-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BZQFxMhCoyQHb+m6pr1kCdxk+ke6VX4+J3tZwyqbEPk/gedeEO0dUXOgQBzhXksp VOqC0HUwpmj/+AqDsc0nFg== 0000891554-00-001216.txt : 20000503 0000891554-00-001216.hdr.sgml : 20000503 ACCESSION NUMBER: 0000891554-00-001216 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000502 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PATAGONIA GOLD CORP /BC CENTRAL INDEX KEY: 0001049576 STANDARD INDUSTRIAL CLASSIFICATION: METAL MINING [1000] IRS NUMBER: 650401897 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-26531 FILM NUMBER: 616922 BUSINESS ADDRESS: STREET 1: 1060 ALBERNI STREET STREET 2: SUITE 1505 CITY: VANCOUVERBC STATE: A1 ZIP: V6C 2W2 BUSINESS PHONE: 6046874432 MAIL ADDRESS: STREET 1: SUITE 1505-1060 ALBERNI STREET CITY: VANCOUVER BC 10QSB 1 FORM 10-QSB UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2000 [_] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT For the transition period from ___________________ to ___________________ Commission file number 0-26531 PATAGONIA GOLD CORPORATION (Exact name of small business issuer as specified in its charter) Florida 65-0401897 (State or other jurisdiction of incorporation (IRS Employer Identification No.) or organization) 1505 - 1060 ALBERNI STREET, VANCOUVER B.C. CANADA V6E 4K2 (Address of principal executive offices) (604) 687-4432 (Issuer's Telephone Number) - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Check whether the issuer (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 the past 90 days. YES [X] NO [_] APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS Check, whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15 (d) of the Exchange Act after the distribution of securities under a plan confirmed by court. YES [ ] NO [ ] APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 13,000,000 shares of Common Stock were outstanding as of March 31, 2000. Transitional Small Business Disclosure Format (check one); YES [_] NO [X] PATAGONIA GOLD CORPORATION This quarterly report contains statements that plan for or anticipate the future and are not historical facts. In this Report these forward looking statements are generally identified by words such as "anticipate", "plan", "believe", "expect", "estimate", and the like. Because forward looking statements involve future risks and uncertainties, these are factors that could cause actual results to differ materially from the estimated results. These risks and uncertainties are detailed in Part 1 - Financial Information - Item 1. "Financial Statements", Item 2. "Management's Discussion and Analysis or Plan of Operation". The Private Securities Litigation Reform Act of 1995, which provides a "safe harbor" for such statements, may not apply to this Report. PART 1. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS PAGE ------ Consolidated Balance Sheets 3 Consolidated Statements of Stockholders' Equity 4 Consolidated Statements of Operations 5 Consolidated Statements of Cash Flows 6 Notes to the Consolidated Financial Statements 7-11 PATAGONIA GOLD CORPORATION (An exploration stage enterprise) Consolidated Balance Sheets - (Unaudited) March 31, 2000 and December 31, 1999 (Expressed in US Dollars)
- ----------------------------------------------------------------------------------------- 2000 1999 - ----------------------------------------------------------------------------------------- ASSETS Current Cash $ 5,473 $ 22,913 Receivables 14 7 Investments (Note 3) 1,250,738 921,332 -------------------------- 1,256,225 944,252 Mineral property costs (Note 4) 12,250 12,250 - ----------------------------------------------------------------------------------------- Total assets $ 1,268,475 $ 956,502 - ----------------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities Current Accounts payable and accrued liabilitie $ 38,000 $ 35,000 Notes payable (Note 5) 87,179 76,879 - ----------------------------------------------------------------------------------------- Total liabilities 125,179 111,879 - ----------------------------------------------------------------------------------------- Stockholders' Equity Share capital, Authorized (Note 6) 50,000,000 common shares, par value $0.001 each 1 Issued 13,000,000 common shares (1997 - 13,000,000) 13,000 13,000 Additional paid in capital 1,827,000 1,827,000 Accumulated deficit (655,901) (625,168) Accumulated other comprehensive income (loss) Unrealized (loss) gains on securities available for sale (40,803) (370,209) -------------------------- 1,143,296 844,623 - ----------------------------------------------------------------------------------------- Total liabilities and stockholders' equity $ 1,268,475 $ 956,502 - -----------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements. 3 PATAGONIA GOLD CORPORATION (An exploration stage enterprise)
