives against their respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets. Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. If long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives.

The Company periodically reviews its proved mineral properties for impairment whenever events and circumstances indicate a decline in the recoverability of their carrying value may have occurred. The Company estimates the expected undiscounted future cash flows of its mineral properties and compares such undiscounted future cash flows to the carrying amount of the mineral properties to determine if the carrying amount is recoverable. If the carrying amount exceeds the estimated undiscounted future cash flows, the Company will adjust the carrying amount of the mineral properties to fair value. The factors used to determine fair value include, but are not limited to, recent sales prices of comparable properties, estimates of proved reserves, future commodity pricing, future production estimates, anticipated capital expenditures, and a discount rate commensurate with the risk associated with realizing the expected cash flows projected.

Unevaluated properties are assessed periodically on a property-by-property basis and any impairment in value is charged to expense. If the unevaluated properties are subsequently determined to be productive, the related costs are transferred to proved mineral properties. Proceeds from sales of partial interests in unproved leases are accounted for as a recovery of cost without recognizing any gain until all costs are recovered.

F-10

The Company determined that there were no impairments of long-lived assets as of March 31, 2010 or June 30, 2009.

Fair value of financial instruments

The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

Level 1		Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
Level 2		Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
Level 3		Pricing inputs that are generally observable inputs and not corroborated by market data.

The carrying amounts of the Company’s financial assets and liabilities, such as cash and accrued expenses, approximate their fair values because of the short maturity of these instruments.

The Company does not have any assets or liabilities measured at fair value on a recurring or a non-recurring basis, consequently, the Company did not have any fair value adjustments for assets and liabilities measured at fair value at March 31, 2010 or December 31, 2009, nor gains or losses are reported in the statement of operations that are attributable to the change in unrealized gains or losses relating to those assets and liabilities still held at the reporting date for the interim period ended March 31, 2010, 2009 or for the period from June 11, 2008 (inception) through March 31, 2010.

Revenue recognition

The Company applies paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.

F-11

The Company will derive its revenue from sales contracts with customers with revenues being generated upon the shipment of mineral ores upon the Company commencing exploration operations. Persuasive evidence of an arrangement is demonstrated via invoice, product delivery is evidenced by warehouse shipping log as well as a signed bill of lading from the trucking company or third party carrier and title transfers upon shipment, based on free on board (“FOB”) warehouse; the sales price to the customer is fixed upon acceptance of the purchase order and there is no separate sales rebate, discount, or volume incentive.

Stock-based compensation for obtaining employee services and equity instruments issued to parties other than employees for acquiring goods or services

The Company accounts for its stock based compensation in which the Company obtains employee services in share-based payment transactions under the recognition and measurement principles of the fair value recognition provisions of section 718-10-30 of the FASB Accounting Standards Codification and accounts for equity instruments issued to parties other than employees for acquiring goods or services under guidance of section 505-50-30 of the FASB Accounting Standards Codification. Pursuant to paragraph 718-10-30-6 of the FASB Accounting Standards Codification, all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the third-party performance is complete or the date on which it is probable that performance will occur.

Income taxes

The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification. Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of operations in the period that includes the enactment date.

The Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”). Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of Section 740-10-25.

F-12

Net loss per common share

Net loss per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by dividing net loss by the weighted average number of shares of common stock and potentially outstanding shares of common stock during each period. There were 20,000,000 options and 3,745,767 warrants outstanding as of March 31, 2010, which were excluded from the calculation because their effect would be anti-dilutive. There were no potential dilutive shares outstanding as of March 31, 2009.

Recently issued accounting pronouncements

In June 2003, the Securities and Exchange Commission (“SEC”) adopted final rules under Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”), as amended by SEC Release No. 33-9072 on October 13, 2009. Commencing with its annual report for the year ending June 30, 2010, the Company will be required to include a report of management on its internal control over financial reporting. The internal control report must include a statement

of management’s responsibility for establishing and maintaining adequate internal control over its financial reporting;

of management’s assessment of the effectiveness of its internal control over financial reporting as of year end; and

of the framework used by management to evaluate the effectiveness of the Company’s internal control over financial reporting.

Furthermore, it is required to file the auditor’s attestation report separately on the Company’s internal control over financial reporting on whether it believes that the Company has maintained, in all material respects, effective internal control over financial reporting.

