-----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, IR5JlMprllA2dx20DBIzJA3kDtxlnP88pGjiZw04aT+fDzUAwPJwhTefOA22xQRu WW8XOiSrS8pK09lGCueT3w== 0001200952-04-001087.txt : 20041228 0001200952-04-001087.hdr.sgml : 20041228 20041228170810 ACCESSION NUMBER: 0001200952-04-001087 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20040731 FILED AS OF DATE: 20041228 DATE AS OF CHANGE: 20041228 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: 1934 Act SEC FILE NUMBER: 000-20722 FILM NUMBER: 041229039 BUSINESS ADDRESS: STREET 1: 3090 BOEING RD CITY: CAMERON PARK STATE: CA ZIP: 95612 BUSINESS PHONE: 9166651840 MAIL ADDRESS: STREET 1: 3090 BOEING RD CITY: CAMERON PARK STATE: CA ZIP: 95612 FORMER COMPANY: FORMER CONFORMED NAME: WAREHOUSE AUTO CENTERS INC /DE DATE OF NAME CHANGE: 19950510 10QSB 1 ni_10qsb-40731.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-QSB [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JULY 31, 2004 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT FOR THE TRANSITION PERIOD FROM _______________ to _______________ Commission File Number 0-20722 NEWGOLD, INC. (Exact name of small business issuer as specified in its charter) DELAWARE 16-1400479 - ------------------------------- ------------------------------------- (State of other jurisdiction of (I.R.S. Employer Identification incorporation or organization) Number) P.O. Box 1626 Shingle Springs, California 95682 - ---------------------------------------- ------------------------------------- (Address of Principal Executive Offices) Zip Code Issuer's telephone number: (530) 672-1116 Check whether the issuer (1) 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 (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: YES NO X -------- -------- Common stock, $0.001 par value, 47,606,174 issued and outstanding as of July 31, 2004. Transitional Small Business Disclosure Format: YES NO X -------- -------- INDEX Page ---- PART I - FINANCIAL INFORMATION.................................................3 ITEM 1. FINANCIAL STATEMENTS.........................................3 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS..................................................17 ITEM 3. CONTROLS AND PROCEDURES.....................................24 PART II - OTHER INFORMATION...................................................26 ITEM 1. LEGAL PROCEEDINGS...........................................26 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS....................................................26 ITEM 5. OTHER INFORMATION...........................................26 ITEM 6. EXHIBITS....................................................26 2 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS NEWGOLD, INC. INDEX TO UNAUDITED FINANCIAL STATEMENTS Condensed Balance Sheet as of July 31, 2004 (Unaudited) 4-5 Condensed Statements of Operations for the three months and six months ended July 31, 2004 and 2003 (Unaudited) 6 Condensed Statements of Comprehensive Loss for the three months and six months ended July 31, 2004 and 2003 (Unaudited) 7 Condensed Statements of Cash Flows for the six months ended July 31, 2004 and 2003 (Unaudited) 8 Notes to Unaudited Financial Statements 9-16 3 NEWGOLD, INC. CONDENSED BALANCE SHEET JULY 31, 2004 (UNAUDITED) - -------------------------------------------------------------------------------- ASSETS CURRENT ASSETS Cash $ 5,340 Marketable securities available for sale 60,525 --------------- Total current assets 65,865 OTHER ASSETS Deferred reclamation costs 513,946 Deposits 23,000 --------------- Total other assets 536,946 --------------- TOTAL ASSETS $ 602,811 =============== 4 The accompanying notes are an integral part of these financial statements NEWGOLD, INC. CONDENSED BALANCE SHEET JULY 31, 2004 (UNAUDITED) - -------------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' DEFICIT CURRENT LIABILITIES Accounts payable $ 540,194 Accrued expenses 1,851,438 Accrued reclamation costs 513,946 Notes payable due to individuals and officer 1,612,630 ----------------- Total current liabilities 4,518,208 ----------------- DEFERRED REVENUE 800,000 Total liabilities 5,318,208 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' DEFICIT Common stock, $0.001 par value 50,000,000 shares authorized 47,606,174 shares issued and outstanding 47,606 Additional paid in capital 10,861,010 Other comprehensive loss (254,663) Accumulated deficit (15,369,350) ----------------- Total shareholders' deficit (4,715,397) ----------------- TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT $ 602,811 ================= 5 The accompanying notes are an integral part of these financial statements NEWGOLD, INC. CONDENSED STATEMENTS OF OPERATIONS FOR THE SIX AND THREE MONTHS ENDED JULY 31, (UNAUDITED) - --------------------------------------------------------------------------------
For the Six Months Ended For the Three Months Ended July 31, July 31, -------- -------- 2004 2003 2004 2003 ------------- ------------- ------------- ------------- NET SALES $ - $ - $ - $ - COST OF GOODS SOLD 10,000 1,500 5,000 1,500 ------------- ------------- ------------- ------------- GROSS LOSS (10,000) (1,500) (5,000) (1,500) OPERATING EXPENSES (152,782) (143,284) (77,407) (76,431) ------------- ------------- ------------- ------------- LOSS FROM OPERATIONS (162,782) (144,784) (82,407) (77,931) ------------- ------------- ------------- ------------- OTHER INCOME (EXPENSE) Dividend income - 10,063 - 5,031 Interest expense (99,405) (59,446) (51,841) (28,085) ------------- ------------- ------------- ------------- Total other income (expense) (99,405) (49,383) (51,841) (23,054) ------------- ------------- ------------- ------------- NET LOSS $ (262,187) $ (194,167) $ (134,248) $ (100,985) ============= ============= ============= ============= BASIC AND DILUTED LOSS PER SHARE $ (0.01) $ (0.01) $ (0.01) $ (0.01) ============= ============= ============= ============= BASIC AND DILUTED WEIGHTED- AVERAGE SHARES OUTSTANDING 47,606,174 47,585,180 47,606,174 47,585,180 ============= ============= ============= =============
6 The accompanying notes are an integral part of these financial statements NEWGOLD, INC. CONDENSED STATEMENTS OF COMPREHENSIVE LOSS FOR THE THREE MONTHS AND SIX MONTHS ENDED JULY 31, (UNAUDITED) - --------------------------------------------------------------------------------
For the Six Months Ended For the Three Months Ended July 31, July 31, -------- -------- 2004 2003 2004 2003 ------------- ------------ ------------ ------------ NET LOSS $ (262,187) $ (194,167) $ (134,248) $ (100,985) OTHER COMPREHENSIVE LOSS Unrealized loss from marketable securities (49,843) - (19,225) - ------------- ------------ ------------ ------------ COMPREHENSIVE LOSS $ (312,030) $ (194,167) $ (153,473) $ (100,985) ============= ============ ============ ============
7 The accompanying notes are an integral part of these financial statements NEWGOLD, INC. CONDENSED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JULY 31, (UNAUDITED) - --------------------------------------------------------------------------------
