TOPZ Topaz Resources Inc (CE)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the Quarterly period ended March 31, 2012
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: 333-158721

TOPAZ RESOURCES, INC.

(Exact name of small business issuer as specified in its charter)

Florida		24-4090511
(State or other jurisdiction of Incorporation or organization)		(I.R.S. Employer Identification No.)

1012 North Masch Branch Road, Denton, TX  76207

(Address of principal executive offices)

940-243-1122

(Issuer's telephone number)

Kids Germ Defense Corp.

(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 Exchange Act 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 at least the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No x

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

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

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

There were 518,175,000 shares of the Registrant's $0.0001 par value common stock outstanding as of May 15, 2012.

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TOPAZ RESOURCES, INC.

INDEX

PART I - FINANCIAL INFORMATION

3

ITEM 1. FINANCIAL STATEMENTS

3

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

14

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLSOURES ABOUT MARKET RISK

17

ITEM 4T. CONTROLS AND PROCEDURES

18

PART II - OTHER INFORMATION

19

ITEM 1. LEGAL PROCEEDINGS

19

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

19

ITEM 3. DEFAULT UPON SENIOR SECURITIES

19

ITEM 4. MINE SAFETY DISCLOSURES

19

ITEM 5. OTHER INFORMATION

19

ITEM 6. EXHIBITS

19

SIGNATURES

20

2

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PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TOPAZ RESOURCES, INC.
(Formerly Kids Germ Defense Corp.)
(A Development Stage Company)
CONDENSED CONSOLIDATED BALANCE SHEETS
		March 31,		December 31,
		2012		2011
		(unaudited)
ASSETS
CURRENT ASSETS
Cash	$	38,532	$	28,131
Other receivables		12,198		23,329
Total Current Assets		50,730		51,460
PROPERTY
Deposit on investment in unevaluated oil and natural gas properties		660,908		660,908
Investment in evaluated oil and natural gas properties		114,371		118,922
Total Property		775,279		779,830
TOTAL ASSETS	$	826,009	$	831,290
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities	$	22,464	$	38,052
Accounts payable, related party		21,234		21,234
Accrued interest		9,335		6,935
Note payable - Related Party		275,000		275,000
Total Current Liabilities		328,033		341,221
STOCKHOLDERS' EQUITY
Preferred stock; $0.0001 par value; 10,000,000 shares authorized;     none issued and outstanding		-		-
Common stock, $0.0001 par value; 700,000,000 shares authorized;     518,175,000 and 518,175,000  shares issued and outstanding at     March 31, 2012 and December 31, 2011, respectively		51,818		51,818
Common stock payable		157,500		157,500
Additional paid-in capital		514,689		514,689
Accumulated deficit during development stage		(226,031)		(233,938)
Total Stockholders' Equity		497,976		490,069
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	826,009	$	831,290

The accompanying notes are an integral part of these financial statements.

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TOPAZ RESOURCES, INC.
(Formerly Kids Germ Defense Corp.)
(A Development Stage Company)
STATEMENTS OF OPERATIONS
						From January 16, 2009 (Inception) to March 31, 2012
		Three Months Ended
		March 31,		March 31,
		2012		2011
		(unaudited)		(unaudited)		(unaudited)
REVENUES	$	25,383	$	-	$	174,180
OPERATING EXPENSES
Professional fees expense		8,500		17,383		153,335
Depletion expense		4,551		-		16,131
Impairment of oil and gas properties		-		-		205,116
General and administrative expenses		15,525		11,588		142,111
TOTAL OPERATING EXPENSES		28,576		28,971		516,693
INCOME (LOSS) FROM OPERATIONS		(3,193)		(28,971)		(342,513)
OTHER INCOME (EXPENSE)
Gain on extinguishment of liability		13,500		-		141,197
Interest expense		(2,400)		(3,896)		(28,242)
Interest income		-		-		3,527
		11,100		(3,896)		116,482
INCOME (LOSS) BEFORE TAXES		7,907		(32,867)		(226,031)
INCOME TAX EXPENSE		-		-		-
NET INCOME (LOSS)	$	7,907	$	(32,867)	$	(226,031)
NET INCOME (LOSS) PER COMMON SHARE, BASIC AND DILUTED	$	0.00	$	(0.00)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, BASIC AND DILUTED		518,175,000		513,744,444

The accompanying notes are an integral part of these financial statements.