In January 2010, the FASB issued the FASB Accounting Standards Update No. 2010-01 “Equity Topic 505 – Accounting for Distributions to Shareholders with Components of Stock and Cash”, which clarify that the stock portion of a distribution to shareholders that allows them to elect to receive cash or stock with a potential limitation on the total amount of cash that all shareholders can elect to receive in the aggregate is considered a share issuance that is reflected in EPS prospectively and is not a stock dividend for purposes of applying Topics 505 and 260 (Equity and Earnings Per Share (“EPS”)). Those distributions should be accounted for and included in EPS calculations in accordance with paragraphs 480-10-25- 14 and 260-10-45-45 through 45-47 of the FASB Accounting Standards codification. The amendments in this Update also provide a technical correction to the Accounting Standards Codification. The correction moves guidance that was previously included in the Overview and Background Section to the definition of a stock dividend in the Master Glossary. That guidance indicates that a stock dividend takes nothing from the property of the corporation and adds nothing to the interests of the stockholders. It also indicates that the proportional interest of each shareholder remains the same, and is a key factor to consider in determining whether a distribution is a stock dividend.

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In January 2010, the FASB issued the FASB Accounting Standards Update No. 2010-02 “Consolidation Topic 810 – Accounting and Reporting for Decreases in Ownership of a Subsidiary – a Scope Clarification”, which provides amendments to Subtopic 810-10 and related guidance within U.S. GAAP to clarify that the scope of the decrease in ownership provisions of the Subtopic and related guidance applies to the following:

A subsidiary or group of assets that is a business or nonprofit activity

A subsidiary that is a business or nonprofit activity that is transferred to an equity method investee or joint venture

An exchange of a group of assets that constitutes a business or nonprofit activity for a noncontrolling interest in an entity (including an equity method investee or joint venture).

The amendments in this Update also clarify that the decrease in ownership guidance in Subtopic 810-10 does not apply to the following transactions even if they involve businesses:

Sales of in substance real estate. Entities should apply the sale of real estate guidance in Subtopics 360-20 (Property, Plant, and Equipment) and 976-605 (Retail/Land) to such transactions.

Conveyances of oil and gas mineral rights. Entities should apply the mineral property conveyance and related transactions guidance in Subtopic 932-360 (Oil and Gas-Property, Plant, and Equipment) to such transactions.

If a decrease in ownership occurs in a subsidiary that is not a business or nonprofit activity, an entity first needs to consider whether the substance of the transaction causing the decrease in ownership is addressed in other U.S. GAAP, such as transfers of financial assets, revenue recognition, exchanges of nonmonetary assets, sales of in substance real estate, or conveyances of oil and gas mineral rights, and apply that guidance as applicable. If no other guidance exists, an entity should apply the guidance in Subtopic 810-10.

Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements.

NOTE 3 - GOING CONCERN

As reflected in the accompanying consolidated financial statements, the Company had a deficit accumulated during the exploration stage of $1,533,121 and a working capital deficit of $2,049,824 at March 31, 2010, respectively, and had a net loss of $99,881 for the six month interim period ended March 31, 2010, with no revenues earned since inception.

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While the Company is attempting to commence operations and generate revenues, the Company’s cash position may not be significant enough to support the Company’s daily operations. Management intends to raise additional funds by way of a public or private offering. Management believes that the actions presently being taken to further implement its business plan and generate revenues provide the opportunity for the Company to continue as a going concern. While the Company believes in the viability of its strategy to generate revenues and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate revenues.

The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

NOTE 4 - STOCKHOLDERS’ EQUITY

Common Stock

On September 11, 2008, the shareholders of the Company authorized a 1 for 6.1728395 forward stock split. All share and per share data in the financial statements and related notes have been restated to give retroactive effect to the reverse stock split.

Issuance of Common Stock for Financing

On September 12, 2008, the Company completed a private placement, pursuant to which 3,631,430 shares of common stock and five-year warrants to purchase 3,631,430 shares of common stock were issued at an initial exercise price of $1.00 per share for aggregate net proceeds of $1,271,000 (the Private Placement”). All costs associated with the Share Exchange, other than financing related costs in connection with Private Placement, were expensed as incurred.

Stock Options

On September 12, 2008, stockholders of the Company approved, by majority written consent, the adoption of the 2008 Stock Incentive Plan (the “Plan”). Under the Plan, 40,000,000 shares of common stock are reserved for the issuance of incentive stock options, non-qualified stock options, stock appreciation rights, performance shares, restricted stock and long term incentive awards. The purpose of the plan is to provide an incentive to attract and retain officers, consultants, advisors and employees whose services are considered valuable, as well as to stimulate an active interest of such persons into our development and financial success.

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On September 12, 2008, Holdings granted to Australian Gemstone Mining Services Pty Ltd, its management services company ("AGM"), immediately vesting five-year options to purchase an aggregate of 20,000,000 shares of Holdings' common stock, at an exercise price of $1.00 per share, under such plan. In addition, Holdings has agreed to grant to L'Hayyim Pty Ltd warrants (the "Management Incentive Warrants") to purchase up to an aggregate of 100,000,000 shares of Holdings' common stock upon achieving certain major milestones. The Management Incentive Warrants shall vest, with respect to 20% of the shares, upon independent verification of inferred resources of at least 100 million, 200 million, 300 million, 400 million and 500 million tons of bauxite at VAC's tenement in accordance with standards prescribed in Australia by the Joint Ore Reserves Committee ("JORC"). To the extent vested, the Management Incentive Warrants will be exercisable for five years after the applicable vesting date at an exercise price of $1.00 per share.