2004 2003 --------------- ---------------- CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (262,187) $ (194,167) Adjustments to reconcile net loss to net cash used in operating activities Accretion of warrants issued as a debt discount 35,337 3,393 Decrease in deposits 22,000 - Increase in Accrued salaries and benefits 82,500 70,000 Accrued expenses 103,574 85,183 ---------------- ----------------- Net cash used by operating activities (18,777) (35,591) ---------------- ----------------- CASH FLOWS FROM INVESTING ACTIVITIES Marketable securities - (10,062) ---------------- ----------------- Net cash used by investing activities - (10,062) ---------------- ----------------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from the issuance of common stock - 20,000 Proceeds from note payable 18,500 76,995 Repayments of note payable (350) (56,949) ---------------- ----------------- Net cash provided by financing activities 18,150 40,046 ---------------- ----------------- Net decrease in cash (627) (5,607) CASH, BEGINNING OF PERIOD 5,967 5,622 ---------------- ----------------- CASH, END OF PERIOD $ 5,340 $ 15 ================ =================
. 8 The accompanying notes are an integral part of these financial statements NOTE 1 - ORGANIZATION AND LINE OF BUSINESS NEWGOLD, Inc. (the "Company") has been in the business of acquiring, exploring, developing, and producing gold properties. The Company had rights to mine properties in Nevada and Montana. Its primary focus was on the Relief Canyon Mine located near Lovelock, Nevada, where it has performed development and exploratory drilling and was in the process of obtaining permits to allow operation of the Relief Canyon Mine. In December 1997, the Company placed the Relief Canyon Mine on care and maintenance status. The Company also conducted exploration at its Washington Gulch Mine property in Montana. In February 2000 the Company began to implement an entirely new business model of investing in Internet companies. Due to the deterioration of the investment market for these types of companies later in 2000, the Company abandoned this investment strategy. From mid-2001 until the beginning of 2003 Newgold was essentially inactive, only continuing with some of the care and maintenance at Relief Canyon, as provided for by a non-affiliate company owned by the Chairman and CEO of Newgold. Merger ------ In November 1996, Newgold, Inc. of Nevada ("Old Newgold") was merged into Warehouse Auto Centers, Inc. ("WAC"), a public company, which had previously filed an involuntary petition under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Western District of New York. Pursuant to the plan of reorganization and merger (the "Plan"), (i) WAC, which was the surviving corporation for legal purposes, changed its name to Newgold Inc. (ii) the outstanding shares of Old Newgold were converted into the right to receive an aggregate of 12,000,000 shares or approximately 69% of the post merger outstanding common stock of the Company, (iii) each outstanding share of WAC was converted into the right to receive 1/65 share of the common stock of the Company, for an aggregate of 51,034 shares or less than 1% of the post merger outstanding common stock, (iv) unsecured trade debts and other unsecured pre-petition liabilities were paid in full via the issuance of one share of the Company's stock, for each $42 of debt, for an aggregate of 63,374 shares or less than 1% of the post merger outstanding common stock, and (v) post petition creditors received 1 share of stock for each $1 of debt, for an aggregate of 191,301 shares or approximately 1% of the post merger outstanding common stock. The Plan also required an amendment to the Company's capital structure to increase the number of shares authorized to 50,000,000 and to reduce the corresponding par value to $.001. In connection with the Plan, the Company raised $4,707,000 of cash through the issuance of convertible debtor certificates. Shortly after confirmation of the Plan, the debtor certificates were exchanged for 5,135,130 shares of common stock (including 428,130 shares issued in lieu of paying cash for underwriter's fees) representing approximately 29% of the post merger outstanding common stock. An additional bonus of 513,514 shares was issued to investors and underwriters during the year ended January 31, 1998 for delay in the effective date of the Company's stock trading. For accounting purposes, Old Newgold has been treated as the acquirer (reverse acquisition). Accordingly, the historical financial statements prior to November 21, 1996 are those of Old Newgold. There were no assets or liabilities acquired in this transaction and there is no impact on the statement of operations. 9 NOTE 2 - GOING CONCERN These financial statements have been prepared on a going concern basis. However, during the year ended January 31, 2004, the Company incurred a net loss of $470,823 and had negative cash flows from operations of $176,583. In addition, the Company had an accumulated shareholders' deficit of $4,425,944 at January 31, 2004. The Company's ability to continue as a going concern is dependent upon its ability to generate profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. The outcome of these matters cannot be predicted with any certainty at this time. Since inception, the Company has satisfied its capital needs by issuing equity securities. Management plans to continue to provide for its capital needs during the year ended January 31, 2005 by issuing equity securities or incurring additional debt financing, with the proceeds to be used to re-establish mining operations at Relief Canyon as well as improve its working capital position. These financial statements do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary should the Company be unable to continue as a going concern. NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Marketable Securities Available for Sale ---------------------------------------- Investments in equity securities are classified as available-for-sale. Securities classified as available for sale are marked to market at each period end. Changes in value on such securities are recorded as a component of Other comprehensive income (loss). If declines in value are deemed other than temporary, losses are reflected in Net income (loss). Deferred Reclamation Costs -------------------------- In August 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 143, "Accounting for Asset Retirement Obligations," which established a uniform methodology for accounting for estimated reclamation and abandonment costs. The statement was adopted February 1, 2003. The reclamation costs will be allocated to expense over the life of the related assets and will be adjusted for changes resulting from the passage of time and revisions to either the timing or amount of the original present value estimate. Prior to adoption of SFAS No. 143, estimated future reclamation costs were based principally on legal and regulatory requirements. Such costs related to active mines were accrued and charged over the expected operating lives of the mines using the UOP method based on proven and probable reserves. Future remediation costs for inactive mines were accrued based on management's best estimate at the end of each period of the undiscounted costs expected to be incurred at a site. Such cost estimates included, where applicable, ongoing care, maintenance and monitoring costs. Changes in estimates at inactive mines were reflected in earnings in the period an estimate was revised. Risks Associated with Gold Mining --------------------------------- The business of gold mining is subject to certain types of risks, including environmental hazards, industrial accidents, and theft. Prior to suspending operations, the Company carried insurance against certain property damage loss (including business interruption) and comprehensive general liability insurance. While the Company maintained insurance consistent with industry practice, it is not possible to insure against all risks associated with the mining business, or prudent to assume 