EARTH LIFE SCIENCES INC - Quarter Report: 2008 March (Form 10-Q)

  UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2008

[  ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT

For the transition period from _________ to __________________

001-31444
(Commission File Number)

ALTUS EXPLORATIONS, INC.

(Exact name of registrant as specified in its charter)

Nevada

       98-0361119

(State or other jurisdiction of incorporation)

(IRS Employer Identification) No.)

2482 Edgemont Boulevard, North Vancouver, British Columbia, V7R 2M8

(Address of principal executive offices)

Issuer’s telephone number, including area code:  (778) 883-9951

Former name, former address and former fiscal year, if changed since last report:  N/A

Check whether the registrant (1) filed all reports required to be filed by sections 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes [  ]   No [X]

Check whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.   Large accelerated filer [   ]  Accelerated filer [   ]  Non-accelerated filed [   ]  Smaller reporting company [X]

Check whether the registrant is a shell company, as defined in Rule 12b-2 of the Exchange Act.  Yes [X]  No [  ]

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: As of March 31, 2008 the registrant’s outstanding common stock consisted of 2,328,640 shares.

PART I.     FINANCIAL INFORMATION

Item 1.    Financial Statements

ALTUS EXPLORATIONS, INC.

(A Development Stage Company)

FINANCIAL STATEMENTS

March 31, 2008

(Unaudited)

BALANCE SHEETS

STATEMENTS OF OPERATIONS

STATEMENTS OF CASH FLOWS

STATEMENTS OF SHAREHOLDERS’ DEFICIT

NOTES TO THE FINANCIAL STATEMENTS

ALTUS EXPLORATIONS, INC.
(A Development Stage Company) 
BALANCE SHEETS

The accompanying notes are an integral part of these financial statements

ALTUS EXPLORATIONS, INC.
(A Development Stage Company) 
STATEMENTS OF OPERATIONS
(Unaudited)

The accompanying notes are an integral part of these financial statements

ALTUS EXPLORATIONS, INC.
(A Development Stage Company) 
STATEMENT OF STOCKHOLDERS’ DEFICIT
March 31, 2008

The accompanying notes are an integral part of these financial statements

ALTUS EXPLORATIONS, INC.
(A Development Stage Company) 
STATEMENTS OF CASH FLOWS
(Unaudited)

The accompanying notes are an integral part of these financial statements

NOTE 1 - BASIS OF PRESENTATION 

Unaudited Interim Financial Statements

The foregoing unaudited interim financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 8-03 of Regulation S-X as promulgated by the Securities and Exchange Commission. Accordingly, these financial statements do not include all of the disclosures required by generally accepted accounting principles for complete financial statements. Except as disclosed herein, these unaudited interim financial statements should be read in conjunction with the audited financial statements for the period ended December 31, 2007 included in the Form 10-KSB. In the opinion of management, the unaudited interim financial statements furnished herein include all adjustments, all of which are of a normal recurring nature, necessary for a fair statement of the results for the interim period presented.

Going concern

These financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future.  The Company has incurred losses since inception resulting in an accumulated deficit of $6,207,848 as at March 31, 2008 and further losses are anticipated in the development of its business raising substantial doubt about the Company’s ability to continue as a going concern.  The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management intends to finance operating costs over the next twelve months with existing cash on hand and loans from directors and or private placement of common stock.  

Operating results for the three month period ended March 31, 2008 are not necessarily indicative of the results that may be expected for the year ending December 31, 2008.

NOTE 2 – CONVERTIBLE LOANS

At December 31, 2007 the Company had received advances from certain shareholders totaling $88,750 (2006 - $87,750). On March 8, 2007, the Company entered into Convertible Loan Agreements (the “Loans”) with the shareholders whose Loans matured on December 31, 2007 and required payment of all outstanding principal and interest in full on January 2, 2008.

The Loans interest rates are 12% per annum payable in arrears upon the maturity of the Loans. The Company recorded imputed interest of $10,697 during the year ended December 31, 2007 and accrued interest of $2,648 on the Loans during the three month ended March 31, 2008.

The Loans are convertible at the shareholders’ option into common stock at the lower of ten day average share price immediately preceding the date of the Loans or the ten day average common share price immediately preceding the date that a Lender provides Notice of Conversion to the Company, but in no circumstance at a conversion rate of less than $0.001 per common share. The Loans are secured by the assets of the Company, and provide that in the occurrence of certain events the Loans’ maturities are accelerated. The Company may prepay the Loans at anytime without penalty or bonus. The Company does not believe the terms of the Loans contain any provisions that would require treatment as derivatives under SFAS No. 133, “Accounting for Derivative Instruments and Hedging,” and the Emerging Issued Task Force 00-19, “Accounting for Derivative Financial Instruments.”

