<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
[_] 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 0-21635
Global Diamond Resources, Inc.
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(Exact name of small business issuer as specified in its charter)
Nevada 33-0213535
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(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
836 Prospect Street, Suite 2B, La Jolla, California 92037
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(Address of principal executive offices)
(619) 459-1928
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(Issuer's telephone number)
Not Applicable
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act of 1934 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
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As of November 11, 1997, the Company had 7,026,771 shares of its $.001 par
value common stock issued and outstanding.
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PART 1 - FINANCIAL INFORMATION
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PAGE
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ITEM 1. Financial Statements
Condensed Consolidated Balance Sheet at September 30, 1997.................. 2
Condensed Consolidated Statements of Operations for the three month
periods and nine month periods ended September 30, 1997 and 1996.......... 3
Condensed Consolidated Statements of Cash Flows for the
nine month periods ended September 30, 1997 and 1996...................... 4
Notes to Condensed Consolidated Financial Statements........................ 5
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<PAGE>
GLOBAL DIAMOND RESOURCES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheet
September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
<S> <C>
Assets
Current assets:
Cash and cash equivalents $ 88,292
Accounts receivable 37,893
Marketable security available-for-sale 22,500
-----------
148,685
Fixed assets, net 994,593
-----------
$ 1,143,278
===========
Liabilities
Current liabilities:
Accounts payable and accrued liabilities $ 42,059
-----------
Stockholders' Equity
Stockholders' equity:
Preferred stock, $0.001 par value, 10,000,000 shares authorized,
no shares issued --
Common stock, $0.001 par value, 25,000,000 shares authorized,
6,425,439 shares issued and outstanding, 432,772 subscribed
and unissued 6,425
Additional paid-in capital 2,625,809
Common stock subscription received, net of costs of $38,782 792,204
Accumulated deficit (2,296,126)
Cumulative translation adjustment (27,093)
-----------
1,101,219
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$ 1,143,278
===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE>
GLOBAL DIAMOND RESOURCES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
For the three month periods and nine month periods ended September 30, 1997 and
1996
(Unaudited)
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<CAPTION>
Three month periods ended Nine month periods ended
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September 30, September 30, September 30, September 30,
1997 1996 1997 1996
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<S> <C> <C> <C> <C>
Other Income:
Interest income $ 1,390 1,188 5,787 6,359
Fee income -- -- -- 35,950
--------- --------- --------- ---------
1,390 1,188 5,787 42,309
Expenses:
Business development 36,000 (10,692) 36,000 6,893
Site investigation, option costs
and project costs written off 11,396 (92,111) 11,396 49,713
Consulting fees 66,225 6,838 185,270 10,038
Depreciation 6,677 1,298 18,748 3,866
Legal and accounting 30,526 46,155 106,917 66,088
Office and miscellaneous 30,160 13,888 108,850 65,225
Salaries and benefits 84,179 47,667 222,256 88,638
Travel 33,075 59,143 63,884 78,538
--------- --------- --------- ---------
298,238 72,186 753,321 368,999
Operating loss (296,848) (70,998) (747,534) (326,690)
Income taxes -- 24 980 1,624
--------- --------- --------- ---------
Net loss $(296,848) (71,022) (748,514) (328,314)
--------- --------- --------- ---------
Net loss per share $ (0.05) (0.01) (0.13) (0.06)
========= ========= ========= =========
Weighted average shares
outstanding 5,829,285 5,206,721 5,621,464 5,134,498
========= ========= ========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE>
GLOBAL DIAMOND RESOURCES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
For the nine month periods ended September 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
Nine month periods ended
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September 30, September 30,
1997 1996
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<S> <C> <C>
Cash flows from operating activities:
Net loss $(748,514) (328,314)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 18,748 3,866
Shares issued in consideration for
consulting fees 177,500 --
Increase in accounts receivable (6,355) (9,457)
Decrease (increase) in inventory 64,208 (67,699)
Decrease in prepaid expenses 24,115 5,275
Increase (decrease) in accounts payable and
accrued liabilities (44,199) 20,548
--------- --------
Net cash used in operating activities $(514,497) (375,781)
--------- --------
Cash flows provided by financing activities:
Subscriptions received (refunded) 769,704 (83,333)
Proceeds from issuance of common shares -- 761,092
--------- --------
Net cash provided by financing activities 769,704 677,759
--------- --------
Cash flows from investing activities:
Purchase of equipment, net (114,629) (8,411)
Development of mining properties (376,973) (123,985)
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Net cash used in investing activities (491,602) (132,396)
--------- --------
Effects of exchange rates on cash (9,700) (7,492)
--------- --------
Net increase (decrease) in cash and
cash equivalents (246,095) 162,090
Cash and cash equivalents, beginning of period 334,387 390,439
--------- --------
Cash and cash equivalents, end of period $ 88,292 552,529
========= ========
</TABLE>
Supplemental disclosure of non-cash transaction.
