-----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, M08cFYTqjXvYSDfXGt2WF5FjJJU/m/cwz4KRLo5W+phHsy3BBb8IdDFXdOsgeJRi j1Phz1r8weyO27KYrQyh4g== 0001025894-97-000310.txt : 19971216 0001025894-97-000310.hdr.sgml : 19971216 ACCESSION NUMBER: 0001025894-97-000310 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971031 FILED AS OF DATE: 19971215 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEWGOLD INC CENTRAL INDEX KEY: 0000878808 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-AUTOMOTIVE REPAIR, SERVICES & PARKING [7500] IRS NUMBER: 161400479 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-20722 FILM NUMBER: 97738560 BUSINESS ADDRESS: STREET 1: 5190 NEIL ROAD STREET 2: SUITE 320 CITY: RENO STATE: NV ZIP: 89502 BUSINESS PHONE: 7028234000 MAIL ADDRESS: STREET 1: 5190 NEIL RD STREET 2: SUITE 320 CITY: RENO STATE: NV ZIP: 89502 FORMER COMPANY: FORMER CONFORMED NAME: WAREHOUSE AUTO CENTERS INC /DE DATE OF NAME CHANGE: 19950510 10QSB 1 QUARTERLY REPORT U.S. Securities And Exchange Commission Washington, D.C. 20549 Form 10QSB Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended October 31, 1997 Commission file number 0-20722 NEWGOLD, INC. ----------------------------------------------------------------- (Exact name of small business issuer as specified in its charter) Delaware 16-1400479 - ------------------------------- ------------------------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 5190 Neil Road, Suite 320, Reno, Nevada 89502 --------------------------------------------- (Address of principal executive offices) (702) 823-4000 --------------------------- (Issuer's telephone number) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- 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 X No --- --- The number of shares of Common Stock outstanding as of December 1, 1997: 18,961,839 Transitional Small Business Disclosure Format (check one): Yes No X --- --- PART I. Financial Information. 1. Interim Financial Statements (unaudited) Balance Sheet - October 31, 1997............................................1 Statements of Operations - Three months ended October 31, 1997 and September 30, 1996..2 Statements of Cash Flows - Three months ended October 31, 1997 and September 30, 1996..3 Notes to Financial Statements....................................4 2. Management's Discussion and Analysis.............................5 PART II. Other information Signatures......................................................10 NEWGOLD, INC. Statements of Operations (Unaudited) For the three months ended October 31 September 30 1997 1996 ------------ ------------ Sales Net sales $ - $ - Cost of sales - - Gross Margin - - Operating expenses General and administrative expenses 313,736 177,871 Exploration costs 48,173 63,107 Total operating expenses 361,909 240,978 Loss from operations (361,909) (240,978) Other income (expense) Interest income 478 Interest expense (9,917) (1,647) Loss on disposal of assets (151,171) Total other expense (161,088) (1,169) Income tax provision - - Net loss $ (522,997) $ (242,147) Loss per share ($0.028) ($0.020) Weighted average number of shares outstanding 18,961,839 12,000,000 1 NEWGOLD, INC. Balance Sheet (Unaudited) October 31, 1997 Assets Property, plant and equipment including undeveloped mineral properties of $4,472,681 net of $36,453 accumulated depreciation $ 4,436,228 Reclamation bonds 256,500 Other assets 2,718 Total assets $ 4,695,446 Liabilities and Stockholder's Equity Current liabilities Bank overdraft $ 56,324 Accounts payable 532,720 Accrued expenses 95,644 Accrued reclamation costs 25,000 Due to affiliate 89,021 Notes payable 317,500 Shareholder loan 165,000 Total current liabilities 1,281,209 Deferred revenue 800,000 Total liabilities $ 2,081,209 Stockholders' equity Common stock - Authorized 50,000,000 shares par value $0.001; 18,961,839 and 12,000,000 outstanding at October 31, 1997 and September 30, 1996, respectively 18,962 Additional paid-in capital 7,144,522 Accumulated deficit (4,549,247) Total stockholders' equity 2,614,237 Total liabilities and stockholders' equity $ 4,695,446 2