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TOPAZ RESOURCES, INC.
(Formerly Kids Germ Defense Corp.)
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
		Three Months Ended		From January 16, 2009 (Inception) to March 31, 2012
		March 31,		March 31,
		2012		2011
		(unaudited)		(unaudited)		(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	7,907	$	(32,867)	$	(226,031)
Adjustments to reconcile net loss to net cash provided (used) by operating activities:
Amortization of discount on notes payable		-		248		1,520
Depletion		4,551		-		11,580
Impairment of oil and gas properties		-		-		205,116
Gain on forgiveness of debt		(13,500)		-		(141,197)
Stock issued for expenses		-		-		17,280
Contribution from shareholder		-		-		38,207
Increase in other receivables and other current assets		11,131		(1,661)		(12,198)
Increase (decrease) in:
Accounts payable and accrued expenses		(2,088)		12,523		19,657
Accrued interest		2,400		2,848		22,032
Net cash provided (used) by operating activities		10,401		(18,909)		(64,034)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of oil and gas properties		-		(378,356)		(144,025)
Deposit on oil and gas properties		-		800		(789,318)
Proceeds from sale of oil and gas properties		-		-		403,409
Net cash provided (used) by investing activities		-		(377,556)		(529,934)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from advances from stockholder		-		-		18,000
Repayment of advances from stockholder		-		-		(18,000)
Proceeds from issuance of notes payable		-		75,000		115,000
Deposit for sale of working interest				48,909
Increase in common stock payable		-		-		157,500
Proceeds from sale of common stock for cash		-		-		360,000
Net cash provided by financing activities		-		123,909		632,500
Net increase (decrease) in cash and cash equivalents		10,401		(272,556)		38,532
Cash, beginning of period		28,131		337,168		-
Cash, end of period	$	38,532	$	64,612	$	38,532

The accompanying notes are an integral part of these financial statements.

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TOPAZ RESOURCES, INC.
(Formerly Kids Germ Defense Corp.)
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
		Three Months Ended		From January 16, 2009 (Inception) to March 31, 2012
		March 31,		March 31,
		2012		2011
		(unaudited)		(unaudited)		(unaudited)
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid	$	-	$	-	$	-
Income taxes paid	$	-	$	-	$	-
NON-CASH FINANCING AND INVESTING ACTIVITIES
Issuance of common stock for acquisition of oil and gas properties	$	-	$	149,500	$	149,500
Acquisition of oil and gas investments for accounts payable	$	-	$	37,541	$	37,541
Forgiveness of notes payable and accrued interest	$	-	$	-		127,697
Forgiveness of a liability	$	13,500	$	-	$	13,500

The accompanying notes are an integral part of these financial statements.

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TOPAZ RESOURCES, INC.

(FORMERLY KIDS GERM DEFENSE CORP.)

(A DEVELOPMENT STAGE COMPANY)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2012

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS AND ORGANIZATION

Topaz Resources, Inc. formerly Kids Germ Defense Corp. (the "Company") is a development stage enterprise that was incorporated in the state of Florida on January 16, 2009. To date, the Company's activities have been limited to raising capital, organizational matters and structuring its business plan. The corporate headquarters are located in Denton, Texas. The Company is an independent oil and gas company focusing on production, acquisitions and developmental drilling opportunities within proven producing areas of North-Central-West Texas.

Effective April 16, 2010, the Company changed its name from Kids Germ Defense Corp. to Topaz Resources, Inc.

On April 16, 2010 the Company commenced oil and gas exploration activities. As of March 31, 2012, the Company has not achieved its planned principal operations from its oil and gas operations. Accordingly, the Company's activities are considered to be those of a "Development Stage Enterprise". Among the disclosures required, are that the Company's financial statements be identified as those of a development stage enterprise. In addition, the statements of operations, stockholders equity (deficit) and cash flows are required to disclose all activity since the Company's date of inception. The Company will continue to prepare its financial statements and related disclosures as those of a development stage enterprise until such time that the Company achieves planned principle operations.

CONSOLIDATION

The accompanying condensed consolidated financial statements include all accounts of Topaz and its wholly-owned subsidiary. All significant inter-company balances and transactions have been eliminated in consolidation.

OIL AND GAS PROPERTIES

The Company uses the full cost method of accounting for its oil and natural gas properties. Under this method, the Company capitalizes all acquisition, exploration and development costs incurred for the purpose of finding oil and natural gas reserves, including leasehold acquisition costs, geological and geophysical expenditures, lease rentals on undeveloped properties and costs of drilling of productive and non-productive wells into the full cost pool. To the extent that support equipment is used in oil and gas activities, the related depreciation is capitalized. Proceeds from the disposition of oil and natural gas properties are accounted for as a reduction of capitalized costs, with no gain or loss recognized unless such disposition would alter the depletion and depreciation rate by 20% or more. When the Company obtains proven oil and gas reserves, capitalized costs, including estimated future costs to develop the reserves proved and estimated abandonment costs, net of salvage, are depleted on the units-of-production method using estimates of proved reserves. The costs of unproved properties are not amortized until it is determined whether or not proved reserves can be assigned to the properties. The Company assesses its properties at least annually to ascertain whether impairment has occurred. In assessing impairment the Company considers factors such as historical experience and other data such as primary lease terms of the property, average holding periods of unproved property, and geographic and geologic data.

Capitalized costs of development oil and natural gas properties may not exceed an amount equal to the present value, discounted at 10%, of estimated future net revenues from proven reserves plus the lower of cost or fair value of unproven properties. Should capitalized costs exceed this ceiling, impairment is recognized.