10 that insurance will continue to be available at a reasonable cost. The Company has not obtained environmental liability insurance because such coverage is not considered by management to be cost effective. The Company currently carries no insurance on any of its properties due to the current status of the mine and the Company's current financial condition. Reclamation Costs ----------------- Reclamation costs and related accrued liabilities, which are based on the Company's interpretation of current environmental and regulatory requirements, are accrued and expensed, upon determination. Based on current environmental regulations and known reclamation requirements, management has included its best estimates of these obligations in its reclamation accruals. However, it is reasonably possible that the Company's best estimates of its ultimate reclamation liabilities could change as a result of changes in regulations or cost estimates. Comprehensive Income -------------------- The Company utilizes SFAS No. 130, "Reporting Comprehensive Income." This statement establishes standards for reporting comprehensive income and its components in a financial statement. Comprehensive income as defined includes all changes in equity (net assets) during a period from non-owner sources. Examples of items to be included in comprehensive income, which are excluded from net income, include foreign currency translation adjustments, minimum pension liability adjustments, and unrealized gains and losses on available-for-sale marketable securities. Comprehensive income is presented in the Company's financial statements since the Company did have unrealized gain (loss) from changes in equity from available-for-sale marketable securities. Estimates --------- The preparation of financial statements 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 revenue and expenses during the reporting period. Actual results could differ from those estimates. Loss Per Share -------------- The Company utilizes SFAS No. 128, "Earnings per Share." Basic loss per share is computed by dividing loss available to common shareholders by the weighted-average number of common shares outstanding. Diluted loss per share is computed similar to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. Common equivalent shares are excluded from the computation if their effect is anti-dilutive. The following common stock equivalents were excluded from the calculation of diluted loss per share since their effect would have been anti-dilutive: 2004 2003 ------------- ------------- Warrants 3,839,229 2,738,600 11 NOTE 4 -MARKETABLE SECURITIES AVAILABLE FOR SALE At July 31, 2004 the Company held 71,205 common shares of NutraCea which were accounted for as an investment in marketable securities. Unrealized holding losses of $19,225 and $49,843 for the three and six months ended July 31, 2004, respectively, and $0 and $0 for the three months and six months ended July 31, 2003, respectively, were recorded in Other comprehensive loss to reflect the market value decrease during the respective periods. In October 2004 the Company sold all of its investment in marketable securities (see Note 10). NOTE 5 - PROPERTY AND EQUIPMENT Property and equipment at July 31, 2004 was recorded at no value. The Company had previously determined that the value of its fixed assets at the Relief Canyon Mine were permanently impaired and wrote off assets with a basis of $800,000. If the Company can reestablish mining operations at Relief Canyon it is possible that some of these assets could be utilized in such operations. A summary of property and equipment was as follows:
` Machinery & Development Capitalized Buildings Equipment Costs Interest Total Relief Canyon Mine $215,510 $277,307 $261,742 $45,441 $800,000
All office furniture and equipment has been fully depreciated as of July 31, 2004. NOTE 6 - NOTES PAYABLE TO RELATED PARTIES AND INDIVIDUALS Unsecured notes payable to individuals and related parties consist of the following at July 31, 2004: Loans from officer. The notes bear interest at 8% per year. The notes are currently due. The Company is in default with respect to these loans. In connection with the loans, warrants to purchase 3,839,229 shares of common stock have been issued. The warrants have been valued using the Black-Scholes option pricing model (see Note 7). The warrants were issued at $0.15 per share and expire in five years from the date of issuance. $1,420,892 Loan from individual. The note bears interest at 8% per year. The note is currently due. The Company is in default with respect to this loan. 176,500 Other non-interest bearing advances 47,038 Unamortized warrant expense (31,800) ----------- Total notes payable to individuals and related parties $1,612,630 =========== The Company recorded interest expense of $51,841 and $99,406 for the three months and six months ended July 31, 2004. 12 NOTE 7 - COMMITMENTS AND CONTINGENCIES Except for the advance royalty and rent payments noted below, the Company is not obligated under any capital leases or non-cancelable operating lease with initial or remaining lease terms in excess of one year as of July 31, 2004. However, minimum annual royalty payments are required to retain the lease rights to the Company's properties. Relief Canyon Mine ------------------ The Company purchased the Relief Canyon Mine from J.D. Welsh Associates ("Welsh") in January 1995. The mine consisted of 39 claims and a lease for access to an additional 800 acres contiguous to the claims. During 1997, the Company staked an additional 402 claims. Subsequent to January 31, 1998, the Company reduced the total claims to 50 (approximately 1,000 acres). The annual payment to maintain these claims is $5,000. As part of the original purchase of Relief Canyon Mine, Welsh assigned the lease from Santa Fe Gold Corporation (Santa Fe) to the Company. The lease granted Santa Fe the sole right of approval of transfer to any subsequent owner of the Relief Canyon Mine. Santa Fe had accepted lease and minimum royalty payments from the Company, but has declined to approve the transfer. Due to Welsh's inability to transfer the Santa Fe lease, the original purchase price of $500,000 for Relief Canyon Mine was reduced by $50,000 in 1996 to $450,000. Subsequent to January 31, 1998, the lease was terminated by Santa Fe. Management believes loss of the Santa Fe lease will have no material adverse affect on the remaining operations of the mine operation or the financial position of the Company. During 1996, Repadre Capital Corporation ("Repadre") purchased for $500,000 a net smelter return royalty (Repadre Royalty). Repadre was to receive a 1.5% royalty from production at each of the Relief Canyon Mine and Mission Mines. In July 1997, an additional $300,000 was paid by Repadre for an additional 1% royalty from the Relief Canyon Mine. In October, 1997, when the Mission Mine lease was terminated, Repadre exercised its option to transfer the Repadre Royalty solely to the Relief Canyon Mine resulting in a total 4% royalty. The total amount received of $800,000 has been recorded as deferred revenue in the accompanying financial statements. Litigation ---------- On December 3, 1996, plaintiff Roy Christiansen filed a breach of contract action against the Company in the Second Judicial District, Reno, Washoe County, Nevada. Plaintiff alleged that he was owed $250,000 relating to recovery of his investment in a property subsequently acquired by the Company. It was discovered during the pendency of this action that a former Secretary-Treasurer of Newgold, Inc., (prior to the