NEWGOLD, INC. Statements of Cash Flows (Unaudited) For the three months ended October 31,1977 September 30, 1996 ------------------ ------------------ Cash flows from operating activities Net loss $ (522,997) $ (242,147) Adjustments to reconcile net loss to net cash used in operating activities Depreciation 9,051 1,126 Changes in operating assets and liabilities Reclamation bonds 10,000 Other assets 3,454 19,868 Accounts payable 83,179 42,867 Accrued expenses 33,007 8,333 Total adjustments to net loss 128,691 82,194 Net cash used by operations (394,306) (159,953) Cash flows from investing activities Net book value of aircraft sold 518,671 Capital expenditures (137,071) (20,987) Net cash used in investing activities 381,600 (20,987) Cash flows from financing activities Net advances from affiliate (5,685) 5,219 Net reduction in notes payable (67,500) - Increase in deferred revenue 200,000 Net cash provided by financing activities (73,185) 205,219 Net increase (decrease) in cash (85,891) 24,279 Cash and cash equivalents, beginning of period 29,567 46,318 Cash and cash equivalents, end of period $ (56,324) $ 70,597
3 NEWGOLD, INC. NOTES TO FINANCIAL STATEMENTS 1. Preparation of Interim Financial Statements: The accompanying financial statements have been prepared in accordance with the instructions to Form 10-QSB and, therefore, do not include all information and footnotes necessary for a presentation of financial position, results of operations and cash flows in conformity with generally accepted accounting principles. In the opinion of management, the referenced financial statements reflect all normal and recurring adjustments necessary for a fair presentation of the results of operations and financial position for the interim periods presented. Operating results for the three month period ended July 31, 1997, are not necessarily indicative of the results that may be expected for the fiscal year ended January 31, 1998. For further information, see the financial statements and footnotes included in the Company's Annual Report on Form 10-KSB for the thirteen months ended January 31, 1997. 2. Income Taxes: No income tax provisions have been made due to losses incurred. Deferred income tax benefits have been fully reserved due to the uncertainty of future realization. 3. Net (Loss) Per share: Net (loss) per share has been computed on the basis of the weighted average number of shares outstanding during the period. 4. Reclamation of Mining Areas: Reclamation costs, including the removal nd accrued on an undiscounted basis over the productive lives of properties. Remediation costs are expensed when the liability is probable and estimable. Based on current environmental regulations and known reclamation requirements, management has included its best estimate of these obligations in it reclamation accruals. However, it is reasonably possible that the Company's estimates of its ultimate reclamation liabilities could change as a result of changes in regulations or cost estimates. The Company performs 4 concurrent reclamation to the extent possible. However, most of the accrued costs are anticipated to be expended at the end of the mine life. 5. Sale of Equipment: The Company negotiated a sale lease back agreement for the Commander aircraft on September 4, 1997. Under this agreement, the Company sold the Commander for $250,000 with an option to buy back the aircraft for $290,000 in September 1998. The Company will make twelve monthly interest payments of $3,141 in the interim. A loss on sale of $143,158 was recorded. The Company sold the Cessna P210 for $117,500 on October 1, 1997. A loss on the sale of $8,013 was recorded. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS Introduction. ------------- The Company is engaged in the business of acquiring dormant, potential gold-producing properties located in the continental United States and developing such properties into a commercial gold mining operation. The Company is the result of a merger (the "Merger") between Warehouse Auto Centers, Inc., a Delaware corporation ("WAC"), and Newgold, Inc., a Nevada corporation ("NGNV"), pursuant to a Plan of Reorganization (the "Plan") approved by the U.S. Bankruptcy Court for the Western District of New York, effective as of November 21, 1996. For accounting purposes, under the terms of the Merger, NGNV has been treated as the acquirer. Financial Plan of Operation for the Next Twelve Months. ------------------------------------------------------- As of July 31, 1997, the Company had $29,567 in cash and ($1,062,178) in working capital. Current plans and assumptions relating to operations will require approximately $2 million in additional funding to complete permitting and to begin operations and gold production at its Relief Canyon Mine. Further, the Company will need approximately $500,000 to begin production at its Mission Mine and approximately $400,000 for exploration at its Bruner property. The Company expects to close two financing plans during mid-September which include a working capital loan of $1.5 million for Relief Canyon mine production and an off-shore placement