Consolidated Statements of Stockholders' Equity Three months ended March 31, 2000 and the years ended December 31, 1999 and 1998 (Unaudited) (Expressed in US Dollars) - ------------------------------------------------------------------------------------------------------------------------------------ Accumulated Compre- Other Common Stock Additional hensive Compre- Total ------------------------ Paid-In Income Accumulated hensive Stockholder's Shares Amount Capital (loss) Deficit Income (loss) Equity - ----------------------------------------------------------------------------------------------------------------------------------- Balance, January 1, 1998 13,000,000 $ 13,000 $ 1,827,000 $ -- $ (28,577) $ 151,673 $ 1,963,096 - ----------------------------------------------------------------------------------------------------------------------------------- Net loss for the year -- -- -- (135,708) (135,708) -- (135,708) Change in unrealized gains -- -- -- 98,086 -- 98,086 98,086 - ----------------------------------------------------------------------------------------------------------------------------------- Total comprehensive income -- -- -- (37,622) (135,708) 98,086 (37,622) - ----------------------------------------------------------------------------------------------------------------------------------- Balance, December 31, 1998 13,000,000 13,000 1,827,000 (164,285) 249,759 1,925,474 - ----------------------------------------------------------------------------------------------------------------------------------- Net loss for the year -- -- -- (460,883) (460,883) -- (460,883) Change in unrealized loss -- -- -- (619,968) -- (619,968) (619,968) - ----------------------------------------------------------------------------------------------------------------------------------- Total comprehensive income -- -- -- (1,080,851) (460,883) (619,968) (1,080,851) - ----------------------------------------------------------------------------------------------------------------------------------- Balance, December 31, 1999 13,000,000 13,000 1,827,000 (625,168) (370,209) 844,623 - ----------------------------------------------------------------------------------------------------------------------------------- Net loss for the period -- -- -- (30,733) (30,733) -- (30,733) Change in unrealized loss -- -- -- 329,406 -- 329,406 329,406 - ----------------------------------------------------------------------------------------------------------------------------------- Total comprehensive income -- -- -- 298,673 (30,733) 329,406 298,673 - ----------------------------------------------------------------------------------------------------------------------------------- Balance, March 31, 2000 13,000,000 $ 13,000 $ 1,827,000 $ (655,901) $ (40,803) $ 1,143,296 - -----------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements. 4 PATAGONIA GOLD CORPORATION (An exploration stage enterprise) Consolidated Statements of Operations Three months ended March 31, 2000 and 1999 (Unaudited) (Expressed in US Dollars)
- -------------------------------------------------------------------------------------------------------------- Three months March 31 Ended 1993 (inception) March 31 to March 31 ---------------------------------- 2000 2000 1999 - -------------------------------------------------------------------------------------------------------------- General and administrative expenses Administration and general $ 54,910 $ 9,843 $ 3,845 Professional fees - accounting and legal 71,659 1,255 9,220 Salaries and consulting fees 96,959 18,463 11,767 - -------------------------------------------------------------------------------------------------------------- 223,528 29,561 24,832 Exploration expenses 152,419 1,135 5,142 Writedown of mineral property costs 297,000 -- -- - -------------------------------------------------------------------------------------------------------------- 672,947 30,696 29,974 - -------------------------------------------------------------------------------------------------------------- Less: Income (loss) Interest income 33,529 84 397 Dividend income 2,835 -- -- Realized gain (loss) on sale of investments (1,875) -- -- Interest expense (14,793) (121) (186) Foreign exchange loss (2,650) -- -- - -------------------------------------------------------------------------------------------------------------- 17,046 (37) 211 - -------------------------------------------------------------------------------------------------------------- Net loss for the period (655,901) $ (30,733) $ (29,763) - -------------------------------------------------------------------------------------------------------------- Loss per share $ (0.00) $ (0.00) - -------------------------------------------------------------------------------------------------------------- Weighted average shares outstanding 13,000,000 13,000,000 - --------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements 5 PATAGONIA GOLD CORPORATION (An exploration stage enterprise) Consolidated Statements of Operations Three months ended March 31, 2000 and 1999 (Unaudited) (Expressed in US Dollars)
