Converted by EDGARwiz

10QSB 1 jun05file10q.htm Converted by EDGARwiz

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-QSB

[X]

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

For the quarterly period ended June 30, 2005

[ ]

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 0-32375

CAPITAL HILL GOLD, INC.

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

Florida

65-0067192

(State or other Jurisdiction of

I.R.S. Employer Identi-

Incorporation or Organization

fication No.)

5486 Tiger Bend Lane, Morrison Colorado

80465

(Address of Principal Executive Offices)

(Zip Code)

(239) 513-9265

(Issuer's Telephone Number, including Area Code)

Indicate by check mark whether the Registrant (i) has filed all reports required to be filed by Section 13, or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (of for such shorter period that the Registrant was required to file such reports) and (ii) has been subject to such filing requirements for the past 90 days.

Yes X No

Indicate the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date.

Common Stock, $.001 par value

97,938,700

Title of Class

Number of Shares outstanding

at June 30, 2005

Transitional Small Business Format Yes No X

CAPITAL HILL GOLD, INC.

(A Company in the Development Stage)

BALANCE SHEETS

ASSETS

December 31,

June 30,

2004

2005

Current Assets

Cash and cash equivalents

2,341

39,684

Prepaid expenses

750

Total Current Assets

3,091

39,684

Other Assets – Option payments on Chiqueritos

Total Assets

3,091

39,684

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities

Accounts Payable and accrued liabilities

18,701

22,529

Related party accounts payable

151,718

22,468

Related party notes payable

14,029

Convertible Debenture

77,000

Note payable

50,365

52,790

Total Current Liabilities

234,813

177,787

Shareholders’ Deficit

Common Stock $.001 par value; 200,000,000 shares

authorized; 1,023,500 and 23,284,675 shares issued

and outstanding

4,096

97,938

Additional paid-in capital (deficiency)

317,040

1,001,162

Accumulated deficit

(323,868)

Deficit accumulated during exploration stage

(229,190)

(913,335)

Total Shareholders’ Deficit

(231,722)

(138,103)

Total Liabilities and Shareholders’ Equity

3,091

39,684

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

CAPITAL HILL GOLD, INC.

(A Company in the Development Stage)

STATEMENTS OF OPERATIONS

CUMULATIVE

FOR THE THREE

FOR THE SIX

FROM INCEPTION

MONTHS ENDED

(February 26, 2004)

June 30,

2004

2005

2004

2005

June 30, 2005

REVENUES

OPERATING EXPENSES

General and Administrative

23,335

53,495

27,647

73,485

136,981

Interest Expense

1,213

2,425

5,120

Compensation Expense

54,000

9,000

316,000

766,264

929,264

TOTAL OPERATING EXPENSES

72,335

63,708

343,647

842,174

1,071,365

OTHER INCOME (EXPENSE) –

Gain on forgiveness of debt

158,029

Income (loss) from discontinued

Operations

8,104

NET (LOSS)

(72,335)

(63,708)

(335,543)

(684,145)

(913,336)

NET (LOSS) PER SHARE

(.01)

(0.00)

(.09)

(.01)

WEIGHTED AVERAGE NUMBER OF SHARES

5,117,500

48,915,811

3,622,637

66,858,828

See Accompanying Notes to Financial Statements.

CAPITAL HILL GOLD, INC.

(A Company in the Development Stage)

STATEMENTS OF CASH FLOWS

Six Months Ended

June 30,

2004

2005

CASH FLOWS FROM OPERATING ACTIVITIES

Net (Loss)

(335,543)

(684,145)

Adjustments to reconcile net loss to

net cash used in operating activities:

Non-Cash Compensation Expense

260,000

757,764

(Increase) Decrease in prepaid expenses

(750)

750

Increase in Note payable

2,925

Increase (decrease) in related party notes payable

(14,029)

Decrease in accrued expenses

(1,961)

Increase (decrease) in accounts payable

(22,242)

3,828

Increase (decrease) in related party accounts payable

(129,250)

Net cash flows from operating activities

(100,496)

(62,657)

CASH FLOWS FROM INVESTING ACTIVITIES

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from note payable – related party

13,700

Repayment of note payable – related party

(500)

Due to related parties

49,000

Proceeds from note payable

20,000

Proceeds from convertible debenture

77,000

Issuance of common stock

23,000

Net Cash flows from financing activities

82,200

100,000

NET INCREASE (DECREASE) IN CASH

(18,296)

37,343

CASH BALANCE AT BEGINNING OF PERIOD

21,704

2,341

CASH BALANCE AT END OF PERIOD

3,408

39,684

Non-cash items

Issuance of common stock for services

757,264

No taxes or interest was paid during the periods.

