-----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, PKALT6X7O9XTwVGqUvVX0sy9J77dCg6+VgBHPXxcc2EkIt7zashq4tS5gjlkjbZu ETKrHlS3DQTHyD1USMgCmw== 0001015402-01-501203.txt : 20010516 0001015402-01-501203.hdr.sgml : 20010516 ACCESSION NUMBER: 0001015402-01-501203 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010515 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: 1636845 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 doc1.txt 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, 2001 ---------------- [ ] 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 (IRS Employer Identification No.) incorporation 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, 2001. 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 Operations 4 Consolidated Statements of Cash Flows 5 Notes to the Consolidated Financial Statements 6-10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11 PART II. Other Information Item 1. Legal Proceedings 13 Item 2. Changes in Securities 13 Item 3. Defaults Upon Senior Securities 13 Item 4. Submission of Matters to A Vote of Security Holders 13 Item 5. Other Information 13 Item 6. Exhibits and Reports on Form 8-K 13 Signatures 14 2
- ---------------------------------------------------------------------------------------- PATAGONIA GOLD CORPORATION & SUBSIDIARY (An exploration stage enterprise) Consolidated Balance Sheets - (unaudited) March 31, 2001 and December 31, 2000 March 31 December 31 (Expressed in U.S. Dollars) 2001 2000 - ---------------------------------------------------------------------------------------- Assets Current Cash $ 28,770 $ 1,352 Receivables 106,667 59 Investments 497,885 693,171 - ---------------------------------------------------------------------------------------- Total current assets 633,322 694,582 Mineral property costs 12,250 12,250 - ---------------------------------------------------------------------------------------- Total assets $ 645,572 $ 706,832 - ---------------------------------------------------------------------------------------- Liabilities and Stockholders' Equity Liabilities Current Accounts payable and accrued liabilities $ 62,250 $ 53,646 Notes payable - 930 - ---------------------------------------------------------------------------------------- Total liabilities 62,250 54,576 - ---------------------------------------------------------------------------------------- Stockholders' Equity Share capital, Authorized 50,000,000 common shares, par value $0.001each Issued 13,000,000 common shares 13,000 13,000 Additional paid in capital 1,827,000 1,827,000 Deficit accumulated (638,760) (690,683) Accumulated other comprehensive (loss) unrealized (loss) on securities available for sale (617,918) (497,061) - ---------------------------------------------------------------------------------------- Stockholders' equity 583,322 652,256 - ---------------------------------------------------------------------------------------- Total liabilities and stockholders' equity $ 645,572 $ 706,832 - ----------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements. 3
PATAGONIA GOLD CORPORATION & SUBSIDIARY (An exploration stage enterprise) Consolidated Statements of Operations (Unaudited) For the three months ended March 31, 2001 and 2000 (Expressed in U.S. Dollars) - ----------------------------------------------------------------------------------------- Cumulative June 30 Three months Three months 1997 to Ended Ended March 31 March 31 March 31 2001 2001 2001 - ----------------------------------------------------------------------------------------- General and administrative expenses Administrative and general $ 89,680 $ 11,293 $ 9,843 Professional fees - accounting and legal 76,519 (2,860) 1,255 Salaries and consulting fees 137,146 6,000 18,463 - ----------------------------------------------------------------------------------------- 303,345 14,433 29,561 Exploration expenses 157,237 4,818 1,135 Writedown of mineral property costs 297,000 - - - ----------------------------------------------------------------------------------------- 757,582 19,251 30,696 - ----------------------------------------------------------------------------------------- Less: Income (loss) Interest income 34,399 698 84 Dividend income 2,835 - - Realized gain (loss) on - sale of investments 100,553 70,588 - Interest expense (15,246) (112) (121) Foreign exchange gain (loss) (3,719) - - - ----------------------------------------------------------------------------------------- 118,822 71,174 (37) - ----------------------------------------------------------------------------------------- Net loss for the period $ 638,760 $ (51,923) $ 30,733 ========================================================================================= (Loss) per share $ (0.00) $ 0.00 ========================================================================================= Weighted average number of common shares outstanding 13,000,000 13,000,000 =========================================================================================
The accompanying notes are an integral part of these financial statements. 4
PATAGONIA GOLD CORPORATION & SUBSIDIARY (An exploration stage enterprise) Consolidated Statements of Cash Flows (Unaudited) Three months ended March 31, 2001 and 2000 (Expressed in U.S. Dollars) - -------------------------------------------------------------------------------------------------- Cumulative June 30 Three months Three months 1997 to Ended Ended March 31 March 31 March 31 2001 2001. 2000 - -------------------------------------------------------------------------------- ----------------- Cash flows from (used in) operating activities Net income (loss) for the period $ (638,760) $ 51,923 $ (30,733) Adjustments to reconcile net loss to net cash used in operating activities: realized loss (gain) on sale of investments (104,302) (70,587) - expenses satisfied with common stock 3,000 - - write-down of mineral properties 297,000 - - - -------------------------------------------------------------------------------------------------- (443,062) (18,664) (30,733) Changes in assets and liabilities: decrease (increase) in accounts receivable (106,667) (106,608) (7) increase in accounts payable 62,250 8,604 3,000 - -------------------------------------------------------------------------------------------------- (487,479) (116,668) (27,740) - -------------------------------------------------------------------------------------------------- Cash flows from (used in) investing activities Purchase of