Company going public through its merger with Warehouse Auto) signed a contract in 1994 which obligated the Company, Newgold, Inc. (the Delaware Corporation) to pay $250,000 to Christiansen, a former developer of the Golden Asset project which Newgold purchased and is located in Helena Montana. This obligation was unknown to the current principals of the Company. During the course of litigation, Plaintiff moved the court for summary judgment based on this signed agreement; this motion was granted and a judgment for $250,000 was entered against the Company. On May 11, 2000, the Company satisfied this judgment through the issuance of 350,000 shares of Common Stock to a shareholder who subsequently settled this judgment. On May 7, 1997 a judgment was entered against the Company on behalf of the plaintiff, Roger Primm, in the Second Judicial District, Reno, Washoe County, Nevada. The underlying lawsuit sought repayment of a loan made by the plaintiff to the Company; loan proceeds were used for development purposes at the Company's mining properties. On May 11, 2000, the Company 13 satisfied this judgment through the issuance of 300,000 shares of Common Stock to a shareholder who subsequently settled this judgment. On March 11, 1998, one of the Company's former consulting firms, JBR Consultants, instituted a suit against the Company for sums due under a consultant engineering contract. On August 19, 1998 the court for the Second Judicial District, Washoe County, Reno, Nevada, entered a default judgment against the Company for $28,815. On September 25, 1999, the outstanding balance of the judgment was paid in full. On February 4, 2000, a complaint was filed against the Company by Sun G. Wong in the Superior Court of Sacramento County, California (Case No. 00AS00690). In the complaint, Mr. Wong claims that he was held liable as a guarantor of Newgold in a claim brought by Don Christianson in a breach of contract action against Newgold. Despite the fact that Newgold settled the action with Mr. Christianson through the issuance of 350,000 shares of Newgold common stock, Mr. Wong, nevertheless, paid $60,000 to a third party claiming to hold Mr. Christianson's judgment pursuant to Mr. Wong's guaranty agreement. Similarly, Mr. Wong alleges that he was held liable as a guarantor for a debt of $200,000 owed by Newgold to Roger Primm with regard to money borrowed by Newgold. Mr. Primm filed suit against the Company which was settled through the issuance of 300,000 shares of Newgold common stock. Nevertheless, Mr. Wong alleges that he remains liable to a third party claiming to hold Mr. Primm's judgment for up to $200,000 pursuant to his guaranty of such debt of Mr. Primm. On December 29, 2000, the superior court entered a default judgment against Newgold in the amount of $400,553 with regard to the Christianson judgment and an additional $212,500 in regard to the Primm judgment against Mr. Wong. The Company believes that Mr. Wong was not obligated to pay any sums pursuant to his guarantees with regard to the Christianson and Primm judgments against Newgold and, as a result, Mr. Wong should not have any recourse against the Company for reimbursement. Should Mr. Wong seek to assert these judgments against the Company, the Company cannot predict the outcome of any such action or the amount of expenses that would be ultimately incurred in defending any such claims. The Company is currently negotiating a settlement with Mr. Wong, however there is no assurance that an acceptable settlement will be consummated. On May 18, 2004 Paul Ngoyi filed a petition for involuntary bankruptcy against Newgold (Case No. BK-N-0451511). Mr. Ngoyi claims to be the holder of both the Christiansen and Primm judgments against Newgold and is claming that Newgold cannot pay such judgments because it is insolvent. Newgold intends to file for Summary Judgment alleging that Mr. Ngoyi's claims are invalid as the two judgments were previously satisfied and that Newgold is not insolvent. A preliminary hearing on the Summary Judgment motion has not yet been scheduled. The Company intends to vigorously oppose the bankruptcy petition. The Company is involved in various other claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate dispositions of these matters will not have a material adverse effect on the Company's financial position, results or operations or liquidity. NOTE 8 - SHAREHOLDERS' DEFICIT Common Stock ------------ On February 20, 2003 warrants to purchase 200,000 shares of common stock were exercised at a price of $0.10 per share. The original exercise price was $1.00 however the investor and the 14 Company renegotiated the exercise price to $0.10 per share. Warrants -------- The Company has issued common stock warrants to an officer of the Company as part of certain financing transactions (see Note 5 and Note 10). The fair market value of these warrants issued during the quarter ended July 31, 2004 was determined to be $9,067 and was calculated under the Black-Scholes option pricing model with the following assumptions used: Expected life 5 years Risk free interest rate 3.71% Volatility 348% Expected dividend yield None The fair value of these warrants is being amortized to interest expense over one year, the original life of the loans. Total amortization expense was $19,357 and $35,337 for the three and six months ended July 31, 2004, respectively, and $0 and $3,393 for the three months and six months ended July 31, 2003, respectively. The following table presents warrant activity from January 31, 2004 through July 31, 2004: Weighted- Average Number Exercise of Shares Price Outstanding, January 31, 2002 3,718,229 $0.15 Granted 121,000 $0.15 -------------- ---------- Outstanding, July 31, 2004 3,839,229 $0.15 ============== ========== Exercisable, July 31, 2004 3,839,229 $0.15 ============== ========== NOTE 9 - RELATED PARTY TRANSACTIONS Loans from officer ------------------ During the quarter ended April 30, 2004, the Chief Executive Officer and Chairman of the Company, loaned the Company $10,000 and was repaid $350. During the quarter ended July 31, 2004, the Chief Executive Officer and Chairman of the Company, loaned the Company $8,500 and was repaid $0. As of July 31, 2004 the net principal balance owing to him was $1,420,892 and accrued interest payable was $388,030. See Note 6 and Note 10. Accrued Payroll and Expenses Owed to Officers --------------------------------------------- As of July 31, 2004 the Company owed the Chief Executive Officer and Chairman of the Company $94,000 for back wages. As of July 31, 2004 the Company owed the Chief Financial Officer and Secretary of the Company $244,834 for back wages and $19,717 for accrued expenses. See Note 10. 15 NOTE 10 - SUBSEQUENT EVENTS As of October 31, 2004 the Chief Executive Officer and Chairman of the Company, loaned the Company an additional $21,581 and was repaid $350 during fiscal 2005. In connection with the loans, warrants to purchase 141,500 shares of common stock have been issued. The warrants were issued at $0.15 per share and expire in five years from the date of issuance. In October 2004, the Company consolidated the amounts owed to the Chief Executive Officer and the Chief Financial Officer as of January 31, 2004 (excluding accrued interest payable) into new convertible notes payable bearing interest at 8% and due September 30, 2005. The notes and any interest accrued on the new notes are convertible into common shares of the Company at a conversion price of $0.15 per share. In connection with the loans, warrants to purchase 5,798,140 and 1,395,007 shares of common stock have been issued to the Chief Executive Officer and the Chief Financial Officer, respectively. In October 2004, the Company liquidated its investment in marketable securities through open market transactions. Net proceeds totaled approximately $34,100. In October 2004, the Company re-staked the Relief Canyon mill site and lode claims, which now include a total of 78 claims. The annual payment to maintain these claims is approximately $15,600. 