See Accompanying Notes to Financial Statements.

CAPITAL HILL GOLD, INC.

(formerly Autec Associates, Inc.)

(An Exploration Stage Company)

NOTES TO THE FINANCIAL STATEMENTS

June 30, 2005

NATURE AND CONTINUANCE OF OPERATIONS

The accompanying financial statements are unaudited, but in the opinion of the management of the Company, contain all adjustments, consisting of only normal recurring accruals, necessary to present fairly the financial position at June 30, 2005, the results of operations for the three and nine months ended June 30, 2005 and 2004, and the cash flows for the three months ended June 30, 2005 and 2004.

Reference is made to the Company's Form 10-KSB for the year ended December 31, 2004. The results of operations for the three months ended June 30, 2005 are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31, 2005.

Capital Hill Gold, Inc. (the “Company”) was incorporated on June 23, 1988, under the laws of the State of Florida under the name Autec Associates, Inc. The Company incorporated a wholly owned Wyoming subsidiary in the quarter ended June 30, 2005.

On January 12, 2004, the Company decided to sell its existing business assets and enter into the mining exploration industry. In connection with this change of business, the Company entered into a purchase and sale agreement, dated February 26, 2004, whereby the Company sold net assets of $13,533 to Mr. Art Garrison (former president of the Company) in consideration of the return of Mr. Garrison’s 221,500 shares of the Company’s common stock to the Company’s treasury. These shares were subsequently retired. The results of all prior jewelry-making operations have been retroactively reclassified as discontinued operations in these financial statements. Due to the fact that the Company was no longer actively engaged in significant business operations, the Company is deemed to have entered the exploration stage as of February 26, 2004.

On February 16, 2004, the Company resolved to amend its Articles of Incorporation whereby the Company changed its corporate name to Capital Hill Gold, Inc, increased its authorized common stock from 20,000,000 shares to 200,000,000 shares and adjusted the par value of its common shares from no par to $0.001 per share. In February 2005, the Company effected a 20:1 share consolidation on the issued and outstanding shares and in June 2005 the Company effected a 4-for-1 forward stock split (Note 11). References to common stock activity in these financial statements have been retroactively restated to incorporate the effects of these changes in par value and the reverse stock split.

GOING CONCERN

The Company’s liabilities exceed assets and the Company has a substantial deficit. These factors create uncertainty about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital it could be forced to cease operations.

In order to continue as a going concern, develop and generate revenues and achieve a profitable level of operations, the Company will need, among other things, additional capital resources. Management’s plans to obtain such resources for the Company include (1) raising additional capital through sales of common stock. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

CAPITAL HILL GOLD, INC.

(formerly Autec Associates, Inc.)

(An Exploration Stage Company)

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2004

SIGNIFICANT ACCOUNTING POLICIES

These financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America. The significant accounting policies adopted by the Company are as follows:

Use of estimates

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

Foreign currency translation

Transaction amounts denominated in foreign currencies are translated at exchange rates prevailing at transaction dates. Carrying values of monetary assets and liabilities are adjusted at each balance sheet date to reflect the exchange rate at that date. Non-monetary assets and liabilities are translated at the exchange rate on the original transaction date. Gains and losses from restatement of foreign currency monetary assets and liabilities are included in the statements of operations. Revenues and expenses are translated at the rates of exchange prevailing on the dates such items are recognized in the statement of operations.

Cash and cash equivalents

The Company considers cash held at banks and all highly liquid investments with original maturities of three months or less to be cash and cash equivalents.

Income taxes

A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting and net operating loss carryforwards. Deferred tax expenses (benefit) result from the net change during the period of deferred tax assets and liabilities.