The fair value of the options issued to AGM, valued using the Black-Scholes valuation model, on the date of issuance, was $420,000.

NOTE 5 - COMMITMENTS AND CONTINGENCIES

The Company has an obligation to pay the vendors of Volcan Australia Pty Ltd an amount of $1,500,000 as additional consideration in relation to the acquisition of that entity.

The Company acquired Volcan Australia Pty Ltd in exchange for 90,000,000 newly issued shares of common stock together with Volcan’s right to receive $1,500,000 in cash at the end of any fiscal quarter in which the Company has cash on hand of at least $5,000,000.

Management Services Agreement

The Company has entered into a Management Services Agreement with Australian Gemstone Mining Services Pty Ltd, a company owned and controlled by Pnina Feldman, a member of the Board.

The Management Services Agreement was entered into as of 1 July 2008, pursuant to which 4 individuals (each a key person) provide executive and corporate services, including geological and technical expertise, to the Company.

During the term of the Management Services Agreement the Company will pay a retainer of $175,000 per annum with respect to each key person, being the two chief geoscientists and the two executive directors for an aggregate amount of $700,000 per annum. However, the directors of Australian Gemstone Mining Services Pty Ltd have agreed not to take any payment for the two executive directors until further funds are raised and the Project has an independently verified resource statement completed.

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The Company is not required to pay any additional fees, including director’s fees, to Australian Gemstone Mining Services Pty Ltd or the key persons personally with respect to the services to be provided by the key persons.

The Agreement also requires that Australian Gemstone Mining Services Pty Ltd provides the Company with suitable fully serviced offices. The Company has obtained rights to shared office space for an amount of $14,500 per month. The directors have agreed to accept only 50% of this amount per month until further funds are raised and the Project has an independently verified resource statement verified.

Australian Gemstone Mining Services Pty Ltd may also provide additional administrative services to the Company, such as secretarial, accounting and office management services. These services will be provided on reasonable arm's-length terms as approved by the Company's independent directors.

During the quarter the following amounts have been paid, or are payable to, Australian Gemstone Mining Services Pty Ltd in accordance with the Agreement:

Paid at March 31, 2010	$373,440

Payable during the next 12 months from the balance date for:
General and administrative expenses	$440,000
Executive officers services	$350,000

Finders Agreement

On June 24, 2009, the Company entered into a Finders Agreement with GDR Privee, Inc. (GDR). GDR shall provide the Company with the names and contact information for investors that it believes may be interested in purchasing the securities of the Company.

In addition to the issuance of 250,000 shares of Company common stock, the Company shall, upon the closing of each sale of securities to a Designated Investor (a "Closing"), pay to GDR in immediately available funds a cash fee equal to (i) five percent (5%) of the gross proceeds from the sale of equity securities to a Designated Investor and (ii) one and one-half percent (1.5%) of the gross proceeds from any sale of debt securities to a Designated Investor; provided, however, that, at the option of GDR, the Company shall pay GDR the foregoing compensation by issuing GDR shares of common stock (in lieu of cash), with each share of common stock being valued at the price per share of any common stock sold to Designated Investors at such Closing.

NOTE 6 - SUBSEQUENT EVENTS

The Company has evaluated all events that occur after the balance sheet date as of March 31, 2010 through May 24, 2010, the date when the financial statements were issued to determine if they must be reported. The Management of the Company determined that there were two reportable subsequent events to be disclosed as follows:

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On April 22, 2010, the Company issued warrants to purchase up to 800,000 shares of its common stock at an exercise price of $1.000 per share to GDR Privee Inc.; warrants to purchase up to 100,000 shares of its common stock at an exercise price of $1.000 per share to Suzan Mazur; and warrants to purchase up to 100,000 shares of its common stock at an exercise price of $1.000 per share to Leonard Barenbaum, for the introduction of the Company to Qantum Mines and Minerals Fund.

On April 27, 2010, the Company issued 2,600,000 shares of its common stock, par value $0.001 per share, to EPFC Trust Company, and on May 13, 2010, the Company issued warrants to purchase up to 2,600,000 shares of its common stock at an exercise price of $1.000 per share, pursuant to and as remuneration for the completion of a mining and engineering study performed by Triad Engineering arranged by the Qantum Mines and Minerals Fund.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

We are a mineral exploration company that intends to explore prospective bauxite deposits in New South Wales, Australia and Queensland, Australia. We are in the exploration stage, have not generated any revenue to date and do not anticipate doing so in the near future. Our inception for accounting purposes was June 11, 2008.