The present value of estimated future net cash flows is computed by applying the average first-day-of-the-month prices during the previous twelve month period of oil and natural gas to estimated future production of proved oil and natural gas reserves as of year-end less estimated future expenditures to be incurred in developing and producing the proved reserves and assuming continuation of existing economic conditions.

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TOPAZ RESOURCES, INC.

(FORMERLY KIDS GERM DEFENSE CORP.)

(A DEVELOPMENT STAGE COMPANY)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2012

DEPOSITS ON OIL AND NATURAL GAS PROPERTIES

The Company accounts for expenditures that are made in conjunction with oil and natural gas properties that it has not yet completed the transfer of title to the properties as a deposit. At such time as the transfer of title has been completed the Company transfers the balance to its Investment in Oil and Natural Gas Properties, in a manner consistent with the full cost method. In the event that the transfer of title is not completed the Company takes an impairment charge for the amount of the deposit.

ASSET RETIREMENT OBLIGATION

The Company follows FASB ASC 410 - Asset Retirement and Environmental Obligations which requires entities to record the fair value of a liability for legal obligations associated with the retirement obligations of tangible long-lived assets in the period in which it is incurred. This standard requires the Company to record a liability for the fair value of the dismantlement and plugging and abandonment costs excluding salvage values. When the liability is initially recorded, the entity increases the carrying amount of the related long-lived asset. Over time, accretion of the liability is recognized each period and the capitalized cost is amortized over the useful life of the related asset. Upon settlement of the liability, an entity either settles the obligation for its recorded amount or incurs a gain or loss upon settlement.

CONCENTRATIONS OF CREDIT RISK AND ALLOWANCE

The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. Accounts are guaranteed by the Federal Deposit Insurance Corporation ("FDIC") up to $250,000 in 2011. The Company has not experienced any losses in such accounts.

USE OF ESTIMATES

In the opinion of management, all adjustments consisting only of normal recurring adjustments necessary for a fair statement of (a) the results of operations for the three month periods ended March 31, 2012 and 2011 and the Period January 16, 2009 (Date of Inception) through March 31, 2012, (b) the financial position at March 31, 2012 and December 31, 2011, and (c) cash flows for the periods ended March 31, 2012 and 2011, and the Period January 16, 2009 (Date of Inception) through March 31, 2012, have been made.

The unaudited condensed financial statements and notes are presented in accordance with SEC Form 10-Q. Accordingly, certain information and note disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted. The accompanying condensed financial statements and notes should be read in conjunction with the audited financial statements and notes of the Company for the fiscal year ended December 31, 2011 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission. The results of operations for the three month period ended March 31, 2012 are not necessarily indicative of those to be expected for the entire year.

CASH AND CASH EQUIVALENTS

The Company considers all highly-liquid instruments with a maturity of three months or less to be cash equivalents. The Company had $38,532 in cash and cash equivalents at March 31, 2012.

REVENUE RECOGNITION

We recognize revenue when all of the following criteria have been met: (i) evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the price to the customer is fixed and determinable and (iv) collectability is reasonably assured.

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TOPAZ RESOURCES, INC.

(FORMERLY KIDS GERM DEFENSE CORP.)

(A DEVELOPMENT STAGE COMPANY)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2012

	•	Evidence of an arrangement exists when a final understanding between us and our customer has occurred, and can be evidenced by a completed customer purchase order, field ticket, supplier contract, or master service agreement.
	•	Delivery has occurred or services have been rendered when we have completed requirements pursuant to the terms of the arrangement as evidenced by a field ticket or service log.
	•	The price to the customer is fixed and determinable when the amount that is required to be paid is agreed upon. Evidence of the price being fixed and determinable is evidenced by contractual terms, our price book, a completed customer purchase order, or a completed customer field ticket.
	•	Collectability is reasonably assured when we screen our customers and provide goods and services to customers according to determined credit terms that have been granted in accordance with our credit policy.

We present our revenues net of any sales taxes collected by us from our customers that are required to be remitted to local or state governmental taxing authorities.

We review our contracts for multiple element revenue arrangements. Deliverables will be separated into units of accounting and assigned fair value if they have standalone value to our customer, have objective and reliable evidence of fair value, and delivery of undelivered items is substantially controlled by us. We believe that the negotiated prices for deliverables in our services contracts are representative of fair value since the acceptance or non-acceptance of each element in the contract does not affect the other elements.

INCOME TAXES

The Company accounts for income taxes pursuant to FASB ASC 740 - Income Taxes, which requires recognition of deferred income tax liabilities and assets for the expected future tax consequences of events that have been recognized in the financial statements or tax returns. The Company provides for deferred taxes on temporary differences between the financial statements and tax basis of assets using the enacted tax rates that are expected to apply to taxable income when the temporary differences are expected to reverse.