available-for-sale securities (2,244,408) (64,667) - Proceeds on sale of available-for-sale securities 1,232,907 209,683 - Mineral property costs (12,250) - - - -------------------------------------------------------------------------------------------------- (1,023,751) 145,016 - - -------------------------------------------------------------------------------------------------- Cash flows from financing activities Proceeds from issuance of common stock 1,540,000 - - Proceeds from notes payable - (930) 10,300 - -------------------------------------------------------------------------------------------------- 1,540,000 (930) 10,300 - -------------------------------------------------------------------------------------------------- Increase (decrease) in cash for the period 28,770 27,418 (17,440) Cash and cash equivalents, beginning of period - 1,352 22,913 - -------------------------------------------------------------------------------------------------- Cash and cash equivalents, end of period $ 28,770 $ 28,770 $ 5,473 - --------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements. 5 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. These consolidated financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The continued operations of the Company and the recoverability of mineral property costs is dependent upon the existence of economically recoverable mineral reserves, confirmation of the Company's interest in the underlying mineral claims, the ability of the Company to obtain necessary financing to complete the development and upon future profitable production. The Company has incurred recurring operating losses and requires additional funds to meet its obligations and maintain its operations. Management's plans in this regard are to raise equity financing as required. These conditions raise substantial doubt about the Company's ability to continue as a going concern. These financial statements do not include any adjustments that might result from this uncertainty. The Company has not generated any operating revenues to date. 2. Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions for Form 10-QSB and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three-month month period ended March 31, 2001 are not necessarily indicative of the results that may be expected for the year ended December 31, 2001. 6 The balance sheet at December 31, 2000 has been derived from the audited financial statements at that date. The consolidated financial statements and footnotes thereto included in the Patagonia Gold Corporation Annual Report on Form 10-KSB for the year ended December 31, 2000 should be reviewed in connection with these condensed consolidated financial statements. 3. 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) 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 costs deferred. As at March 31, 2001 and December 31, 2000, 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. (c) 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. (d) Advertising Expenses The Company expenses advertising costs as incurred. Total advertising costs charged to expenses for the three-months ended March 31, 2001 and 2000 were $0 and $0, respectively. (e) 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. (f) 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. 7 (g) 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. (h) 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. (i) 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". (j) 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. (k) 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 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. 8
4. Investments Investments consist of available-for-sale securities and are summarized as follows: - ---------------------------------------------------------------------------------------------- Gross Gross Accumulated unrealized unrealized unrealized Market Cost gains losses gains (losses) value - ---------------------------------------------------------------------------------------------- January 1, 1997 Equity securities $ - $ - $ - $ - $ - Change during the year 225,463 151,673 - 151,673 377,136 - ---------------------------------------------------------------------------------------------- December 31, 1997 Equity securities 225,463 151,673 - 151,673 377,136 Change during the year 1,092,234 223,556 125,470 98,086 1,190,320 - ---------------------------------------------------------------------------------------------- December 31, 1998 Equity securities 1,317,697 375,229 125,470 249,759 1,567,456 Change during the year (26,156) (352,795) 267,173 (619,968) (646,124) - ---------------------------------------------------------------------------------------------- December 31, 1999 Equity securities 1,291,541 22,434 392,643 (370,209) 921,332 Change during the year (101,309) 148,788 275,640 (126,852) (228,161) - ---------------------------------------------------------------------------------------------- December 31, 2000 Equity securities $ 1,190,232 $ 171,222 $ 668,283 $ (497,061) $ 693,171 Change during the year (74,429) (97,758) 23,099 (120,857) (195,286) - ---------------------------------------------------------------------------------------------- March 31, 2001 Equity securities 1,115,803 73,464 691,382 (617,918) 497,885 ==============================================================================================
Unrealized gains totalling $0 (December 31, 2000 - $0; December 31, 1999 - $7,949; December 31, 1998 - $174,043; December 31, 1997 - $151,673) relate to investments held by the Company's Bermuda subsidiary and are not subject to income tax. 5. Mineral Property Costs (a) Argentina Mineral concessions in the Province of La Rioja, Argentina, are as follows: - Piloncho 1, Sierra de Chepes - Piloncho 2, Sierra de Chepes - Piloncho 20, Sierra de Chepes - Piloncho 21, Sierra de Chepes - Carmelita 16, Sierra de Chepes - Carmelita 17, Sierra de Chepes - Carmelita 18, Sierra de Chepes 9 (b) Guatamala Pursuant to an agreement dated October 1, 1999, the Company has paid $9,250 of acquisition cost, spent $18,617 towards the required exploration program and earned a 50% interest in the San Diego Mineral Exploration Reconnaissance License. 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. 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. 7. Income Taxes (a) The Company has estimated net losses for tax purposes to December 31, 2000, totalling approximately $680,000, 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, 2000 and 1999. 