of a stock offering for a minimum of $1 million with a cap of $3 million. Further, the Company is investigating a credit line of $2 million, through multiple sources, for putting Relief Canyon into production. There can be no assurance that any of these opportunities will result in actual funding, or that additional financing will be available to the Company, when needed, on commercially reasonable terms. If the Company is unable to obtain additional financing, it will be required to curtail its development plans and cease its operations. The Company's independent accountants have included an explanatory paragraph in their report on 5 the Company's financial statements for the thirteen months ended January 31, 1997, indicating substantial doubt about the Company's ability to continue as a going concern. At the Relief Canyon Mine, the Company intends to begin operations upon approval of its Plan of Operations, an environmental assessment by the Nevada Department of Environmental Protection and final approval by the Bureau of Land Management ("BLM") and upon a significant increase in the price of gold. The Company anticipates issuance of the permits before the end of April 1998. In addition, the Company must post an $888,000 reclamation bond and has filed its application with the State of Nevada Bond Pool. The Company is unsure at this point in time how the cost for the bond will be distributed between itself and the State of Nevada Bond Pool. The company anticipates this expense The recovery facilities are complete with the exception that an additional leach pad will need to be built at an approximate cost of $200,000 and approved by the State of Nevada and the BLM. Mining and loading the new pad with processed ore will be accomplished by third-party contractors. The Company has allocated $1 million for contractor mobilization and operation for the initial 90 days with $655,000 held in reserve for possible contingencies. The Company has personnel in place to operate the leach system recovery facility. The Company intends to have analyses completed by an independent engineering firm to establish proven and probable reserves for the Relief Canyon claims based upon the exploration data collected during 1997. The company has completed its review of the Mission Mine and at this time feels that the expense to bring this mine into production at current gold prices is not ecnomically feasable and therefore has chosen to terminates its purchase contract for this property This report, as well as certain of the notes to the financial statements, contain "forward-looking statements" within the meaning of Section 27A of the Securities Exchange Act of 1934, as amended. Such statements include, but are not limited to, (i) expectations as to the funding of future capital expenditures and other cash needs, (ii) statements as to the projected development of certain ore deposits, including estimates of development and other capital costs and financing plans with respect thereto, (iii) estimates of future costs and other liabilities for certain environmental matters and (iv) statements as to the likelihood of the outcome of litigation matters. These forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from the forward-looking statements or the results projected or implied by the forward-looking statements. The amount and timing of future capital expenditures could be influenced by a number of factors, including the timing of receipt of necessary permits and other governmental approvals, the failure of equipment, processes or facilities to operate in accordance with specifications and expectations, labor disputes and unanticipated changes in mine plans. The funding of such expenditures and other cash needs will be affected by the level of cash flow generated by the Company, if any, and the ability of the Company to otherwise finance such expenditures, which in turn could be affected by general U.S. and international economic and political conditions, political and economic conditions in the country in which the expenditure is being made, a well as 6 financial market conditions. The development of certain ore deposits could be affected by, among other things, labor disputes, delays in the receipt of or failure to receive necessary governmental permit or approvals, changes in U.S. or foreign laws or regulations or the interpretation, enforcement or implementation thereof, the failure of any of the Company's joint venture partners to perform as agreed under the relevant agreements or any termination of any such agreements, unanticipated ground and water conditions, the failure