- ------------------------------------------------------------------------------------------------------------------------------------ March 31, Three months 1993 (inception) Ended to December 31 March 31 -------------------------------- 2000 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Cash flows from (used in) operating activities Net loss for the period $ (655,901) $ (30,733) $ (29,763) Adjustments to reconcile net loss to net cash used in operating activities: - realized loss (gain on sale of investments (1,875) -- -- - writedown of mineral properties 297,000 -- -- - ------------------------------------------------------------------------------------------------------------------------------------ (360,776) (30,733) (29,763) Changes in assets and liabilities - decrease (increase) in accounts receivable (14) (7) (113) - increase (decrease) in accounts payable 38,000 3,000 1,184 - ------------------------------------------------------------------------------------------------------------------------------------ (322,790) (27,740) (28,692) - ------------------------------------------------------------------------------------------------------------------------------------ Cash flows from (used in) investing activities Purchase of available for sale securities (2,178,119) -- -- Proceeds on sale of available-for-sale securities 888,453 -- -- Mineral property costs (12,250) -- -- - ------------------------------------------------------------------------------------------------------------------------------------ (1,301,916) -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Cash flows from financing activities Proceeds from issuance of common stock 1,540,000 -- -- Proceeds from notes payable 90,179 10,300 -- - ------------------------------------------------------------------------------------------------------------------------------------ 1,630,179 10,300 -- - ------------------------------------------------------------------------------------------------------------------------------------ Increase (decrease) in cash for the period 5,473 (17,440) (28,692) Cash, beginning of period -- 22,913 73,651 - ------------------------------------------------------------------------------------------------------------------------------------ Cash, end of period $ 5,473 $ 5,473 $ 44,959 - ------------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements. 6 Notes to Interim Consolidated Financial Statements (Unaudited) 1. Nature of Business and Going Concern The Company was incorporated under the laws of the State of Florida on March 31, 1993 and is in the business of exploration and development of mineral properties. On October 13, 1997, the Company changed its name to Patagonia Gold Corporation. The Company was inactive until June 30, 1997, when it entered into a share exchange agreement with the shareholders of Patagonia Gold Mines Ltd. ("PGM"), an inactive company incorporated in 1994 under the laws of Bermuda, whereby the Company acquired all issued and outstanding share of PGM in exchange for 5,500,000 common shares of the Company. There were no operations of the companies prior to June 30, 1997. At the conclusion of the transaction, the former shareholders of PGM controlled the Company and, thus, the transaction has been accounted for as a reverse acquisition of the Company by PGM. Consistent with accounting principles governing the accounting for reverse acquisitions, these consolidated financial statements are accounted for as a continuation of the legal subsidiary. The acquisition was recorded using the purchase method. As the net book value of the Company at the date of the acquisition was $Nil, a nominal value has been assigned to shares issued pursuant to the share exchange agreement. Also on July 30, 1997, the Company acquired mineral properties in Argentina in exchange for the issuance of 3,000,000 common shares. The mineral properties were valued at $300,000. During the year ended December 31, 1999, the Company determined that the carrying value of the Argentinean mineral properties exceeded the future projected cash flows from the mineral properties. Consequently, the mineral properties were written down to their estimated fair value of $3,000. The recovery of the amounts shown for interests in mineral properties is dependent upon the discovery of economically recoverable reserves or proceeds from the disposition thereof, confirmation of the Company's interest in the underlying mineral claims, the ability of the Company to obtain financing to complete development of the properties and on future profitable operations. 