16 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS CAUTION ABOUT FORWARD-LOOKING STATEMENTS This Form 10-QSB includes "forward-looking" statements about future financial results, future business changes and other events that haven't yet occurred. For example, statements like the Company "expects," "anticipates" or "believes" are forward-looking statements. Investors should be aware that actual results may differ materially from the Company's expressed expectations because of risks and uncertainties about the future. The Company does not undertake to update the information in this Form 10-QSB if any forward-looking statement later turns out to be inaccurate. Details about risks affecting various aspects of the Company's business are discussed throughout this Form 10-QSB and should be considered carefully. PLAN OF OPERATION FOR THE NEXT TWELVE MONTHS Certain key factors that have affected the Company's financial and operating results in the past will affect its future financial and operating results. These include, but are not limited to the following: o Gold prices, and to a lesser extent, silver prices; o Current gold deposits under Company control at the Relief Canyon Mine are estimated by the Company (based on past exploration by the Company and work done by others). The Company's properties now include 50 unpatented mining claims contained in about 1000 acres. The Company's operating plan is to place its mining claims into profitable production by the end of 2005, and use the net proceeds from these operations to fund ongoing exploration and development of its property holdings. Through the use of joint ventures, royalties and partnerships, the Company intends to progressively enlarge the scope and scale of the mining and processing operations, thereby increasing both the Company's annual revenues and its net profits. The Company's objective is to achieve quarterly growth rates in revenue and net profits for the foreseeable future; o The Company expects to make capital expenditures in fiscal year 2006 of between $2.5 million and $4 million, including costs related to the resumption of mine operations and production at the Relief Canyon mine. o Due to the strengthening of the gold market, and consistent with the Company's exploration growth strategy, it expects exploration, research and development expenditures in 2005 will total between $500,000 and $1 million. 17 o Additional funding or the utilization of other venture partners will be required for mining operations, exploration, research, development and operating expenses. In the past the Company has been dependent on the funding from the private placement of its securities as well as loans from related parties as the sole sources of capital to fund its operations. RESULTS OF OPERATIONS The Company has only recently resumed business operations after having been inactive from July 2001 until February 2003. Consequently, comparisons between the operating results of the Company for the fiscal years 2004 and 2005 are not as relevant as they otherwise would be if the Company had been engaged in business operations during both fiscal years. In addition, because the Company is in the process of reinstituting its business and mining operations, the results of operations for the last two fiscal years will likely not be indicative of the Company's current and future operations. The current management discussion and analysis should be read from the context of the Company's recent resumption of its mining business. Operating Results for the Fiscal Quarters Ended July 31, 2004 and 2003 - ---------------------------------------------------------------------- Although the Company commenced efforts to re-establish its mining business early in fiscal year 2004, no mining operations have commenced and no revenues have been recognized during the quarter ended July 31, 2004. The Company was also inactive during the quarter ended July 31, 2003 and, as a result, generated no revenues from operations. The Company hopes to be able to commence generating revenues from mining operations during the 2006 fiscal year. The Company has granted a 4% net smelting return royalty to a third party which has been recorded as an $800,000 deferred option income. During the quarter ended July 31, 2004 the Company spent $5,000 on exploration expenses related to the Relief Canyon mining property. This compares to exploration expenses of $1,500 expended during the same quarter ended July 31, 2003. These expenses relate primarily to estimated maintenance and retention costs required to maintain the Company's mining claims. The Company incurred operating expenses of $77,407 during the quarter ended July 31, 2004. Of this amount, $55,000 reflects officer compensation and related payroll taxes during the quarter, $8,315 reflect payroll tax penalties and $12,000 reflect fees for outside professional services. During the same quarter ended July 31, 2003 the Company incurred operating expenses of $76,431 of which $55,000 represents officer compensation and $8,065 reflecting payroll tax penalties. It is anticipated that both exploration costs and operating expenses will increase significantly as the Company resumes its mining operations and exploration program. The Company incurred interest expense of $51,841 during the quarter ended July 31, 2004 which compares to interest expenses of $28,085 incurred during the same quarter ended July 31, 2003. Although the amount of loans outstanding during the second quarter of fiscal 2005 increased slightly, the increase in additional interest expense was a direct result of the increase in accretion of warrants issued as a debt discount. 18 The Company's total net loss for the quarter ended July 31, 2004 increased to $134,248 compared to a net loss of $100,985 incurred for the same quarter ended July 31, 2003. The larger net loss in the current fiscal year reflects the substantial increase in operating expenses and interest expense as well as a lack of revenues recognized during the second quarter of fiscal year 2005. Operating Results for the Six Months Ended July 31, 2004 and 2003 - ----------------------------------------------------------------- During the six months ended July 31, 2004 the Company spent $10,000 on exploration expenses related to the Relief Canyon mining property. This compares to exploration expenses of $1,500 expended during the same period ended July 31, 2003. These expenses relate primarily to estimated maintenance and retention costs required to maintain the Company's mining claims. The Company incurred operating expenses of $152,782 during the six months ended July 31, 2004. Of this amount, $110,000 reflects officer compensation and related payroll taxes during the period, $16,505 reflect payroll tax penalties and $23,000 reflect fees for outside professional services. During the same period ended July 31, 2003 the Company incurred operating expenses of $143,283 of which $110,000 represents officer compensation and $16,129 reflecting payroll tax penalties. It is anticipated that both exploration costs and operating expenses will increase significantly as the Company resumes