Critical Accounting Policies

Exploration stage company. We are an exploration stage company as defined by section 915-10-20 of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification. We are still devoting substantially all of our efforts to establishing our business and its planned principal operations have not commenced. All losses accumulated since inception have been considered as part of our exploration stage activities.

Use of Estimates. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Fiscal Year End. We elected June 30 as our fiscal year ending date.

Cash Equivalents. We consider all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

Mineral Property and Related Mineral Rights - Bauxite Claims. We follow topic 930 and subtopic 720-15 of the FASB Accounting Standards Codification for our mineral property and related mineral rights - bauxite claims. Mineral property and related mineral rights acquisition costs are capitalized pending determination of whether the drilling has found proved reserves. If a mineral ore body is discovered, capitalized costs will be amortized on a unit-of-production basis following the commencement of production. Otherwise, capitalized acquisition costs are expensed when it is determined that the mineral property has no future economic value. Exploration costs, including rights of access to lands for geophysical work and salaries, equipment, and supplies for geologists and geophysical crews are expensed as incurred. When it is determined that a mining deposit can be economically and legally extracted or produced based on established proven and probable reserves, further exploration costs and development costs as well as interest costs relating to exploration and development projects that require greater than six (6) months to be readied for their intended use incurred after such determination will be capitalized. The establishment of proven and probable reserves is based on results of final feasibility studies which indicate whether a property is economically feasible. Upon commencement of commercial production, capitalized costs will be transferred to the appropriate asset categories and amortized on a unit-of-production basis. Capitalized costs, net of salvage values, relating to a deposit which is abandoned or considered uneconomic for the foreseeable future will be written off. Upon becoming fully amortized, the related cost and accumulated amortization are removed from the accounts. The sale of a partial interest in a proved property is accounted for as a cost recovery and no gain or loss is recognized as long as this treatment does not significantly affect the unit-of-production amortization rate. A gain or loss will be recognized for all other sales of proved properties and will be classified in other operating revenues. Maintenance and repairs are charged to expense, and renewals and betterments are capitalized to the appropriate property and equipment accounts.

Impairment of Long-Lived Assets. We have adopted paragraph 360-10-35-17 of the FASB Accounting Standards Codification for our long-lived assets. Our long-lived assets, which include mineral property and related mineral rights, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

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We assess the recoverability of our long-lived assets by comparing the projected undiscounted net cash flows associated with the related long-lived asset or group of long-lived assets over their remaining estimated useful lives against their respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets. Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. If long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives.

We periodically review our proved mineral properties for impairment whenever events and circumstances indicate a decline in the recoverability of their carrying value may have occurred. We estimate the expected undiscounted future cash flows of our mineral properties and compare such undiscounted future cash flows to the carrying amount of the mineral properties to determine if the carrying amount is recoverable. If the carrying amount exceeds the estimated undiscounted future cash flows, we will adjust the carrying amount of the mineral properties to fair value. The factors used to determine fair value include, but are not limited to, recent sales prices of comparable properties, estimates of proved reserves, future commodity pricing, future production estimates, anticipated capital expenditures, and a discount rate commensurate with the risk associated with realizing the expected cash flows projected.

We determined that there were no impairments of long-lived assets as of March 31, 2010 or 2009.

Fair value of financial instruments. We follow paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States (“U.S. GAAP”), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

Level 1: Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.

Level 2: Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.

Level 3: Pricing inputs that are generally observable inputs and not corroborated by market data.

The carrying amounts of our financial assets and liabilities, such as cash, other receivables, loans receivable, deposits and accounts payable, advances from shareholder, loans payable and common stock to be issued, approximate their fair values because of the short maturity of these instruments. Our loans receivable, and loans payable approximate the fair value of such instruments based upon management’s best estimate of interest rates that would be available to us for similar financial arrangements at March 31, 2010.

We do not have any assets or liabilities measured at fair value on a recurring or a non-recurring basis. Consequently, we did not have any fair value adjustments for assets and liabilities measured at fair value at March 31, 2010 or December 31, 2009, nor gains or losses are reported in the statement of operations that are attributable to the change in unrealized gains or losses relating to those assets and liabilities still held at the reporting date for the interim period ended March 31, 2010, or for the period from June 11, 2008 (inception) through March 31, 2010.

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Revenue Recognition. We apply paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. We recognize revenue when it is realized or realizable and earned. We consider revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable and (iv) collectability is reasonably assured.

We will derive our revenue from sales contracts with customers with revenues being generated upon the shipment of mineral ores upon our commencement of mining operations. Persuasive evidence of an arrangement is demonstrated via invoice, product delivery is evidenced by warehouse shipping log as well as a signed bill of lading from the trucking company or third party carrier and title transfers upon shipment, based on free on board (“FOB”) warehouse; the sales price to the customer is fixed upon acceptance of the purchase order and there is no separate sales rebate, discount, or volume incentive.