2. Significant Accounting Policies (a) Basis of Consolidation These consolidated financial statements, prepared in accordance with accounting principles generally accepted in the United States, include the accounts of the Company and its wholly-owned subsidiary, Patagonia Gold Mines Ltd., a company incorporated in 1994 under the laws of Bermuda. Significant inter-company accounts and transactions have been eliminated. (b) Cash and Cash Equivalents Cash equivalents are comprised of certain highly liquid instruments with a maturity of three months or less when purchased. There were no cash equivalents as of March 31, 2000. (c) Mineral Properties and Exploration Expenses Exploration costs are charged to operations as incurred as are normal development costs until such time that proven reserves are discovered. From that time forward, the Company will capitalize all costs to the extent that future cash flow from reserves equals or exceeds the 7 costs deferred. As at March 31, 2000 and December 31, 1999, the Company did not have proven reserves. Cost of initial acquisition of mineral rights and concessions are capitalized until the properties are abandoned or the right expires. Exploration activities conducted jointly with others are reflected at the Company's proportionate interest in such activities. Costs related to site restoration programs are accrued over the life of the project. (d) Investments Available-for-sale securities are carried at fair market value with unrealised holding gains and losses included in stockholders' equity. Realized gains and losses are determined on an average cost basis when securities are sold. (e) Concentration of Credit Risk The Company places its cash and cash equivalents with high credit quality financial institutions. The Company routinely maintains balances in a financial institution beyond the insured amount. As of March 31, 2000 the Company had $ nil in a bank beyond insured limits. (f) Foreign Currency Transactions Foreign currency accounts are translated into U.S. dollars as follows: At the transaction date, each asset, liability, revenue and expense is translated into U.S. dollars by the use of the exchange rate in effect at that date. At the period end, monetary assets and liabilities are translated into U.S. dollars by using the exchange rate in effect at that date. The resulting foreign exchange gains and losses are included in operations. (g) Advertising Expenses The Company expenses advertising costs as incurred. Total advertising costs charged to expenses for the three months ended March 31, 2000 and 1999 were $Nil and $Nil, respectively. (h) Impairment Certain long-term assets of the Company are reviewed when changes in circumstances require as to whether their carrying value has become impaired, pursuant to guidance established in Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of". Management considers assets to be impaired if the carrying value exceeds the future projected cash flows from related operations (undiscounted and without interest charges). If impairment is deemed to exist, the assets will be written down to fair value. (i) Accounting 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 and assumptions. 8 (j) Fair Value of Financial Instruments The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, receivables, investments and accounts payable and accrued liabilities. Fair values were assumed to approximate carrying values for these financial instruments, except where noted, since they are short term in nature and their carrying amounts approximate fair values or they are receivable or payable on demand. Management is of the opinion that the Company is not exposed to significant interest, credit or currency risks arising from these financial instruments. (k) Income Taxes The Company has adopted Statement of Financial Accounting Standards (SFAS") No. 109, "Accounting for Income Taxes", which requires the Company to recognize deferred 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 using the liability method. Under this method, deferred tax liabilities and assets are determined based on the temporary differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. (l) Loss Per Share Loss per share is computed using the weighted average number of shares outstanding during the year. Effective for the year ended December 31, 1997, the Company adopted SFAS No. 128, "Earnings Per Share". (m) Comprehensive Income In 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive Income", which establishes standards for reporting and display of comprehensive income, its components and accumulated balances. The Company is disclosing this information on its Statement of Stockholders' Equity. Comprehensive income comprises equity except those resulting from investments by owners and distributions to owners. SFAS No. 130 did not change the current accounting treatments for components of comprehensive income. (n) New Accounting Pronouncements In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133 requires companies to recognize all derivatives contracts as either assets or liabilities in the balance sheet and to measure them at fair value. If certain conditions are met, a derivative may be specifically designated as a hedge, the objective of which is to match the timing of gain or loss recognition on the hedging derivative with the recognition of (i) the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk or (ii) the earnings effect of the hedged forecasted transaction. For a derivative not designated as a hedging instrument, the gain or loss is recognized in income in the