its mining operations and exploration program. The Company incurred interest expense of $99,406 during the six months ended July 31, 2004 which compares to interest expenses of $59,446 incurred during the same period ended July 31, 2003. Although the amount of loans outstanding during the first six months of fiscal 2005 increased slightly, the increase in additional interest expense was a direct result of the increase in accretion of warrants issued as a debt discount. The Company's total net loss for the six months ended July 31, 2004 increased to $262,187 compared to a net loss of $194,167 incurred for the same period ended July 31, 2003. The larger net loss in the current fiscal year reflects the substantial increase in operating expenses and interest expense as well as a lack of revenues recognized during the first six months of fiscal year 2005. LIQUIDITY AND CAPITAL RESOURCES The Company has incurred significant operating losses during the last two fiscal years and during the six month period ended July 31, 2004 which has resulted in an accumulated deficit of $15,369,350 as of July 31, 2004. At July 31, 2004, the Company had cash and marketable securities of $65,865 and a net working capital deficit of $4,452,343. Since the resumption of its business in February 2003, the Company has been dependent on borrowed or invested funds in order to finance its ongoing operations. As of July 31, 2004, the Company had $1,612,630 of outstanding notes payable which reflects an increase compared to notes payable of $1,581,721 outstanding as of January 31, 2004. During the quarter ended July 31, 2004 the Company borrowed an additional $8,500 from its President and Chief Executive Officer at an interest rate of 8% per year. This amount increased the Company's total indebtedness to its President to $1,420,892. Notes representing principal 19 and interest due to the President of the Company as well as notes payable to four other individuals have one year terms. As of July 31, 2004, $1,255,798 of loans due to the Company's President and $176,500 of loans due to other individuals were in default. By attempting to resume mining operations, the Company will require approximately $3 million to $5 million in additional working capital above the current working capital deficiency to bring the mine into full production. It is the Company's intention to pursue several possible funding opportunities including the sale of additional securities or the incurring of additional debt. Due to the Company's continuing losses from its business operations, the independent auditor's report dated November 7, 2004, includes a "going concern" explanation relating to the fact that the Company's continuation is dependent upon obtaining additional working capital either through significantly increasing revenues or through outside financing. As of July 31, 2004, Newgold's principal commitments included its obligation to pay ongoing maintenance fees on its 50 unpatented mining claims. Due to the Company's limited cash flow, operating losses and limited assets, it is unlikely that the Company could obtain financing through commercial or banking sources. Consequently, the Company is dependent on continuous cash infusions from its major stockholders or other outside sources in order to fund its current operations. If these investors were unwilling or unable to provide necessary working capital to the Company, the Company would probably not be able to commence or sustain its operations. There is no written agreement or contractual obligation which would require the Company's investors to fund Company operations up to a certain amount or indeed continue to finance the Company's operations at all. Management of the Company believes that it will need to raise additional capital to continue to develop, promote and conduct its mining operations. Such additional capital may be raised through public or private financing as well as borrowing from other sources. To date, the Company's President has paid substantially all of the Company's expenses since restarting its business in February 2003. Although the Company believes that these creditors and investors will continue to fund the Company's expenses based upon their significant debt or equity interest in Newgold, there is no assurance that such investors will continue to pay the Company's expenses. If adequate funds are not otherwise available, the Company would not be able to establish or sustain mining operations. Off-Balance Sheet Arrangements - ------------------------------ During the fiscal quarter ended July 31, 2004, the Company did not engage in any off-balance sheet arrangements as defined in Item 303(c) of the SEC's Regulation S-B. FACTORS AFFECTING FUTURE OPERATING RESULTS The Company has been relatively inactive since April 2001. Consequently, it is only recently reactivating its business operations and has generated no revenues, other than dividend income, since its inception. As a result, Newgold has only a limited operating history upon which to evaluate its future potential performance. The Company's prospects must be considered in light 20 of the risks and difficulties encountered by new companies which have not yet established their business operations. The Company will need additional funds to finance its mining and exploration activities as well as fund its current operations. It currently has no cash reserves and a working capital deficit and is unable to fund its operations from revenues. Consequently, its ability to meet its obligations in the ordinary course of business is dependent upon its ability to raise additional financing through public or private equity financings, establish increasing cash flow from operations, enter into joint ventures or other arrangements with corporate sources, or secure other sources of financing to fund operations. The audit report of the Company's independent auditors includes a "going concern" qualification. In the auditor's opinion, the Company's limited operating history and the accumulated net deficit as of January 31, 2004, raise substantial doubt about its ability to continue as a going concern. See Note 2 to the Unaudited Financial Statements. The price of gold has experienced an increase in value over the past three years, generally reflecting among other things declining interest rates in the United States; worldwide instability due to terrorism; and a global economic slump. Any significant drop in the price of gold may have a materially adverse affect on the results of the Company's operations unless the Company is able to offset such a price drop by substantially increased production. The Company prepares estimates of future gold production for its various operations. The Company's production estimates are dependent on, among other things, the accuracy of mineral reserve estimates, the accuracy of assumptions regarding ore grades and recovery rates, assumptions pertaining to ground conditions and physical characteristics of ores, such as hardness and the presence or absence of particular metallurgical characteristics and the accuracy of estimated rates and costs of mining and processing. The failure of the Company to achieve its production estimates could have a material and adverse effect on any or all of the Company's future cash flows, profitability, results of operations and financial condition. The Company's published figures for mineral resources are only estimates. The Company has no proven or probable reserves and has no ability to currently measure or prove its reserves other then relying on information produced in the 1990's and thus may be unable to actually recover the quantity of gold anticipated. The Company can only estimate potential mineral resources which is a subjective process which depends in part on the quality of available data and the assumptions used and judgments made in interpreting such data. There is significant uncertainty in any resource estimate such that the actual deposits encountered or reserves validated and the economic viability of mining the deposits may differ materially from the Company's estimates. Gold exploration is highly speculative in nature. Success in exploration is dependent upon a number of factors including, but not limited to, quality of management, quality and availability of geological expertise and availability of exploration capital. Due to these and other factors, no assurance can be given that the Company's exploration programs will result in the discovery of new mineral reserves or resources. 