of equipment, processes or facilities to operate in accordance with specifications or expectations, or delays in the receipt of or the ability to obtain necessary financing. Future environmental costs and liabilities could be impacted by changes in U.S. or foreign laws or regulations or the interpretation, enforcement or implementation thereof and other factors beyond the control of the Company. For a more detailed discussion of the foregoing risks and uncertainties affecting the Company and its operations, see "Cautionary Statement for Purposes of the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995." and "Risk Factors" contained in Item 1 and 2 of the Company's annual Report on Form 10-KSB for the period ended January 31, 1997, as well as other filings made by the Company from time to time with the Securities and Exchange Commission. Many of these factors are beyond the Company's ability to control or predict. Readers are cautioned not to put undue reliance on forward-looking statements. The Company disclaims any intent or obligation to update publicly any forward-looking statements set forth in this discussion, whether as a result of new information, future events or otherwise. PART II. OTHER INFORMATION. ITEM 1. Legal Proceedings. a) On December 3, 1996, the case of Christiansen v. Newgold, et al., a purported breach of contract action was filed in the Second Judicial District, Washoe County, Reno, Nevada. Plaintiff alleges that he is owed $250,000 relating to recovery of his investment with a property subsequently acquired by the Company. The Company believes that Plaintiff's claim is meritless and the claim is being vigorously defended by counsel. b) On January 28, 1997, the case of Stewart v. Newgold, a purported breach of contract for the purchase of the Cerro Gordo Mine in California, was filed in the Second Judicial District, Washoe County, Reno, Nevada. Plaintiff was unable to present clear title to the property and the Company was unable to clear title and refused to make additional payments called for under the contract. Plaintiff is seeking $40,000 in damages. The parties have reached an agreement for settlement totalling $20,000; the Company is waiting for funds to complete the transaction. 7 c) On April 25, 1997, the Company filed a declaratory relief action in the case of Newgold v. Wirsing, et al. in the Sacramento County Superior Court. Mr. Wirsing and his fellow defendant, Mr. Wong, are each alleging that they are the owners of a 10% share of the net profits interest from Relief Canyon. The Company filed the action to seek declaratory relief that Messrs. Wirsing and Wong's claim is without merit. Mr. Wong has filed a $100,000,000 mechanics lien on the Relief Canyon Mine. The Company believes that the use of a mechanics' lien is improper and that there is no merit in Messrs. Wirsing and Wong's claims. The case currently is in the discovery stage. However, to the extent that Messrs. Wiring and Wong are successful, it could have a material adverse effect on the Company. ITEM 2. Changes in Securities. None. ITEM 3. Defaults on Senior Securities. None. ITEM 4. Matters Submitted to a Vote of Security Holders. None. ITEM 5. Other Information. None. ITEM 6. Exhibits and Reports on Form 8-K. a) Exhibits. Exhibit 3.1 Certificate of Incorporation of the Registrant (1). Exhibit 3.2 Certificate of Amendment to Certificate of Incorporation of the Registrant (2). Exhibit 3.3 Bylaws of the Registrant (1). Exhibit 27 Financial Data Schedule. (1) Incorporated by reference to the Registrant's Registration 8 Statement on Form SB-2 (File No. 33-49920) filed with the Commission on October 14, 1993. (2) Incorporated by reference to the Registrant's Annual Report on Form 10-KSB-40 for the fiscal year ended January 31, 1996 filed with the Commission on January 22, 1997. b) Reports on Form 8-K. A current report was filed on March 12, 1997, to announce the approval of the Plan of Reorganization by the U.S. Bankruptcy Court and the merger of Newgold, Inc., a Nevada corporation, And the Registrant on November 21, 1996. 9 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto authorized. NEWGOLD, INC. /s/ A. Scott Dockter Date: December 12, 1997 - -------------------- A. Scott Dockter Chief Executive Officer /s/ Robert W. Morris Date: December 12, 1997 - -------------------- Robert W. Morris Chief Financial Officer 10 EX-27 2
5 3-MOS JAN-31-1998 OCT-31-1997 (56,324) 0 0 0 0 0 4,472,681 36,453 4,695,446 1,224,885 0 0 0 18,962 2,595,275 4,695,446 0 0 0 513,080 0 0 9,917 (522,997) 0 (522,997) 0 0 0 (522,997) (0.028) (0.028)
-----END PRIVACY-ENHANCED MESSAGE-----