period of change. SFAS No. 133 is effective for all fiscal quarters of fiscal years beginning after June 15, 2000. Historically, the Company has not entered into derivatives contracts either to hedge existing risks or for speculative purposes. Accordingly, the Company does not expect adoption of the new standards on January 1, 2000 to affect its financial statements. In April 1998, the American Institute of Certified Public Accountants issued Statement of Position 98-5, "Reporting on the Costs of Start-up Activities", ("SOP 98-5") which provides guidance on the financial reporting of start-up costs and organization costs. It requires costs of start-activities and organization costs to be expensed as incurred. SOP 98-5 is effective for 9 fiscal years beginning after December 15, 1998 with initial adoption reported as the cumulative effect of a change in accounting principle. Adoption of this standard has no material effect on the financial statements. 3. Investments Investments consist of available-for-sale securities and are summarized as follows: Gross Gross unrealized unrealized Market Cost gains losses value --------------------------------------------------------------------------- March 31, 2000 Equity securities $1,291,541 $ 224,943 $ 265,746 $1,250,738 =========================================================================== December 31, 1999 Equity securities $1,291,541 $ 22,434 $ 392,643 $ 921,332 =========================================================================== Unrealised losses totalling $73,440 (December 31, 1999 - $7,949) relate to investments held by the Company's Bermuda subsidiary and are not subject to income tax. 4. Mineral Property Costs (a) Argentina Mineral concessions in the Province of La Rioja, Argentina, are as follows: o Piloncho 1, Sierra de Chepes o Piloncho 2, Sierra de Chepes o Piloncho 20, Sierra de Chepes o Piloncho 21, Sierra de Chepes o Carmelita 16, Sierra de Chepes o Carmelita 17, Sierra de Chepes o Carmelita 18, Sierra de Chepes (b) Guatamala On October 1, 1999, the Company entered into an agreement that gives the Company the right to earn a 50% interest in the San Diego Mineral Exploration Reconnaissance Licence by paying: o A $9,250 acquisition fee (paid); and o $18,617 towards the Phase I exploration program. 5. Notes Payable Loans payable are unsecured, non-interest bearing and are due on demand. 6. Share Capital On April 9, 1997, the Company amended its Articles of Incorporation to provide for the authorization of 50,000,000 common shares at $0.001 par value. Previously, the authorized capital was 200 common shares of no par value. 10 Also, on April 9, 1997, the Company forward split its common stock 5,000:1, thus increasing the number of issued and outstanding common shares from 200 shares to 1,000,000 shares. This split has been reflected retroactively in these financial statements. Income 7. Taxes (a) The Company has estimated net losses for tax purposes to December 31, 1999, totalling approximately $614,000, which may be applied against future taxable income. Accordingly, there is no tax expense charged to the Statement of Operations for the years ended December 31, 1999 and 1998. The Company evaluates its valuation allowance requirements on an annual basis based on projected future operations. When circumstances change and this causes a change in management's judgement about the realizability of deferred tax assets, the impact of the change on the valuation allowance is generally reflected in current income. The right to claim these losses is expected to expire as follows: 2008 $ 10,000 2012 16,000 2018 128,000 2019 460,000 --------------------------------- $614,000 ================================= (b) The tax effects of temporary differences that give rise to the Company's deferred tax asset (liability) are as follows: 1999 1998 ---------------------------------------------------------------------- Tax loss carry forwards $ 157,000 $ 52,000 Valuation allowance (157,000) (52,000) ---------------------------------------------------------------------- $ -- $ -- ====================================================================== No tax effect haseen recorded on the accumulated other comprehensive income unrealized gains on securities available-for-sale due to the existence of U.S. tax loss carry forwards. 8. Comparative Figures Certain 1999 comparative figures have been reclassified to conform with the financial statement presentation adopted for 2000. 9. Related Party Transactions Related party transactions not disclosed elsewhere in these financial statements for the three months ended March 31, 2000, include salaries of $10,000 (1999 - $Nil), which were paid to a director of the Company and were charged to operations in 2000. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS (A) General Patagonia Gold Corporation (the "Company" or "Patagonia") was incorporated under the laws of the State of Florida on March 31, 1993, under the name "Cayman Purchasing & Supply, Inc." The 11 Company was inactive until it redirected its business efforts in mid 1997 following a change of management, which occurred on June 25, 1997, to the acquisition, exploration and, if warranted, the development of mineral resource properties. The Company changed its name to Patagonia Gold Corporation on October 13, 1997 to more fully reflect its business activities. Since its redirection, the Company's activities have been limited primarily to the acquisition of rights to certain mineral properties and the implementation of preliminary exploration programs on these properties in which it has acquired an interest. The Company is engaged in the location, acquisition, exploration and, if warranted, development of mineral resource properties. All of the mineral properties in which the Company has an interest or a right to acquire an interest in are currently in the exploration stage. None of the properties have a known body of Mineral Reserves. The Company's primary objective is to explore for gold, silver, base metals and industrial minerals and, if warranted, to develop those existing mineral properties. Its secondary objective is to locate, evaluate, and acquire other mineral properties, and to finance their exploration and development either through equity financing, by way of joint venture or option agreements or through a combination of both. Currently, the Company's activities are centered in Argentina and Guatemala. During 1999 and the first quarter of 2000, the Company conducted initial exploration programs for gold mineralization on its properties in Argentina and Guatemala. In Guatemala, the Company entered into a joint venture agreement with Aurora Gold Corporation in October 1999 to conduct initial mineral exploration on the San Diego Exploration Reconnaissance Licence. The licence was granted to Aurora Gold Corporation in September 1999. Initial exploration work begun in 1999 continued during the first quarter of 2000. None of the Company's properties contain any known Mineral Reserves. The Company's common stock is traded on the NASD's OTC Bulletin Board. The Company has not declared or paid dividends on its shares since incorporation and does not anticipate doing so in the near future. The Company's offices are located at 1505 - 1060 Alberni Street, Vancouver, British Columbia, Canada, V6E 4K2. (B) Significant developments during the first quarter of 2000 In October 1999 the Company entered into a joint venture with Aurora Gold Corporation for preliminary exploration of the San Diego reconnaissance license located in Guatemala. The reconnaissance licence covers 800 square kilometers. An exploration program funded by Patagonia Gold Corporation commenced on the most prospective areas during the last quarter of 1999 and continued during the first quarter of 2000. (C) Financial Information Three Months Ended March 31, 2000 versus Three Months Ended March 31, 1999 For the three months ended March 31, 2000 the Company recorded a loss of $30,733 or $0.00 per share, compared to a loss of $29,763 or $0.00 per share in 1999. General and administrative expenses - For the three months ended March 31, 2000 the Company recorded general and administrative expenses of $9,843, compared to $3,845 in 1999. 12 Professional fees - accounting and legal - For the three months ended March 31, 2000 the Company recorded accounting and legal fees of $1,255, compared to $9,220 in 1999. The 1999 costs reflect the costs associated with the preparation and filing of the Company's Form 10-SB Registration Statement. Exploration expenditures - For the three months ended March 31, 2000 the Company recorded exploration expenses of $1,135, compared to $5,142 in 1999. (D) Financial Condition and liquidity At March 31, 2000, the Company had cash of $5,473 (1999 - $44,959) and working capital of $1,131,046 (1999 - $1,490,622) respectively. Total liabilities as of March 31, 2000 were $125,179 as compared to $17,037 on March 31, 1999, an increase of $108,142. During the three months ended March 31, 2000 financing activities consisted of the following, proceeds from notes and advances payable $10,300 (1999 - $0). For the three months ended March 31, 2000 investing activities consisted $0 (1999 - $0). The Company recorded a loss for the three months ended March 31, 2000 of $30,733, or $0.00 per share, compared to a loss of $29,763 ($0.00 per share) in 1999. The Company has sufficient working capital to (i) pay its administrative and general operating expenses through December 31, 2000 and (ii) to conduct preliminary exploration programs. However, without cash flow from operations, it may need to obtain additional funds (presumably through equity offerings and/or debt borrowing) in order, if warranted, to implement additional exploration programs on its properties. Failure to obtain such additional financing may result in a reduction of the Company's interest in certain properties or an actual foreclosure of its interest. The Company has no agreements or understandings with any person as to such additional financing. None of the