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

CAPITAL HILL GOLD, INC.

(formerly Autec Associates, Inc.)

(An Exploration Stage Company)

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2004

SIGNIFICANT ACCOUNTING POLICIES (cont’d…)

Net loss per share

Basic net loss per share is computed by dividing net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share takes into consideration shares of common stock outstanding (computed under basic loss per share) and potentially dilutive shares of common stock. Diluted net loss per share is not presented separately from basic net loss per share as the conversion of outstanding convertible debentures into common shares and exercise of stock options would be anti-dilutive. As of June 30, 2005, there were 10,000 no potentially dilutive securities outstanding.

Comparative figures

Certain comparative figures have been reclassified to conform with the presentation adopted in the current period.

New accounting pronouncements

In January 2003, the Financial Accounting Standards Board (“FASB”) issued Financial Interpretation No. 46 “Consolidation of Variable Interest Entities” ("FIN 46") (revised on December 17, 2003). The objective of FIN 46 is to improve financial reporting by companies involved with variable interest entities. A variable interest entity is a corporation, partnership, trust, or any other legal structure used for business purposes that either (a) does not have equity investors with voting rights or (b) has equity investors that do not provide sufficient financial resources for the entity to support its activities. FIN 46 requires a variable interest entity to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entity's activities or entitled to receive a majority of the entity's residual returns or both. FIN 46 also requires disclosures about variable interest entities that a company is not required to consolidate but in which it has a significant variable interest. The consolidation requirements of FIN 46 apply immediately to variable interest entities created after December 15, 2003. The consolidation requirements apply to older entities in the first fiscal year or interim period beginning after March 15, 2004.

In December 2004, FASB issued Statement of Financial Accounting Standards No. 153, “Exchanges of Nonmonetary Assets – an amendment of APB Opinion No. 29” (“SFAS 153”) which amends Accounting Principles Board Opinion No. 29, “Accounting for Nonmonetary Transactions” to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. SFAS 153 is effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005.

In December 2004, FASB issued Statement of Financial Accounting Standards No. 123R, “Share Based Payment” (“SFAS 123R”). SFAS 123R supersedes APB 25 and its related implementation guidance by requiring entities to recognize the cost of employee services received in exchange for awards of equity instruments based on the grant-date fair value of those awards (with limited exceptions) and revises SFAS 123 as follows:

CAPITAL HILL GOLD, INC.

(formerly Autec Associates, Inc.)

(An Exploration Stage Company)

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2004

SIGNIFICANT ACCOUNTING POLICIES (cont’d…)

Public entities are required to measure liabilities incurred to employees in share-based payment transactions at fair value and nonpublic entities may elect to measure their liabilities to employees incurred in share-based payment transactions at their intrinsic value whereas under SFAS 123, all share-based payment liabilities were measured at their intrinsic value.

ii)

Nonpublic entities are required to calculate fair value using an appropriate industry sector index for the expected volatility of its share price if it is not practicable to estimate the expected volatility of the entity’s share price.

iii)

Entities are required to estimate the number of instruments for which the requisite service is expected to be rendered as opposed to accounting for forfeitures as they occur.

iv)

Incremental compensation cost for a modification of the terms or conditions of an award is measured by comparing the fair value of the modified award with the fair value of the award immediately before the modification whereas SFAS 123 required that the effects of a modification be measured as the difference between the fair value of the modified award at the date it is granted and the award’s value immediately before the modification determined based on the shorter of (1) its remaining initially estimated expected life or (2) the expected life of the modified award.

SFAS 123R also clarifies and expands guidance in several areas, including measuring fair value, classifying an award as equity or as a liability and attributing compensation cost to reporting periods. SFAS 123R does not change the accounting guidance for share-based payment transactions with parties other than employees provided in SFAS 123 as originally issued and EITF 96-18. SFAS 123R also does not address the accounting for employee share ownership plans which are subject to Statement of Position 93-6, “Employers’ Accounting for Employee Stock Ownership Plans”. Public entities (other than those filing as small business issuers) will be required to apply SFAS 123R as of the first annual reporting period that begins after June 15, 2005. Public entities that file as small business issuers will be required to apply SFAS 123R in the first annual reporting period that begins after December 15, 2005. For nonpublic entities, SFAS 123R must be applied as of the beginning of the first annual reporting period beginning after December 15, 2005.