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 2020 66,000 -------------------------------- 680,000 ================================ (b) The tax effects of temporary differences that give rise to the Company's deferred tax asset (liability) is as follows: ------------------------------------------------- 2000 1999 ------------------------------------------------- Tax loss carry forwards $ 22,000 $ 157,000 Valuation allowance (22,000) (157,000) ------------------------------------------------- $ - $ - ================================================= No tax effect has been 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. Related Party Transactions Related party transactions not disclosed elsewhere in these financial statements for the three-months ended March 31, 2001, include salaries of $0 (2000 - $0). 10 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 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. The Company is engaged in the location, acquisition, exploration and, if warranted, development of mineral resource properties. 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. 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 2001 The Company is currently concentrating its exploration activities in Argentina and Guatemala. The Company is also examining other exploration properties in Mexico. An exploration work program on the San Diego reconnaissance license, Guatemala, started in the fourth quarter of 1999 was completed during the first quarter of 2000. The program included geological mapping and soil and rock sampling. The aim of the preliminary exploration work was to identify a number of highly prospective areas for which applications for mineral exploration licenses will be made, and subsequently undertake more comprehensive work. The Company's exploration work program in 2001 will entail surface mapping of geology, sampling of soils on a grid basis to delineate geochemical anomalies, stream sediment sampling and geophysical surveying. The data assembled from this work will be used to determine whether: (i) further exploration is warranted; or (ii) whether the mineral reconnaissance license should be surrendered. During the three-months ended March 31, 2001, the Company continued its preliminary field assessment and sampling programs on its Argentina properties. The fieldwork consisted of reconnaissance, mapping and sampling of individual outcrops. The Company's exploration work program in 2001 will entail surface mapping of geology, sampling of soils on a grid basis to delineate geochemical anomalies, stream sediment sampling and geophysical surveying. The data assembled from this work will be used to determine whether: (i) further exploration is warranted; or (ii) whether mineral exploration concession licenses should be surrendered. All of the Company's properties are in the exploration stages only and are without a known body of Mineral Reserves. Development of the properties will follow only if satisfactory exploration results are obtained. Mineral exploration and development involves a high degree of risk and few properties that are explored are ultimately developed into producing mines. There is no assurance that the Company's mineral exploration and development activities will result in any discoveries of commercially viable bodies of mineralization. The long-term profitability of the Company's operations will be, in part, directly related to the cost and success of its exploration programs, which may be affected by a number of factors. 11 On May 8, 2001 The Board of Directors of Patagonia Gold Corporation announced that Mr. David Jenkins resigned from the Board of Directors and as President of the Company to pursue other interests. Mr. Terry Longair was appointed to the Board of Directors of the Corporation and President of the Company. (C) Financial Information Three-Months Ended March 31, 2001 versus Three-Months Ended March 31, 2000 For the three-months ended March 31, 2001 the Company recorded a profit of $51,923 or $0.00 per share, compared to a loss of $30,733 or $0.00 per share in 2000. General and administrative expenses - For the three-months ended March 31, 2001 the Company recorded general and administrative expenses of $11,293, compared to $9,843 in 2000. Professional fees - accounting and legal - For the three-months ended March 31, 2001 the Company recorded accounting and legal fees of $-2,860, compared to $1,255 in 2000. Exploration expenditures - For the three-months ended March 31, 2001 the Company recorded exploration expenses of $4,818, compared to $1,135 in 2000. (D) Financial Condition and liquidity At March 31, 2001, the Company had cash of $28,770 (2000 - $5,473) and working capital of $571,072 (2000 working capital - $1,131,046) respectively. Total liabilities as of March 31, 2001 were $62,250 as compared to $125,179 on March 31, 2000, a decrease of $62,929. During 2001 financing activities consisted of the following, proceeds from notes and advances payable $0 (2000 - $10,300), repayment of notes and advances payable $930 (2000 - $0). In Fiscal 2001 investing activities consisted of additions to mineral properties $0 (2000 - $0), purchases of available-for-sale securities $64,667 (2000 - $0) and proceeds from the sale of available-for-sale securities $209,683 (2000 - $0). The Company recorded a gain of $70,587 (2000 - loss of $0) on the sale of available-for-sale securities. For the three-months ended March 31, 2001 the Company recorded a profit of $51,923, or $0.00 per share compared to a loss of $30,733 ($0.00 per share) in 2000. The Company does not have sufficient working capital to (i) pay its administrative and general operating expenses through December 31, 2001 and (ii) to conduct its preliminary exploration programs. 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. 12 The Company has not declared or paid dividends on its shares since incorporation and does not anticipate doing so in the foreseeable future. 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. * 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 * - -------- * Previously Filed (b) Reports on Form 8-K None. 13 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: May 11, 2001 BY: /s/ Terry Longair -------------- ------------------- Terry Longair Director and President Date: May 11, 2001 BY: /s/ Cosme M. Beccar Varela -------------- ---------------------------- Cosme M. Beccar Varela Director 14 -----END PRIVACY-ENHANCED MESSAGE-----