Company's properties has commenced commercial production and the Company has no history of earnings or cash flow from its operations. While the Company may attempt to generate additional working capital through the operation, development, sale or possible joint venture development of its properties, there is no assurance that any such activity will generate funds that will be available for operations. The Company has not declared or paid dividends on its shares since incorporation and does not anticipate doing so in the foreseeable future. (E) Year 2000 issues The "Year 2000 problem", as it has come to be known, refers to the fact that many computer programs use only the last two digits to refer to a year, and therefore recognize a year that begins with "20" as instead beginning with "19". For example, the year 2000 would be read as being the year 1900. If not corrected, this problem could cause many computer applications to fail or create erroneous results. The Company has modified and tested all the critical applications of its information technology ("IT"), the result of which is that all such critical applications are now Year 2000 compliant. The Company believes that virtually all of the non-critical applications of its IT are Year 2000 compliant. The Company is using independent consultants to oversee the Year 2000 project as well, as to perform certain remediation efforts. In addition, progress on the Year 2000 project is also monitored by senior management, and reported to the Board of Directors. The total amount of the payments made to date and to be made hereafter to such independent consultant are not expected to be material. New equipment and software was installed during the third and fourth quarters of 1999. Based on the Company's analysis to date, the Company believes that its material non-IT systems are either Year 2000 compliant, or do not need to be made Year 2000 compliant in order to continue to function in substantially the same manner in the Year 2000. The Company's Year 2000 compliance work has not caused, nor does the Company expect that it will cause, a deferral on the part of the Company of any material IT or non-IT projects. 13 However, there can be no assurance that any of the Company's vendors or others, with whom it transacts business, will be Year 2000 compliant prior to such date. The company is unable to predict the ultimate affect that the Year 2000 problem may have upon the Company, in that there is no way to predict the impact that the problem will have nation-wide or world-wide and how the Company will in turn be affected, and, in addition, the company cannot predict the number and nature of its vendors and customers who will fail to become Year 2000 compliant prior to January 1, 2000. Significant Year 2000 difficulties on the part of vendors or customers could have a material adverse impact upon the Company. The Company intends to monitor the progress of its vendors and customers in becoming Year 2000 compliant. The Company has formulated a contingency plan to deal with the potential non-compliance of vendors and customers. As of April 30, 2000 the Company has not experienced any year 2000 problems nor has any of the Company's vendors or others with whom it transacts business. PART 11. OTHER INFORMATION ITEM 1. Legal Proceedings The Company is not party to any litigation, and has no knowledge of any pending or threatened litigation against it. ITEM 2. Changes in Securities Not Applicable ITEM 3. Defaults Upon Senior Securities Not Applicable ITEM 4. Submission of Matters to a Vote of Security Holders Not Applicable ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: 3.1 Article of Incorporation of Cayman Purchasing & Supply, Inc. * 3.2 Company By-laws for Cayman Purchasing & Supply, Inc. * 3.3 Notice of reinstatement for Cayman Purchasing & Supply, Inc. * 3.4 Amendment to the Articles of Incorporation of Cayman Purchasing & Supply, Inc. * 14 4 3.5 Notice of filing of Amendment to the Articles of Incorporation of Cayman Purchasing & Supply, Inc. * 3.6 Notice of filing of Amendment to the Articles of Incorporation of Cayman Purchasing & Supply, Inc. changing its name to Patagonia Gold Corporation * 10.1 Agreement dated July 30, 1997 between The Company and Carrington International Limited * 10.2 Joint Venture Agreement between the Company and Aurora Gold Corporation * 27.1 Financial Data Schedule - -------- * Previously Filed (b) Reports on Form 8-K None. 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 thereunder duly authorized. Date: April 30, 2000 BY: /s/ David Jenkins --------------------------- David Jenkins Director and President Date: April 30, 2000 BY: /s/ Cosme M. Beccar Varela -------------------------- Cosme M. Beccar Varela Director 15 EX-27 2 FDS --
5 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 5,473 1,250,738 14 0 0 1,256,225 12,250 0 1,268,475 125,179 0 0 0 13,000 1,130,296 1,268,475 0 0 0 0 30,733 0 0 (30,733) 0 (30,733) 0 0 0 (30,733) (0.00) (0.00)
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