The adoption of these new pronouncements are not expected to have a material effect on the Company's financial position or results of operations.

DUE TO RELATED PARTIES

The Company is accruing $3,000 per month compensation due to its officer. Such amounts totaled $12,000 as of June 30, 2005. The remaining $10,529 in related party payables are due to former related parties.

These balances are unsecured, due on demand and without fixed terms for repayment.

On March 4, 2005 On March 4, 2005, the board of directors appointed Daniel Enright as the Company’s chief executive officer, chief financial officer and a member of the Company’s board of directors. Concurrently, the Company entered into an employment agreement with Daniel Enright whereby Daniel Enright will be paid $3,000 per month and 5% of the Company’s common stock on a non-dilutive basis. The Company also is obligated to issue 50,000 common shares to Daniel Enright. The total number of shares sue as of June 30, 2005 is 1,161,165. On the same date the Company also entered into a consulting agreement with its former Chief Financial Officer for three years at $3,000 per month plus 50,000 shares of common stock. This agreement has been cancelled for non-performance.

CAPITAL HILL GOLD, INC.

(formerly Autec Associates, Inc.)

(An Exploration Stage Company)

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2004

NOTES PAYABLE

Principal due under three notes payable to CHR of $14,829 were forgiven as of December 31, 2004.

Convertible loan agreement dated May 25, 2004, maturing May 31, 2005	$ 20,000
Convertible loan agreement dated August 1, 2004, maturing August 1, 2005	5,000
Convertible loan agreement dated October 15, 2004, maturing October 31, 2005	23,500

	$ 48,500

The above notes bear interest at 10% per annum. Interest of $5,292 has been accrued to June 30, 2005.

Under all the convertible loan agreements, the lender has the option to convert the debt, including any accrued interest, to common stock of the Company at a rate to be negotiated at the time of conversion.

The debenture is due on December 31, 2006 but has been classified as a current liability since the Company intends to retire it during fiscal 2005. The Company assumed a convertible debenture in the amount of $100,000 as a result of a merger of its wholly owned subsidiary on March 17, 2005. The debenture is convertible into shares of common stock. In the June 2005 quarter $12,000 of the debenture was converted into 4,800,000 shares of common stock.

RELATED PARTY TRANSACTIONS

Except as disclosed elsewhere, no related party transactions occurred during the three months ended June 30, 2005.

COMMITMENTS

The Company has entered into an option agreement with CHR to acquire forty-two unpatented mineral claims located in Cochise County, Arizona. CHR acquired its interest in these properties through the assignment of two existing option agreements and the surface lease agreement.

Under the terms of the agreement with CHR, the Company has the option to acquire a 100% undivided interest in the above described mining claims and surface rights. A portion of the claims are subject to a 3% net smelter return (“NSR”) as well as cash payments totaling $18,000 per year for 19 years, increasing to $24,000 per year for the following ten years and $30,000 for the subsequent 10 years. In addition, the Company would pay a 6% NSR to CHR and $4,800 per year cash to lease the surface rights for a period of five years. The Company may acquire the underlying land to the surface rights on payment of $272,400 to the lessor.

On February 26, 2004, the Company issued 600,000 common shares to CHR under the option agreement.

CAPITAL HILL GOLD, INC.

(formerly Autec Associates, Inc.)

(An Exploration Stage Company)

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2004

INCOME TAXES

The Company has approximately $913,335 of operating loss carry forwards, which expire beginning in 2014. Under Section 382 of the Internal Revenue Code, utilization of net operating losses may be limited in the event of a change of ownership.

The Company has provided a valuation allowance against its deferred tax assets given that it is in the exploration stage and it is more likely than not that these benefits will not be realized.

SEGEMENT INFORMATION

The Company operates in one segment, being the exploration of mineral properties, in the United States of America.

10.

FINANCIAL INSTRUMENTS

The Company's financial instruments consist of cash and cash equivalents, inventory, accounts payable and accrued liabilities, due to related parties and notes payable. Unless otherwise noted, it is management's opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments. The fair value of these financial instruments approximates their carrying values, unless otherwise noted.