21 The Company's mining property rights consist of 50 unpatented mining claims. The validity of unpatented mining claims is often uncertain and is always subject to contest. Unpatented mining claims are generally considered subject to greater title risk than patented mining claims, or real property interests that are owned in fee simple. If title to a particular property is successfully challenged, the Company may not be able to retain its royalty interests on that property, which could reduce its future revenues. Mining is generally subject to regulation by state and federal regulatory authorities. State and federal statutes regulate environmental quality, safety, exploration procedures, reclamation, employees' health and safety, use of explosives, air quality standards, pollution of stream and fresh water sources, noxious odors, noise, dust, and other environmental protection controls as well as the rights of adjoining property owners. The Company believes that it is currently operating in compliance with all known safety and environmental standards and regulations applicable to its Nevada property. However, there can be no assurance that its compliance could be challenged or that future changes in federal or Nevada laws, regulations or interpretations thereof will not have a material adverse affect on the Company's ability to resume and sustain mining operations. The business of gold mining is subject to certain types of risks, including environmental hazards, industrial accidents, and theft. Prior to suspending operations, the Company carried insurance against certain property damage loss (including business interruption) and comprehensive general liability insurance. While the Company maintained insurance consistent with industry practice, it is not possible to insure against all risks associated with the mining business, or prudent to assume that insurance will continue to be available at a reasonable cost. The Company has not obtained environmental liability insurance because such coverage is not considered by management to be cost effective. The Company currently carries no insurance on any of its properties due to the current status of the mine and the Company's current financial condition. The Company is substantially dependent upon the continued services of A. Scott Dockter, its President. The Company has no employment agreement with Mr. Dockter, nor is there either key person life insurance or disability insurance on Mr. Dockter. While Mr. Dockter expects to spend the majority of his time assisting the Company, there can be no assurance that Mr. Dockter's services will remain available to the Company. If Mr. Dockter's services are not available to the Company, the Company will be materially and adversely affected. However, Mr. Dockter has been a significant shareholder of the Company since its inception and considers his investment of time and money in the Company of significant personal value. CRITICAL ACCOUNTING POLICIES Newgold's discussion and analysis of its financial conditions and results of operations are based upon its financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of financial statements require managers to make estimates and disclosures on the date of the financial statements. On an on-going basis, Newgold evaluates its estimates, including, but not limited to, those related to revenue recognition. The Company uses authoritative pronouncements, 22 historical experience and other assumptions as the basis for making judgments. Actual results could differ from those estimates. Newgold believes that the following critical accounting policies affect its more significant judgments and estimates in the preparation of its financial statements. Valuation of long-lived assets - ------------------------------ Long-lived assets, consisting primarily of property and equipment, patents and trademarks, and goodwill, comprise a significant portion of the Company's total assets. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying values may not be recoverable. Recoverability of assets is measured by a comparison of the carrying value of an asset to the future net cash flows expected to be generated by those assets. The cash flow projections are based on historical experience, management's view of growth rates within the industry, and the anticipated future economic environment. Factors Newgold considers important that could trigger a review for impairment include the following: (a) significant underperformance relative to expected historical or projected future operating results, (b) significant changes in the manner of its use of the acquired assets or the strategy of its overall business, and (c) significant negative industry or economic trends. When the Company determines that the carrying value of long-lived assets and related goodwill and enterprise-level goodwill may not be recoverable based upon the existence of one or more of the above indicators of impairment, it measures any impairment based on a projected discounted cash flow method using a discount rate determined by its management to be commensurate with the risk inherent in its current business model. Deferred Reclamation Costs - -------------------------- In August 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 143, "Accounting for Asset Retirement Obligations," which established a uniform methodology for accounting for estimated reclamation and abandonment costs. The statement was adopted February 1, 2003. The reclamation costs will be allocated to expense over the life of the related assets and will be adjusted for changes resulting from the passage of time and revisions to either the timing or amount of the original present value estimate. Prior to adoption of SFAS No. 143, estimated future reclamation costs were based principally on legal and regulatory requirements. Such costs related to active mines were accrued and charged over the expected operating lives of the mines using the UOP method based on proven and 23 probable reserves. Future remediation costs for inactive mines were accrued based on management's best estimate at the end of each period of the undiscounted costs expected to be incurred at a site. Such cost estimates included, where applicable, ongoing care, maintenance and monitoring costs. Changes in estimates at inactive mines were reflected in earnings in the period an estimate was revised. Exploration Costs - ----------------- Exploration costs are expensed as incurred. All costs related to property acquisitions are capitalized. Mine Development Costs - ---------------------- Mine development costs consist of all costs associated with bringing mines into