FASB ASC-740 establishes a more-likely-than-not threshold for recognizing the benefits of tax return positions in the financial statements. Also, the statement implements a process for measuring those tax positions which meet the recognition threshold of being ultimately sustained upon examination by the taxing authorities. There are no uncertain tax positions taken by the Company on its tax returns. The Company files tax returns in the US and states in which it has operations and is subject to taxation. The tax years from 2009 remain open to examination by U.S. federal and state tax jurisdictions.

EARNINGS PER SHARE

The Company follows ASC Topic 260 to account for the earnings per share. Basic earnings per common share (“EPS”) calculations are determined by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding. During periods when common stock equivalents, if any, are anti-dilutive they are not considered in the computation.

ADVERTISING

The Company expenses advertising costs as incurred. There were no advertising costs incurred during the fiscal quarter ending March 31, 2012.

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TOPAZ RESOURCES, INC.

(FORMERLY KIDS GERM DEFENSE CORP.)

(A DEVELOPMENT STAGE COMPANY)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2012

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

The Company has evaluated all accounting pronouncements through the issuance of these financial statements and there were no new accounting pronouncements that had a significant impact on the Company's operating results, financial position or financial statements.

NOTE 2 - GOING CONCERN

The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. For the three months ended March 31, 2012 and since inception through March 31, 2012, the Company has had a net income of $7,907 and net losses of $226,031, respectively. As of March 31, 2012, the Company has not emerged from the development stage.  In view of these matters, there is substantial doubt that the Company will continue as a going concern and will be dependent upon the Company's ability to begin operations and achieve a level of profitability.

Since inception, the Company has financed its activities principally from term notes and the sale of public equity securities. The Company intends on financing its future development activities and its working capital needs largely from the sale of public equity securities with some additional funding from other traditional financing sources, including term notes until such time that funds provided by operations are sufficient to fund working capital requirements. The financial statements of the Company do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.

NOTE 3 - INVESTMENT IN OIL AND NATURAL GAS PROPERTIES

The amounts capitalized as oil and natural gas properties were incurred for the purchase, exploration and ongoing development of properties.

	Acquisition Costs	Evaluation Costs	Total
Balance at December 31, 2011		99,500		19,422		118,922
Costs incurred on purchase, exploratory and development activities during the year ended March 31, 2012
Depletion		(4,551)				(4,551)
Impairment of oil and natural gas properties during the three months ended March 31, 2012
Balance at March 31, 2012	$	94,949	$	19,422	$	114,371

The Company has a single producing natural gas well in Denton County, TX that has demonstrated sufficient production history to be considered a proved developed producing (“PDP”) property. We do not have an independent engineering reserve study report but based on internal Company estimates utilizing methods consistent with Securities and Exchange Regulation S-X Rule 4-10 we have assigned PDP reserves to this well. Reserve estimates and production rate projections are based on the established performance of the well and on an extrapolation of established performance trends in the area.  During the three months ended March 31, 2012 this well produced an estimated 15,608 net thousand cubic feet of natural gas to the Company’s ownership interest.

Pursuant to Securities and Exchange Regulation S-X Rule 4-10, the Company’s accounting policy is to follow the “full cost” accounting method, including depletion under the unit of production method. The Company has calculated a depletion expense for the three months ended March 31, 2012 and 2011 of $4,551 and $0, respectively.

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TOPAZ RESOURCES, INC.

(FORMERLY KIDS GERM DEFENSE CORP.)

(A DEVELOPMENT STAGE COMPANY)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2012

Properties which are not being amortized are assessed quarterly, on a field-by-field and a project-by-project basis, to determine whether they are recorded at the lower of cost or fair market value. During the three months ended March 31, 2012, the Company did not recognize any impairment costs.

NOTE 4 - DEPOSIT ON OIL AND NATURAL GAS PROPERTIES

The Company acquired the right to a working interest in a lease in north Texas and drilled an exploratory well. The completion of the assignment of the working interest is pending the consent of the trustee for the landowners, such consent not to be unreasonably withheld.

 

The Company assigned, subject to completion of the well, a portion of its working interest in the exploratory well. In addition, the Company assigned a portion of its right to a working interest in the remaining lease.

		March 31, 2012
Beginning balance	$	660,908
Lease acquisition costs		—
Exploratory well drilling costs (reclassification)		—
Less proceeds from sale of working interests		—
	$	660,908

NOTE 5 - RELATED PARTY TRANSACTIONS

On October 23, 2010 the Company entered into an agreement to acquire from Dark Horse Operating Co., L.L.C. (DHOC"), an affiliate of the Company, its interest in 766,562 net acres in north central Texas. In consideration of this the Company agreed to pay $275,000, committed to issue 3,000,000 shares of its Common Stock, which is recorded as common stock payable of $157,500 in the accompanying balance sheet and assumed liabilities of $21,234. The property was assigned by Dark Horse Operating Co., L.L.C. to the Company on April 13, 2011.  As of March 31, 2012, the Company has not paid the cash consideration of $275,000 and has not issued the 3,000,000 shares to DHOC.

DHOC is an affiliate of the Company because two of the officers, one of whom is also a director of the Company, own DHOC. The Company has adopted a policy that requires that the two officers not participate in discussions or votes regarding matters involving DHOC.