Stock-based Compensation. We account for our stock based compensation in which we obtain employee services in share-based payment transactions under the recognition and measurement principles of the fair value recognition provisions of section 718-10-30 of the FASB Accounting Standards Codification and account for equity instruments issued to parties other than employees for acquiring goods or services under guidance of section 505-50-30 of the FASB Accounting Standards Codification. Pursuant to paragraph 718-10-30-6 of the FASB Accounting Standards Codification, all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the third-party performance is complete or the date on which it is probable that performance will occur.

Income Taxes. We account for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification. Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of operations in the period that includes the enactment date.

We adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”). Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under Section 740-10-25, we may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. We had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of Section 740-10-25.

Net Loss per Common Share. Net loss per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by dividing net loss by the weighted average number of shares of common stock and potentially outstanding shares of common stock during each period. There were 20,000,000 options and 6,345,767 warrants outstanding as of March 31, 2010, which were excluded from the calculation because their effect would be anti-dilutive. There were no potential dilutive shares outstanding as of March 31, 2009.

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Financial Statement Impact of these Critical Accounting Policies and Estimates. We are still in the exploration stage and have had nominal operations to date. These critical policies and estimates have not materially impacted our financial statements given our limited operations.

There has been no change in any critical policies or estimates since our inception.

Results of Operations

Period Ended March 31, 2010

Revenues. For the three and nine months ended March 31, 2010 and 2009, we did not recognize any revenue.

Expenses. For the three months ended March 31, 2010, we incurred $140,175 in expenses, which consisted of professional fees of $57,514 and general and administrative expenses of $82,661 For the three months ended March 31, 2009, we incurred $192,954 in expenses, professional fees of $43,530 and general and administrative expenses of $149,424. For the nine months ended March 31, 2010, we incurred $576,968 in expenses, professional fees of $298,562 and general and administrative expenses of $278,406 For the nine months ended March 31, 2009, we incurred $1,065,628 in expenses, which consisted of officers’compensation of $420,000, professional fees of $972,202 and general and administrative expenses of $348,426.

Income Tax Expense. For the three and nine months ended March 31, 2010 and March 31, 2009, we did not recognize any income tax expense.

Accounts Payable. For the nine months ended March 31, 2010, we had accounts payable of approximately $2,261,538 as compared to approximately $1,564,199 for the fiscal year ended June 30, 2009. The accounts payable for both periods consisted of amounts due to a related party, Australian Gemstone Mining Services Pty Ltd (“AGM”), for the purchase of exploration and prospecting information and administration services. These amounts largely related to work done by AGM’s geological team in exploring our tenements and exploring opportunities. The reimbursement of these amounts are important to retain the geological expertise that is currently available to us for our future development of our projects, which require specialist expert knowledge of this particular area and geology. The geological team is mindful of our current cash position and therefore has agreed to a staggered payment plan that our directors believe will not materially affect our ability to carry out our initial objectives in securing an independent verification of inferred JORC resources on our tenements. It is the view of our directors, that such a resource statement should in normal market conditions make us eligible for larger institutional funding.

Liquidity and Capital Resources

We had cash or cash equivalents of $100,525 at March 31, 2010. For the fiscal year ended June 30, 2009, we had cash and cash equivalents of $92,062. Based on our cash flow projections, we believe that we have sufficient cash to satisfy our cash needs for approximately three months. We may need to raise additional capital of at least $250,000 to enable us to have sufficient capital liquidity to complete the initial field program to a level where we should be able to secure an independent resource statement to JORC standard. We anticipate that Plateau Bauxite Limited, which has the right to acquire up to 25% of certain of our tenements and with respect to which have a non-controlling interest, to continue to contribute funds towards the initial field programs. If we are unable to raise additional funds on a timely basis or at all, any progress with respect to our exploration activities may be adversely affected.

Over the next twelve months, provided we are able to raise sufficient funds, we intend to make the following expenditures in connection with exploring the geology of our tenement holdings:

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·	Aerial photo and remote data interpretation. We intend to spend approximately $130,000 to conduct and interpret airborne and/or satellite surveys of our proposed tenement holdings.

·	High resolution image based mapping and target selection. We intend to spend approximately $200,000 to conduct ground-based geological mapping and target selection of the bauxite and other mineral deposits on our proposed tenement holdings.

·	Drilling, sampling and sub-surface mapping. We intend to spend approximately $6,600,000 million to perform drilling and sampling of bauxite deposits that we identify on our tenement holdings.

·	Bulk sampling of identified bauxite deposits. We intend to spend approximately $700,000 to conduct bulk sampling of bauxite deposits that we identify on our proposed tenement holdings.