production, to develop new ore bodies and to develop mine areas substantially in advance of current production. The decision to develop a mine is based on assessment of the commercial viability of the property and the availability of financing. Once the decision to proceed to development is made, development and other expenditures relating to the project will be deferred and carried at cost with the intention that these will be depleted by charges against earnings from future mining operations. No depreciation will be charged against the property until commercial production commences. After a mine has been brought into commercial production, any additional work on that property will be expensed as incurred, except for large development programs, which will be deferred and depleted. Reclamation Costs - ----------------- Reclamation costs and related accrued liabilities, which are based on the Company's interpretation of current environmental and regulatory requirements, are accrued and expensed, upon determination. Based on current environmental regulations and known reclamation requirements, management has included its best estimates of these obligations in its reclamation accruals. However, it is reasonably possible that the Company's best estimates of its ultimate reclamation liabilities could change as a result of changes in regulations or cost estimates. ITEM 3. CONTROLS AND PROCEDURES The Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's President and Chief Executive Officer along with the Company's Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Exchange Act Rule 13a-14 as of the end of the period covered by this report. Based upon that evaluation, the Company's President and Chief Executive Officer along with the Company's Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective to ensure the information required to be disclosed by the Company in reports filed or submitted under the 24 Exchange Act were timely recorded, processed and reported within the time periods specified in the Securities and Exchange Commission rules and forms. There have been no significant changes in the Company's internal controls over financial reporting or in other factors which occurred during the last quarter covered by this report, which could materially affect or are reasonably likely to materially affect the Company's internal controls over financial reporting. 25 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS On May 18, 2004, Paul Ngoyi filed a petition for involuntary bankruptcy against the Company (Case No. BK-N-0451511). Mr. Ngoyi claims to be a holder of both the Christiansen and Primm judgments against Newgold and is claiming that Newgold cannot pay such judgments because it is insolvent. Newgold intends to file for Summary Judgment alleging that Mr. Ngoyi's claims are invalid because the two judgments were previously satisfied and that Newgold is not insolvent. While the petition is in its early stages and an outcome cannot be predicted, the Company intends to vigorously oppose the bankruptcy petition. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS SALES OF UNREGISTERED SECURITIES DURING THE QUARTER In July 2004, the Company borrowed $8,500 from its President, Scott Dockter. The promissory note is not convertible into stock, is due on July 31,2005, and bears interest at 8% per year. In connection with the loans, warrants to purchase 56,667 shares of common stock have been issued. The warrants have been valued using the Black-Scholes option pricing model. The warrants were issued at $0.15 per share and expire in five years from the date of issuance. The issuance of the note and warrants were made in reliance upon the exemption from registration set forth in Section 4(2) of the 1933 Act as a transaction not involving a public offering and made to one affiliate of the Company. The note and warrants were deemed to be "restricted securities" as defined in Rule 144 under the 1933 Act. Prior issuances of the Company's common stock during fiscal years 2003 and 2004 have been reported in the Company's Form 10-KSB for the year ended January 31, 2004. ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS 31.1 Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32. Certification by CEO and CFO pursuant to Section 906 of the Sarbanes- Oxley Act of 2002 26 SIGNATURES In accordance with the requirements of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: December 28, 2004 NEWGOLD, INC. /s/ SCOTT DOCKTER -------------------------------------------- Scott Dockter, President and Chief Executive Officer /s/ JAMES KLUBER -------------------------------------------- James Kluber, Principal Accounting Officer and Chief Financial Officer 27 EX-31.1 2 ni_10qsbex311-40731.txt Exhibit 31.1 CERTIFICATION FOR QUARTERLY REPORTS ON FORM 10-QSB I, Scott Dockter, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Newgold, Inc. ("Registrant"); 2 Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this quarterly report; 4. The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the Registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the Registrant's auditors and the audit committee of Registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the Registrant's ability to record, process, summarize and report financial data and have identified for the Registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal controls; and 6. The Registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: December 28, 2004 /s/ SCOTT DOCKTER -------------------------------------------- Scott Dockter, President and Chief Executive Officer EX-31.2 3 ni_10qsbex312-40731.txt Exhibit 31.2 CERTIFICATION FOR QUARTERLY REPORTS ON FORM 10-QSB I, James Kluber, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Newgold, Inc. ("Registrant"); 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this quarterly report; 4. The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the Registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the Registrant's auditors and the audit committee of Registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the Registrant's ability to record, process, summarize and report financial data and have identified for the Registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal controls; and 6. The Registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: December 28, 2004 /s/ JAMES KLUBER ------------------------------------- James Kluber, Chief Financial Officer EX-32 4 ni_10qsbex32-40731.txt EXHIBIT 32 CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (SUBSECTIONS (a) AND (b) OF SECTION 1350, CHAPTER 63 OF TITLE 18, UNITED STATES CODE) Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of Title 18, United States Code), the undersigned officers of Newgold, Inc., a Delaware corporation (the "Company"), do hereby certify with respect to the Quarterly Report of the Company on Form 10-QSB for the quarter ended July 31, 2004 as filed with the Securities and Exchange Commission (the "10-QSB Report") that: (1) the 10-QSB Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) the information contained in the 10-QSB Report fairly presents, in all material respects, the financial condition and results of operations of the Company. NEWGOLD, INC. Dated: December 28, 2004 /s/ SCOTT DOCKTER ----------------- ----------------------------------------------------- Scott Dockter, President and Chief Executive Officer Dated: December 28, 2004 /s/ JAMES KLUBER ----------------- ----------------------------------------------------- James Kluber, Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----