NOTE 2 – CONVERTIBLE LOANS (Continued)

The ten day average share price immediately preceding the date of the loan was equal to the share price on the agreement date. The conversion feature had no intrinsic value and accordingly no beneficial conversion feature was recorded.

As of March 31, 2008, the Company has not repaid the Loans, nor have the shareholders’ provided a Notice of Conversion to the Company. The Company is currently in negotiations with the shareholders to settle the Loans.

NOTE 3 – COMMON STOCK

During the year ended December 31, 2007, the Company affected a 20:1 reverse split of its issued and outstanding common stock. All share and per share balances have been retroactively restated to reflect the reverse split for all periods presented in these financial statements.

The Company entered into a subscription agreement for the issuance of 2,000,000 common shares at a price of $0.005 per share in December 2007. As at March 31, 2008, the Company received $20,000 in advance and these shares have not been issued.

NOTE 4 – STOCK OPTION PLAN

During the year ended December 31, 2004, the Company established a stock option plan pursuant to which 274,152 common shares were reserved for issuance. During the year ended December 31, 2004, the Company granted 216,250 stock options to directors, executive officers and employees and recognized $222,199 in share-based compensation expense. The options have an exercise price of $0.02 and a term of 10 years. All options were vested as of December 30, 2005.

During the three month ended March 31, 2008, no stock options were granted.

NOTE 5 – INCOME TAXES

The Company is subject to United States federal and state income taxes at an approximate rate of 34%. The reconciliation of the provision for income taxes at the United States federal statutory rate compared to the Company’s income tax expense as reported is as follows:

The amount taken into income as deferred income tax assets must reflect that portion of the income tax loss carry forwards that is more likely-than-not to be realized from future operations. The Company has chosen to provide a full valuation allowance against all available income tax loss carry forwards, regardless of their time of expiry.

NOTE 6 – SUBSEQUENT EVENT

Item 2.    Management Discussion and Analysis or Plan of Operation

Results of Operations

Three Months Ended March 31, 2008

Our net loss for the three months ended March 31, 2008 totaled $14,391. This compares with our net loss of $8,162 for the three months ended March 31, 2007.  General and administrative expenses for the three months ended March 31, 2008 and 2007 were $11,627 and $5,323, respectively.  The primary components of general and administrative expenses for the first three months of 2008 are costs associated with accounting and administrative contract labor and professional fees associated with being a public company.  The increase in general and administrative expenses from 2007 to 2008 is the result of costs increases relating to compliance costs of being a public company.

We incurred interest expense during the three months ended March 31, 2008 of $2,648, compared to $2,386 interest expense for the same period in 2007.  The interest expense was incurred due to advances made by certain shareholders in the amount of $88,750. The Company entered into Convertible Loan Agreements (the “Loans”) with these shareholders whose Loans matured on December 31, 2007 and required payment of all outstanding principal and interest in full on January 2, 2008. Interest rates are 12% per annum payable in arrears upon the maturity of the Loans. The shareholders agreed to forego interest that accrued during 2006, and provided for interest on the outstanding Loan balances to commence January 1, 2007. The Company accrued interest of $10,697 on the Loans during the year ended December 31, 2007. As of March 31, 2008, the Company has not repaid the Loans, nor have the shareholders’ provided a Notice of Conversion to the Company. The Company is in negotiations with the shareholders to settle the Loans.

During the three months ended March 31, 2008, the Company entered into a subscription agreement for the issuance of 2,000,000 post-split common shares at a price of $0.005 per share and received $10,000 in advance. The shares have yet to be issued.

The Company had no revenues for the three months ended March 31, 2008.

The company currently holds no producing assets and has no revenues.

Liquidity and Capital Resources

Natural gas and oil exploration, drilling and development activities requires substantial capital resources, and we historically have not been able to secure sufficient financing to act on oil and gas investment opportunities as they are identified.  If we are unsuccessful in obtaining financing and fail to achieve and sustain a profitable level of operations, we may be unable to fully implement our business plans or continue operations.  Future financing through equity, debt or other sources could result in the dilution of Company equity, increase our liabilities, and/or restrict the future availability and use of cash resources.  Additionally, there can be no assurance that adequate financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms.  If we are not able to obtain the additional financing on a timely basis, we will be unable to execute our business plans, and will be required to scale back the pace and magnitude of our oil and gas prospects drilling and development initiatives.  We also may not be able to meet our vendor and service provider obligations as they become due.  In such event, we will be forced to cease our operations.