Payment to Shareholder. Pursuant to the terms of a share exchange agreement, pursuant to which we acquired all of the outstanding capital stock of Volcan Australia Corporation Pty Ltd., we have agreed to pay $1.5 million to L'Hayyim Pty Ltd as trustee for The L'Hayyim Trust, our principal shareholder, at the end of the first fiscal quarter in which we have cash on hand of at least $5 million. This may be possible through the success of the our joint venture with Plateau Bauxite Limited where pursuant to our agreement, upon varying levels of exploration success, Plateau Bauxite will invest in us up to potentially approximately $20M to earn an interest in the many tenements owned by us.

Related Party Transaction. We have paid approximately $150,000 to AGM for the provision of exploration and prospecting information. The remaining funds will be paid when more funds are raised, and/or when our liquidity allows.

Other expected uses of proceeds. Our other expected uses of cash during the next twelve months are for our general and administrative expenses, including approximately $480,000 of payments to AGM pursuant to our Management Services Agreement for rent, the wages of the expert geological team and their basic office expenses. In addition, we are obligated to pay AGM an additional $380,000 for the services of our executive officers. Finally, we are obligated to make payments to one of our directors in the amount of $50,000 per year. To date, in light of our current financial situation, AGM has agreed to defer any payments to it with respect to the services of our officers. In addition, the director has agreed to defer any payments owed to him until our liquidity situation improves.

To the extent our cash on hand, together with any cash we are able to raise in the future, does not cover the amount of our planned expenditures above, the expenditures listed above will be reduced pro rata.

We do not expect any purchases of plant and equipment we make during fiscal 2010 to be material. Nor do we intend to engage in any material sales and marketing efforts during such period. As our prospects are in the early exploration phase, we do not anticipate generating any revenues from operations for several years, if ever. We may also consider selling some or all of our projects if management determines that an appropriate price can be obtained.

Off-Balance Sheet Arrangements

We did not engage in any off balance sheet arrangements during the nine months ended March 31, 2010 and 2009.

Recent Accounting Pronouncements

In June 2003, the Securities and Exchange Commission (“SEC”) adopted final rules under Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”), as amended by SEC Release No. 33-9072 on October 13, 2009. Under the provisions of Section 404, public companies and their independent auditors are each required to report to the public on the effectiveness of a company’s internal controls. The smallest public companies with a public float below $75 million have been given extra time to design, implement and document these internal controls before their auditors are required to attest to the effectiveness of these controls. This extension of time will expire beginning with the annual reports of companies with fiscal years ending on or after June 15, 2010. Commencing with our annual report for the year ending June 30, 2010, we will be required to include a report of management on our internal control over financial reporting. The internal control report must include a statement:

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·	of management’s responsibility for establishing and maintaining adequate internal control over our financial reporting;
·	of management’s assessment of the effectiveness of our internal control over financial reporting as of year end; and

·	of the framework used by management to evaluate the effectiveness of our internal control over financial reporting.

Furthermore, we are required to file the auditor’s attestation report separately on our internal control over financial reporting on whether it believes that we have maintained, in all material respects, effective internal control over financial reporting.

In June 2009, the FASB approved the FASB Accounting Standards Codification as the single source of authoritative nongovernmental U.S. GAAP to be launched on July 1, 2009. The FASB Accounting Standards Codification does not change current U.S. GAAP, but is intended to simplify user access to all authoritative U.S. GAAP by providing all the authoritative literature related to a particular topic in one place. All existing accounting standard documents will be superseded and all other accounting literature not included in the FASB Accounting Standards Codification will be considered non-authoritative. The FASB Accounting Standards Codification is effective for interim and annual periods ending after September 15, 2009. The adoption of this standard did not have a material impact on our consolidated financial position, results of operations or cash flows.

In August 2009, the FASB issued the FASB Accounting Standards Update No. 2009-04 “Accounting for Redeemable Equity Instruments - Amendment to Section 480-10-S99” which represents an update to section 480-10-S99, distinguishing liabilities from equity, per EITF Topic D-98, Classification and Measurement of Redeemable Securities. We do not expect the adoption of this update to have a material impact on our consolidated financial position, results of operations or cash flows.

In August 2009, the FASB issued the FASB Accounting Standards Update No. 2009-05 “Fair Value Measurement and Disclosures Topic 820 – Measuring Liabilities at Fair Value”, which provides amendments to subtopic 820-10, Fair Value Measurements and Disclosures – Overall, for the fair value measurement of liabilities. This Update provides clarification that in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using one or more of the following techniques: 1. A valuation technique that uses: a. The quoted price of the identical liability when traded as an asset b. Quoted prices for similar liabilities or similar liabilities when traded as assets. 2. Another valuation technique that is consistent with the principles of topic 820; two examples would be an income approach, such as a present value technique, or a market approach, such as a technique that is based on the amount at the measurement date that the reporting entity would pay to transfer the identical liability or would receive to enter into the identical liability. The amendments in this Update also clarify that when estimating the fair value of a liability, a reporting entity is not required to include a separate input or adjustment to other inputs relating to the existence of a restriction that prevents the transfer of the liability. The amendments in this Update also clarify that both a quoted price in an active market for the identical liability when traded as an asset in an active market when no adjustments to the quoted price of the asset are required are Level 1 fair value measurements. We do not expect the adoption of this update to have a material impact on our consolidated financial position, results of operations or cash flows.