11.

STOCKHOLDERS’ EQUITY; MERGER

On January 26, 2005, the Company effected a consolidation of the Company’s common stock capital on a twenty to one basis. This share consolidation decreased the number of the Company’s common shares issued and outstanding from 20,470,000 to 1,023,500.

A 4-for-1 forward stock split was effected in June 2005.

On March 17, 2005, CAGI Transition, Inc., a wholly owned subsidiary, merged with Chiriquitos Mining, Inc. (“Chiriquitos”) whereby Chiriquitos was the survivor in the merger. In connection with the merger, the shareholders of Chiriquitos received 20,000,000 shares of the Company’s common stock. In connection with this merger agreement, the Company assumed the outstanding $100,000 principal amount of Chiriquitos’ 1.5% convertible debenture due December 31, 2006, and concurrently issued 4,400,000 shares upon conversion of $11,000 of the $100,000 convertible debenture of Chiriquitos.

Item 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

Our primary focus in calendar 2005 will be in commencing exploration of the Los Galivanes property. We intend to start exploring for mineral reserves on the Mexican Hat property commencing in early 2006. The first phase of exploration for either property will include diamond drilling and deep trench bulk sampling, sampling, assaying, structural geological work and surveys. We have no revenues from operations.

CAPITAL HILL GOLD, INC.

(formerly Autec Associates, Inc.)

(An Exploration Stage Company)

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2004

Liquidity and Capital Resources

We have never earned revenues from operations. Our cash needs for 2005 are estimated to be $80,000, for general and administrative costs, drilling and other exploration activities on Los Gavilanes and option payments under the Los Gavilanes option, and an additional $3,000 per month for each of Mr. Enright. We intend to pay management compensation only out of cash from future placements. The $144,000 due to Capital Hill Resources in 2004 was forgiven by Capital Hill Resources. As of June 2005, we have approximately $40,000 remaining from a private placement undertaken by our subsidiary. In 2006 additional sums in the amount of $500,000 are estimated to be required for our mineral projects. We have no arrangement or understanding for the financing needed in 2006.

We do not have sufficient capital to begin exploration of our projects without a substantial infusion of operating capital. It will be necessary to either borrow funds to operate or generate operating funds through the sale of equity. There can be no assurance that we will be able to generate sufficient income from either borrowing, the sale of equity, or a combination thereof to allow it to operate its business during the coming year. Unless we are successful in raising additional operating capital, we will not have sufficient funds to operate during the balance of the 2006 fiscal year.

Information included in this report includes forward looking statements, which can be identified by the use of forward-looking terminology such as may, will, expect, anticipate, believe, estimate, or continue, or the negative thereof or other variations thereon or comparable terminology. The statements and disclaimers in this report constitute cautionary statements identifying important factors, including risks and uncertainties, relating to the forward-looking statements that could cause actual results to differ materially from those reflected in the forward-looking statements.

Item 3. CONTROLS AND PROCEDURES.

(a) Evaluation of disclosure controls and procedures. The Company’s principal executive officer and its principal financial officer, based on their evaluation of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-14(c) and 15d -14 (c) as of a date within 90 days prior to the filing of this Quarterly Report on Form 10Q, have concluded that the Company’s disclosure controls and procedures are adequate and effective for the purposes set forth in the definition in Exchange Act rules.

(b) Changes in internal controls. There were no significant changes in the Company’s internal controls or in other factors that could significantly affect the Company’s internal controls subsequent to the date of their evaluation.

PART II. OTHER INFORMATION

Item 1.

LEGAL PROCEEDINGS - None

Item 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS – not applicable since this information was included in Current Reports on Form 8-K.

Item 3.

DEFAULTS UPON SENIOR SECURITIES - None

Item 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - None

Item 5.

OTHER INFORMATION - None

Item 6.

EXHIBITS

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.

CAPITAL HILL GOLD, INC.

Date:

August 16, 2005

By:/s/ Daniel Enright

Daniel Enright,

CEO and Chief Financial Officer

(chief financial officer and

accounting officer and duly

authorized officer)