NOTE 6-- DEPOSIT

The Company agreed to sell a working interest in an oil and natural gas well at such time as the Company had acquired and completed that well for production of oil and natural gas. The Company received a $300,000 deposit towards the costs to acquire and complete the well.  The transactions to acquire the well closed in January and February 2011 and the work to complete the well began in May and finished in July 2011.  As of March 31, 2012 the deposit amount has been netted against the Company’s investment in this well.

NOTE 7 - STOCKHOLDER'S EQUITY

On January 13, 2011, the Company issued 5,000,000 shares of common stock at $0.0129 per share (the underlying fair market value of the common stock), for a total of $64,500, for the acquisition of oil and gas properties.

On March 1, 2011, the Company issued 5,000,000 shares of common stock at $0.017 per share (the underlying fair market value of the common stock), for a total of $85,000, for the acquisition of oil and gas properties.

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TOPAZ RESOURCES, INC.

(FORMERLY KIDS GERM DEFENSE CORP.)

(A DEVELOPMENT STAGE COMPANY)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2012

Effective April 22, 2010, the Company and an investor signed a subscription agreement to purchase a total of 4,800,000 shares of the Company's common stock at $0.04167 per share (the underlying fair market value of the common stock) plus 180,000,000 warrants to purchase shares of the Company's common stock at an exercise price of $0.0833 per share for a total amount of $200,000.

The warrant entitles the holder to purchase 180,000,000 shares of the Company's common stock, at any time, at an exercise price of $0.0833 per share, provided, however, that in no event shall the holder be entitled to exercise this warrant for a number of shares in excess of the number of shares which, upon giving effect to such exercise, would cause the aggregate number of shares of common stock beneficially owned by the holder and its affiliates to exceed 4.99% of the outstanding shares of common stock. The holder may exercise the warrant on either a cash or cashless exercise as determined by the holder of the warrant. The warrants expire in 2015.

		Shares		Range of Exercise Prices		Weighted Average Exercise Price
Outstanding at December 31, 2011		180,000,000		$	0.0833		$	0.0833
Warrants granted		—		$	—		$	—
Warrants cancelled or expired		—		$	—		$	—
Outstanding at March 31, 2012		180,000,000		$	0.0833		$	0.0833

Effective December 21, 2010 and in connection with the issuance of a secured note payable, the Company issued the lender 80,000 shares of common stock at the fair market value of $0.019 or $1,520.

NOTE 8 - INCOME TAXES

The Company operates in the United States ("U.S."); accordingly, federal and state income taxes have been provided based upon the tax laws and rates of the U.S. as they apply to the Company's current ownership structure.

The Company accounts for income taxes pursuant to Accounting Standards Codification No. 740, ACCOUNTING FOR INCOME TAXES, which requires recognition of deferred income tax liabilities and assets for the expected future tax consequences of events that have been recognized in the Company's financial statements or tax returns. The Company provides for deferred taxes on temporary differences between the financial statements and tax basis of assets using the enacted tax rates that are expected to apply to taxable income when the temporary differences are expected to reverse.

The Company recognizes interest and penalties related to unrecognized tax benefits within the provision for income taxes on continuing tax benefits. There are no unrecognized tax benefits that if recognized would affect the tax rate. There were no interest or penalties recognized as of the date of adoption or for the three months ended March 31, 2012. The Company files tax returns in the U.S. and states in which it has operations and is subject to taxation. Each of the Company's tax years from 2009 remains open to examination by taxing authorities.

The Company's effective tax rate for continuing operations for the three months ended March 31, 2012 and 2011 was approximately 0% and 0%, respectively because the Company had minimal taxable income in 2012 and no taxable income in 2011.

12

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TOPAZ RESOURCES, INC.

(FORMERLY KIDS GERM DEFENSE CORP.)

(A DEVELOPMENT STAGE COMPANY)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2012

		March 31, 2012			March 31, 2011
Income (loss)		$          7,907			$      (32,867)
Deferred Tax Asset (30%)		$        (2,372)			$         9,860
Impairment of Deferred Tax Asset		$      2,372			$     (9,860)
Net Deferred Tax Asset		$                  0			$                 0

NOTE 9 - COMMITMENTS AND CONTINGENCIES

The Company, as an owner or lessee and operator of oil and gas properties, is subject to various federal, state and local laws and regulations relating to discharge of materials into, and protection of, the environment. These laws and regulations may, among other things, impose liability on the lessee under an oil and gas lease for the cost of pollution clean-up resulting from operations and subject the lessee to liability for pollution damages. In some instances, the Company may be directed to suspend or cease operations in the affected area.

In January 2011, the Company entered into an agreement to lease oil and gas property contiguous with existing leased oil and gas properties held by the Company. During the first and second quarters of 2011, the Company drilled a new well on this newly leased property which did not produce commercial quantities of hydrocarbons and has been declared a dry hole. Immediately prior to commencing the drilling of this well, the Company received $75,000 of proceeds from the issuance of three (3) separate 12% Senior Secured Notes. The Notes bear 12% interest and are due and payable on January 26, 2012. In January 2011, the Company also sold an interest in this well to another third party company.  This third party company has lost his investment and retains no further interest in the lease or the well.