Future Operations

Cash Requirements

During the twelve month period ending December 31, 2008, we project cash requirements of approximately $100,000 as we continue to restructure our activities.  Our requirements are comprised of $35,000 for general and administrative costs primarily related to professional fees associated with being a public company; and $65,000 for our screening of potential oil and gas projects and sourcing of financing to fund economically viable projects identified in connection with our screening process.

There are no assurances, however, that we will be able to raise sufficient financing to meet our needs in the future.  In the event that we are unable to raise additional financing, and fail to generate significant operating cash flow, we will be required to modify our exploration and development plan accordingly.  Should we raise funds through equity financing, debt financing, or other sources, it could result in dilution in the equity ownership of our shares.  There is still no assurance that we will be able to maintain operations at a level sufficient for an investor to obtain a return on his investment.  Further, until we are able to raise additional capital, we expect to continue to be unprofitable.

Over the next twelve months we intend to use all available funds to continue the exploration and development of oil and gas opportunities, and our estimated funding needs for the next twelve months are summarized below:

Estimated Funding Required During the Twelve Month Period Ending December 31, 2008

Product Research and Development

Our business plan is focused on the exploration and development of oil and gas interests.

We do not anticipate that we will expend any significant funds on research and development over the next twelve months ending December 31, 2008.

Purchase of Significant Equipment

We do not intend to purchase any significant equipment over the next twelve months ending December 31, 2008.

Employees

Currently we have no full-time or part-time employees.  We utilize short term contractors as necessary.  Our directors and officers provide services on a month to month basis pursuant to oral arrangements, but have not signed employment or consulting agreements with us.  We do not expect any material changes in the number of employees over the next 12 month period.  We may enter formal written service agreements with our directors and officers in the future.  We expect to continue to outsource contract employment as needed.  Depending on the level of success of our exploration and development initiatives, we may retain full- or part-time employees in the future.

Going Concern

The accompanying financial statements have been prepared assuming we will continue as a going concern.  We incurred a net loss of $14,391 for the three months ended March 31, 2008 and a net loss of $8,162 for the same period in 2007.   

The Company’ primary source of operating funds during the three months has been advances from shareholders.  The Company does not currently hold an interest in any oil and gas properties.

There are no assurances that we will be able, over the next twelve months, to either (1) achieve a level of revenues adequate to generate sufficient cash flow from operations; or (2) obtain additional financing through either private placement, public offerings, bank financing or shareholder advances necessary to support Altus' working capital requirements.  To the extent that funds generated from operations and any private placements, public offerings or bank financing are insufficient, the Company will have to raise additional working capital.  No assurance can be given that additional financing will be available, or if available, will be on terms acceptable to Altus.  If adequate working capital is not available, Altus may be required to cease its operations.

The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.  These conditions raise substantial doubt about our ability to continue as a going concern.  There are no definitive agreements or arrangements for future funding.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

Our financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles in the United States.  Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses.  These estimates and assumptions are affected by management's application of accounting policies.  We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our consolidated financial statements is critical to an understanding of our balance sheet, the statements of operations and stockholders' equity, and the cash flows statements included elsewhere in this filing.

Item 4(T).    Controls and Procedures

Our management, including our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of March 31, 2008.  Based on that evaluation, our principal executive officer and principal financial officer have concluded that as of March 31, 2008, we have maintained effective disclosure controls and procedures in all material respects, including those necessary to ensure that information required to be disclosed in reports filed or submitted with the SEC (i) is recorded, processed, and reported within the time periods specified by the SEC, and (ii) is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate to allow for timely decision regarding required disclosure.  

There have been no changes in our internal control over financial reporting that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 6.    Exhibits

31.1

Certification Pursuant to Rule 13a-14(a) or 15d-14(a) of the U.S. Securities Exchange Act of 1934

32.1

Section 1350 Certification of the Principal Executive Officer and Principal Financial Officer

SIGNATURES

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

Date:  May 20, 2008

ALTUS EXPLORATIONS, INC

(Registrant)

By:  

/s/ David Whyte

David Whyte

        Principle Executive Officer and

        Principle Financial Officer