In September 2009, the FASB issued the FASB Accounting Standards Update No. 2009-08 “Earnings Per Share – Amendments to Section 260-10-S99”,which represents technical corrections to topic 260-10-S99, Earnings per share, based on EITF Topic D-53, Computation of Earnings Per Share for a Period that includes a Redemption or an Induced Conversion of a Portion of a Class of Preferred Stock and EITF Topic D-42, The Effect of the Calculation of Earnings per Share for the Redemption or Induced Conversion of Preferred Stock. We do not expect the adoption of this update to have a material impact on our consolidated financial position, results of operations or cash flows.

In September 2009, the FASB issued the FASB Accounting Standards Update No. 2009-09 “Accounting for Investments-Equity Method and Joint Ventures and Accounting for Equity-Based Payments to Non-Employees”. This Update represents a correction to Section 323-10-S99-4, Accounting by an Investor for Stock-Based Compensation Granted to Employees of an Equity Method Investee. Additionally, it adds observer comment Accounting Recognition for Certain Transactions Involving Equity Instruments Granted to Other Than Employees to the Codification. We do not expect the adoption to have a material impact on our consolidated financial position, results of operations or cash flows.

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In September 2009, the FASB issued the FASB Accounting Standards Update No. 2009-12 “Fair Value Measurements and Disclosures Topic 820 – Investment in Certain Entities That Calculate Net Assets Value Per Share (or Its Equivalent)”, which provides amendments to Subtopic 820-10, Fair Value Measurements and Disclosures-Overall, for the fair value measurement of investments in certain entities that calculate net asset value per share (or its equivalent). The amendments in this Update permit, as a practical expedient, a reporting entity to measure the fair value of an investment that is within the scope of the amendments in this Update on the basis of the net asset value per share of the investment (or its equivalent) if the net asset value of the investment (or its equivalent) is calculated in a manner consistent with the measurement principles of Topic 946 as of the reporting entity’s measurement date, including measurement of all or substantially all of the underlying investments of the investee in accordance with Topic 820. The amendments in this Update also require disclosures by major category of investment about the attributes of investments within the scope of the amendments in this Update, such as the nature of any restrictions on the investor’s ability to redeem its investments a the measurement date, any unfunded commitments (for example, a contractual commitment by the investor to invest a specified amount of additional capital at a future date to fund investments that will be make by the investee), and the investment strategies of the investees. The major category of investment is required to be determined on the basis of the nature and risks of the investment in a manner consistent with the guidance for major security types in U.S. GAAP on investments in debt and equity securities in paragraph 320-10-50-1B. The disclosures are required for all investments within the scope of the amendments in this Update regardless of whether the fair value of the investment is measured using the practical expedient. We do not expect the adoption to have a material impact on our consolidated financial position, results of operations or cash flows.

In January 2010, the FASB issued the FASB Accounting Standards Update No. 2010-01 “Equity Topic 505 – Accounting for Distributions to Shareholders with Components of Stock and Cash”, which clarifies that the stock portion of a distribution to shareholders that allows them to elect to receive cash or stock with a potential limitation on the total amount of cash that all shareholders can elect to receive in the aggregate is considered a share issuance that is reflected in EPS prospectively and is not a stock dividend for purposes of applying Topics 505 and 260 (Equity and Earnings Per Share (“EPS”)). Those distributions should be accounted for and included in EPS calculations in accordance with paragraphs 480-10-25- 14 and 260-10-45-45 through 45-47 of the FASB Accounting Standards codification. The amendments in this Update also provide a technical correction to the Accounting Standards Codification. The correction moves guidance that was previously included in the Overview and Background Section to the definition of a stock dividend in the Master Glossary. That guidance indicates that a stock dividend takes nothing from the property of the corporation and adds nothing to the interests of the stockholders. It also indicates that the proportional interest of each shareholder remains the same, and is a key factor to consider in determining whether a distribution is a stock dividend.

1.	A subsidiary or group of assets that is a business or nonprofit activity;

2.	A subsidiary that is a business or nonprofit activity that is transferred to an equity method investee or joint venture; and

3.	An exchange of a group of assets that constitutes a business or nonprofit activity for a noncontrolling interest in an entity (including an equity method investee or joint venture).