In March 2011, the Company entered into an agreement with a third party company to sell an interest in one of the Company's oil and gas properties. This agreement also provided for participation of this third party and funding by this third party company of drilling of new oil and gas wells on Company held properties. This transaction did not close because the required cash consideration by the third party company was not received by the Company.  The agreement has been terminated.

NOTE 10—MINORITY INTEREST IN THE WHOLLY OWNED SUBSIDIARY, MASCH BRANCH

In 2011, $127,697 of principal and the related accrued interest was converted into equity units of Masch Branch (designated as “Subsequent Member” units) which had been wholly owned by us. This resulted in a total of 2,118,790 units outstanding, of which the Company holds 2,000,000 units.

As Masch Branch is a limited liability company, the managers are not required to allocate income or distribute cash to these minority Subsequent Members. The minority Subsequent Members have no claims on the assets of Topaz, the parent company and “Original Member” of Masch Branch, and therefore no value has been assigned to this equity. The managers of Masch Branch may distribute subsequent earnings/losses to the minority Subsequent Members but are under no such obligation.

NOTE 11 - GAIN ON EXTINGUISHMENT OF LIABILITY

During the three months ended March 31, 2012, the Company obtained a release from payment for a liability incurred in earlier years and therefore recorded a gain on the settlement of $13,500.

NOTE 12 – SUBSEQUENT EVENTS

The Company has evaluated subsequent events from the date the Financial Statements were issued through the date of this filing and has determined that there are no items to disclose.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

THE FOLLOWING DISCUSSION AND ANALYSIS OF OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS SHOULD BE READ IN CONJUNCTION WITH OUR FINANCIAL STATEMENTS AND THE NOTES THERETO INCLUDED ELSEWHERE IN THIS QUARTERLY REPORT ON FORM 10-Q AND IN OUR ANNUAL REPORT ON FORM 10-K FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 16, 2012.

THIS FILING, INCLUDING BUT NOT LIMITED TO "MANAGEMENT'S DISCUSSION AND ANALYSIS", CONTAINS FORWARD-LOOKING STATEMENTS. THE WORDS "ANTICIPATED," "BELIEVE," "EXPECT," "PLAN," "INTEND," "SEEK," "ESTIMATE," "PROJECT," "WILL," "COULD," "MAY," AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. THESE STATEMENTS INCLUDE, AMONG OTHERS, INFORMATION REGARDING FUTURE OPERATIONS, FUTURE CAPITAL EXPENDITURES, AND FUTURE NET CASH FLOW. SUCH STATEMENTS REFLECT THE COMPANY'S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND FINANCIAL PERFORMANCE AND INVOLVE RISKS AND UNCERTAINTIES, INCLUDING, WITHOUT LIMITATION, GENERAL ECONOMIC AND BUSINESS CONDITIONS, CHANGES IN FOREIGN, POLITICAL, SOCIAL, AND ECONOMIC CONDITIONS, REGULATORY INITIATIVES AND COMPLIANCE WITH GOVERNMENTAL REGULATIONS, THE ABILITY TO ACHIEVE FURTHER MARKET PENETRATION AND ADDITIONAL CUSTOMERS, AND VARIOUS OTHER MATTERS, MANY OF WHICH ARE BEYOND THE COMPANY'S CONTROL. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD- LOOKING STATEMENTS AS A RESULT OF SEVERAL FACTORS, INCLUDING THE RISKS FACED BY US AS DESCRIBED BELOW AND ELSEWHERE IN THIS FORM 10-Q AS WELL AS IN OUR FORM 10-K FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 15, 2011. IN LIGHT OF THESE RISKS AND UNCERTAINTIES THERE CAN BE NO ASSURANCE THAT THE FORWARD-LOOKING STATEMENTS CONTAINED IN THIS FORM 10-Q WILL OCCUR. WE HAVE NO OBLIGATION TO PUBLICLY UPDATE OR REVISE THESE FORWARD-LOOKING STATEMENTS TO REFLECT NEW INFORMATION, FUTURE EVENTS, OR OTHERWISE, EXCEPT AS REQUIRED BY FEDERAL SECURITIES LAWS AND WE CAUTION YOU NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS. WE MAY NOT UPDATE THESE FORWARD-LOOKING STATEMENTS, EVEN THOUGH OUR SITUATION MAY CHANGE IN THE FUTURE.

INTRODUCTION AND OVERVIEW

On April 16, 2010 the Company changed its plan of operations from developing health and safety products to an independent oil and gas company focusing on production, acquisitions and developmental drilling opportunities within proven producing areas of north, central and west Texas.

We are an independent oil and natural gas exploration, development and production company. Our basic business model is to increase shareholder value by finding and developing oil and gas reserves through exploration and development activities, and selling the production from those reserves at a profit. To be successful, we must, over time, be able to find oil and gas reserves and then sell the resulting production at a price that is sufficient to cover our finding costs, operating expenses, administrative costs and interest expense, plus offer us a return on our capital investment.

We have a limited operating history and minimal proven reserves, production and cash flow. To date, we have had limited revenues and have not been able to generate sustainable positive earnings. Our management cannot provide any assurances that the Company will ever operate profitably. As a result of our limited operating history, we are more susceptible to the numerous business, investment and industry risks that have been described in Item 1A. Risk Factors of our Form 10-K.

Topaz is currently focused on obtaining the appropriate financing to allow the Company to execute its strategy.  Our short and longer-term success depends on our ability to obtain this financing.  In addition our success depends on,

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among many other factors, the acquisition and drilling of commercial grade oil and gas properties and on the prevailing sales prices for oil and natural gas along with associated operating expenses. The volatile nature of the energy markets makes it difficult to estimate future prices of oil and natural gas; however, any prolonged period of depressed prices would have a material adverse effect on our results of operations and financial condition.

Our operations are focused on identifying and evaluating prospective oil and gas properties and funding projects that we believe have the potential to produce oil or gas in commercial quantities. We currently have projects and properties in Montague, Denton and Wichita Counties in Texas.

RESULTS OF OPERATIONS

THE THREE MONTHS ENDED MARCH 31, 2012 COMPARED TO THE SAME PERIOD ENDED MARCH 31, 2011

The following table presents a summary of our results of operations.

			Three Months Ended		Three Months Ended
			March 31,		March 31,
			2012		2011
			(unaudited)		(unaudited)
Revenues		$	25,383	$	-
Professional fees expense			8,500		17,383
Impairment of oil and gas properties			-		-
Depletion expenses			4,551		-
General and administrative expenses			15,525		11,588
Interest expense			2,400		3,896
Gain on extinguishment of liability			(13,500)		-
NET INCOME (LOSS)			7,907		(32,867)

REVENUES

The revenues of $25,383 are the result of a rework of an existing well which resulted in the production and sale of natural gas in the amount of an estimated 15,623 net thousand cubic feet of natural gas during the three months ended March 31, 2012.

PROFESSIONAL FEES

The professional fees of $8,500 incurred during the three months ended March 31, 2012 were a decrease of $8,883 from $17,383 for the three months ended March 31, 2011.  The decrease was primarily the result of a decrease in engineering fees in 2012.

DEPLETION EXPENSE

Depletion expense increased by $4,551 during the three months ended March 31, 2012 as compared to $0 for the three months ended March 31, 2011. The increase is due to the Company having a well that has proven reserves and the related acquisition costs are being depleted based on the unit of production.

GENERAL AND ADMINISTRATIVE EXPENSES

The Company incurred $15,525 in general and administrative expenses during the three months ended March 31, 2012 as compared to $11,588 for the three months ended March 31, 2011. The increase of $3,937 was primarily the result of an increase in costs associated with operations, such as utilities.

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INTEREST EXPENSE

The Company incurred $2,400 in interest expense for the three months ended March 31, 2012 as compared to $3,896 for the three months ended March 31, 2011.  The decrease in interest expense is due to a reduction in the outstanding notes payable for the three months ended March 31, 2012.

GAIN ON EXTINGUISHMENT OF LIABILITY

During 2012, the Company was able to obtain a release from payment for a liability incurred in earlier years and therefore recorded a gain on the settlement.

LIQUIDITY AND CAPITAL RESOURCES

WORKING CAPITAL

	March 31, 2012		December 31, 2011
Current assets	$	50,730		$	51,460
Current liabilities		328,033			341,221
Working capital (deficit)		(277,303)			(289,761)

The Company had $38,532 in cash at March 31, 2012.

The Company does not currently have the cash to fund the level of activity required on its existing properties. As set out in the Company's strategic focus, included herein, the Company will seek to arrange the funding by some combination of: (i) proceeds from the sale of oil and natural gas produced from wells once they are completed; (ii) the sale of a portion of the Company's working interest in wells to be drilled; (iii) the incurrence of interest bearing debt, which may include the issuance of equity securities, such as warrants, preferred stock and/or common stock, to enhance the yield of the lender and thus increase the effective interest rate of the Company; and (iv) the issuance of equity instruments, such as warrants, preferred stock and/or common stock.

There is no assurance that the Company will be able to obtain the further funds required for our continued working capital requirements. The lease acquisition costs and the exploration and development costs are largely discretionary in nature. In the event that the Company does not have sufficient cash resources to fund these activities, the level of activity can and will be adjusted accordingly. The ability of the Company to meet its financial liabilities and commitments is primarily dependent on the issuance of debt and equity instruments to existing and new lenders and stockholders, and the Company's ability to achieve and maintain profitable operations.