The amendments in this Update also clarify that the decrease in ownership guidance in Subtopic 810-10 does not apply to the following transactions even if they involve businesses:

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1.	Sales of in substance real estate. Entities should apply the sale of real estate guidance in Subtopics 360-20 (Property, Plant, and Equipment) and 976-605 (Retail/Land) to such transactions.

2.	Conveyances of oil and gas mineral rights. Entities should apply the mineral property conveyance and related transactions guidance in Subtopic 932-360 (Oil and Gas-Property, Plant, and Equipment) to such transactions.

We do not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements.

Certain Risks and Uncertainties

Certain statements in this Quarterly Report on Form 10-Q, including certain statements contained in “Management’s Discussion and Analysis,” constitute forward-looking statements. The words or phrases “can be,” “may,” “could,” “would,” “expects,” “believes,” “seeks,” “estimates,” “projects” and similar words and phrases are intended to identify such forward-looking statements. Such forward-looking statements are subject to various risks and uncertainties. Any forward-looking information provided by us or on our behalf is not a guarantee of future performance. Our actual results could differ materially from those anticipated by such forward-looking statements due to a number of factors, some of which are beyond our control. All such forward-looking statements are current only as of the date on which such statements were made. We do not undertake any obligation to publicly update any forward-looking statement to reflect events or circumstances after the date on which any such statement is made or to reflect the occurrence of unanticipated events.

Item 4T.

Controls and Procedures.

Under the supervision and with the participation of our management, including the Chief Executive Officer and Treasurer, we have evaluated the effectiveness of our disclosure controls and procedures as required by Rule 13a-15(b) of the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Treasurer have concluded that these disclosure controls and procedures are effective. There were no changes in our internal control over financial reporting during the quarter ended March 31, 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

On April 27, 2010, we entered into a letter agreement (the “Agreement”) with Triad Engineering (“Triad”) and EPFC (“EPFC”), a designee of Triad, pursuant to which we issued to EPFC, as compensation for a project report conducted by Triad, 2,600,000 shares of our common stock (the “Shares”) and a five-year warrant (the “Warrant”) to purchase up to 2,600,000 shares of our common stock at an exercise price of $1.00 per share. For a period of 12 months following the date of issuance (the “Repurchase Period”), EPFC agreed not to sell, assign, transfer, exchange, or otherwise dispose of, or grant any option with respect to, the Shares, nor to create, incur or permit to exist any pledge, lien, mortgage, hypothecation, security interest, charge, option or any other encumbrance with respect to any of the Shares. In the event that we elect to repurchase the Shares during the Repurchase Period, EPFC is obligated to sell the Shares to us for an aggregate purchase price of $1,660,000.

The Warrant is exercisable for cash and contains limitations on exercise, including the limitation that the holder may not exercise its warrants to the extent that upon exercise the holder, together with its affiliates, would own in excess of 4.99% of our outstanding shares of common stock. The Shares and the Warrant were not registered under the Securities Act of 1933, as amended (the “Securities Act”), or the securities laws of any state, and were offered and sold in reliance on the exemption from registration afforded by Section 4(2) and Regulation D (Rule 506) under the Securities Act, and corresponding provisions of state securities laws, which exempt transactions by an issuer not involving any public offering.

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The foregoing is not a complete summary of the terms of the transaction described in this Item 2, and reference is made to the complete text of the Agreement and the form of warrant attached hereto as Exhibit 10.1 and Exhibit 10.2, respectively.

Item 6. Exhibits.

Exhibit No.	Description

10.1*	Letter Agreement by and among Volcan Holdings, Inc., Triad Engineering and EPFC, dated as of April 27, 2010

10.2*	Form of Warrant

31.1*	Section 302 Certification by the Principal Executive Officer

31.2*	Section 302 Certification by the Principal Accounting Officer

32.1*	Section 906 Certification by the Principal Executive Officer and Principal Accounting Officer

________________________

* Filed herewith

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		VOLCAN HOLDINGS, INC.

Date:	May 24, 2010	By:	/s/ Pnina Feldman
			Pnina Feldman
			President and Chief Executive Officer
			(Principal Executive Officer)


Date:	May 24, 2010	By:	/s/ Sholom Feldman
			Sholom Feldman
			Treasurer and Secretary
			(Principal Accounting Officer)

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EXHIBIT INDEX

Exhibit No.	Description

10.1*	Letter Agreement by and among Volcan Holdings, Inc., Triad Engineering and EPFC, dated as of April 27, 2010

10.2*	Form of Warrant

31.1*	Section 302 Certification by the Principal Executive Officer

31.2*	Section 302 Certification by the Principal Accounting Officer

32.1*	Section 906 Certification by the Principal Executive Officer and Principal Accounting Officer

________________________

* Filed herewith

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Volcan Holdings, Inc. - FORM 10-Q - May 24, 2010

Attached files

Volcan Holdings, Inc. Reports