There is substantial doubt about the ability of the Company to continue as a going concern as the continuation of the business of the Company is dependent on obtaining further long-term financing, successful exploration of the Company's property interests, the identification of reserves sufficient enough to warrant development, successful development of the property interests of the Company and, finally, achieving a profitable level of operations. The issuance of additional equity securities by the Company could result in significant dilution of the equity interests of the current stockholders. Obtaining commercial loans, assuming these loans would be available, will increase the Company's liabilities and future cash commitments.

OIL AND NATURAL GAS PRODUCTION COSTS

The Company has one well that that began to produce in May 2011.  The Company has actual and accrued production and sales of natural gas during this quarter from this well.  As the Company completes wells and begins to produce oil and natural gas it will incur production costs. These production costs will be funded from the proceeds of the sale of the oil and natural gas produced from those wells.

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LAND ACQUISITION AND EXPLORATION AND DEVELOPMENT COSTS

In order to maintain this continued right to explore and develop the oil and natural gas rights on its leases in Montague and Wichita Counties in Texas, the Company is obligated to continue to drill wells. On the Montague County acreage the lease terms are satisfied if a well that tests the Barnett Shale is drilled approximately every 9 months or if a shallower well is drilled approximately every 6 months. The estimated cost to drill and complete each well is estimated to be between $650,000 and $2,500,000 depending on the type and depth of the well. On the Wichita County acreage the lease terms are satisfied if a well is drilled every 12 months at an approximate cost of $150,000 per well. In the event that the Company fails to meet its ongoing drilling obligations under this lease then the Company's right to explore and develop the land that has not been drilled will be forfeited. The Company will consider selling some or all of its working interest in these leases.

PROFESSIONAL FEES

The Company uses the services of independent legal counsel, certified landmen, auditors and corporate tax preparers during the course of the fiscal year.

GENERAL AND ADMINISTRATIVE EXPENSES

The Company does not have any employees, but does, from time to time contract for administrative and accounting services.

CASH FLOWS

CASH FLOW USED IN OPERATING ACTIVITIES

The Company provided $10,401 in operating activities during the three months ended March 31, 2012. This is the result of a decrease in other receivables of $15,610 coupled with net income of $7,907.

CASH FLOW PROVIDED BY INVESTING ACTIVITIES

As of March 31, 2012 the Company has no investing activities.

CASH FLOW PROVIDED BY FINANCING ACTIVITIES

As of March 31, 2012 the Company has no financing activities.

CAPITAL EXPENDITURES

As of March 31, 2012 the Company has no capital spending commitments.

OFF-BALANCE SHEET ARRANGEMENTS

As of March 31, 2012, we did not have any relationships with unconsolidated entities or financial partners, such as entities often referred to as structured finance or special purpose entities, which have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As such, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLSOURES ABOUT MARKET RISK

Not applicable.

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ITEM 4T. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Our Chief Executive Officer and Chief Financial Officer (collectively the "Certifying Officers") maintain a system of disclosure controls and procedures that is designed to provide reasonable assurance that information, which is required to be disclosed, is accumulated and communicated to management timely.  The Certifying Officers have concluded that the disclosure controls and procedures are effective at the "reasonable assurance" level. Under the supervision and with the participation of management, as of the end of the period covered by this report, the Certifying Officers evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act).  Furthermore, the Certifying Officers concluded that our disclosure controls and procedures in place are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported on a timely basis in accordance with applicable Commission rules and regulations; and (ii) accumulated and communicated to our management, including our Certifying Officers and other persons that perform similar functions, if any, to allow us to make timely decisions regarding required disclosure in our periodic filings.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

No change in the Company's internal control over financial reporting occurred during the three months ended March 31, 2012, that materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The status of our legal proceedings, as disclosed in our Annual Report remains unchanged. The Company may be party to lawsuits from time to time arising in the ordinary course of its business. The Company provides for costs relating to these matters when a loss is probable and the amount is reasonably estimable.  The effect of the outcome of these matters on the Company's future results of operations cannot be predicted because any such effect depends on future results of operations and the amount and timing of the resolution of such matters.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULT UPON SENIOR SECURITIES

There have been no defaults in any material payments during the covered period.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

The Company does not have any other material information to report with respect to the three months ended March 31, 2012.

ITEM 6. EXHIBITS

31.1	Certification of President, Chief Executive Officer and Principal Executive Officer as required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer and Principal Financial Officer as required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of President, Chief Executive Officer and Principal Executive Officer as required pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer and Principal Financial Officer as required pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS (1)	XBRL Instance Document
101.SCH (1)	XBRL Taxonomy Extension Schema Document
101.CAL (1)	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF (1)	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB (1)	XBRL Taxonomy Extension Label Linkbase Document
101.PRE (1)	XBRL Taxonomy Extension Presentation Linkbase Document

(1)  Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Act of 1934 and otherwise are not subject to liability.

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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.

TOPAZ RESOURCES, INC. (Registrant)
/s/ EDWARD J MUNDEN				Dated:		May 17, 2012
Edward J. Munden
President and Chief Executive Officer
(Principal Executive Officer)
Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)

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