In 1997, the Company issued 310,000 common shares to three unaffiliated parties.
The shares were issued in consideration of consulting services rendered by each
party.
In September 1997, the Company purchased plant and equipment for $350,000. The
Company paid $100,000 in cash and issued 615,385 common shares for the balance,
being the number of shares based on their market value on the date of purchase.
See accompanying notes to condensed consolidated financial statements.
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<PAGE>
GLOBAL DIAMOND RESOURCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
As of September 30, 1997 and for each of the three month
periods and nine month periods ended September 30, 1997 and 1996
(1) These condensed consolidated financial statements of Global Diamond
Resources, Inc. (the "Company") do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements and should be read in conjunction with the financial
statements and notes thereto included in the Company's Annual Report on Form
10-KSB. In the opinion of management, the financial information set forth in
the accompanying condensed consolidated financial statements reflect all
adjustments necessary for a fair statement of the periods reported, and all
such adjustments were of a normal and recurring nature. Interim results are
not necessarily indicative of results for a full year.
(2) Fixed Assets
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Mining properties under development:
Caerwinning deposit $287,499
Grasdrif deposit 337,201
--------
624,700
Less accumulated depreciation (8,487)
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616,213
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Plant and equipment, at cost 350,000
--------
Equipment, at cost 48,949
Less accumulated depreciation (20,569)
--------
28,380
--------
$994,593
========
</TABLE>
(3) During March 1997, the Company entered into agreements with three parties
("Agreements") whereby they would subscribe, at prices ranging from $1.60 to
$2.20 per share, for 802,931 common shares of the Company for a total of
$1,500,000 in cash and shares of a publicly traded company. The shares of
the publicly traded company were to be sold and the net proceeds were to be
used to purchase shares in the Company at $1.90 per share. Through September
30, 1997, subscriptions totalling $830,986 have been received by the Company
in connection with these Agreements. The consideration received consisted of
$808,486 in cash (including $97,966 from the sale of 100,000 shares in the
publicly traded company) and 100,000 shares of the publicly traded company
with a market value as of September 30, 1997 of $22,500. In November 1997,
the Company issued 432,772 common shares and returned the 100,000 shares in
the publicly traded company to the subscribers.
In the quarter ended September 30, 1996, site investigation costs of
$90,500 incurred in the bulk sample on the Caerwinning deposit, which were
written off in the prior two quarters, were capitalized. This was due to
the large increase in the size of the bulk sample in that quarter to an
extent that the accounting policies of the Company required capitalizing of
all the bulk sample costs incurred at the Caerwinning deposit.
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During October and November 1997, warrant holders exercised outstanding
warrants for the purchase of 163,560 common shares of the Company at an
exercise price of Cdn $0.75 per share, resulting in receipt of $87,619 by
the Company.
The Company is accounting for these publicly-traded shares in accordance
with SFAS No. 115, Accounting for Certain Investments in Debt and Equity
Securities, which requires that debt and marketable equity securities be
classified into one of three categories: trading, available-for-sale, or
held to maturity. The Company's equity security qualifies under the
provisions of SFAS No. 115 as available-for-sale.
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ITEM 2. Management's Discussion and Analysis or Plan of Operation
The Company is engaged in diamond exploration and mining. The Company
has exercised an option to acquire one mining property (the Caerwinning
Deposit), acquired an option to purchase a second mining property (the Montrose
Kimberlite Pipe) and has acquired a 50% partnership interest in the third
property (the Grasdrif Deposit), all of which are located in the Republic of
South Africa. The Company intends to conduct exploration and acquisitions of
additional diamond pipes and alluvial deposits and is continuously evaluating
potential property acquisitions.
To date, the Company's activities have included the investigation and
acquisition of mining property interests, exploratory and development work,
completion of a drilling program at all three properties, completion of a bulk
sample program at the Caerwinning Deposit and commencement of site establishment
at the Grasdrif Deposit. The Company has financed its activities to date
through the sale of shares of its Common Stock.
As of the date of this report, the Company is seeking to acquire $6 million
in capital through the nonpublic offering of shares of its Common Stock and
convertible debt, and long-term debt. However, there are no firm commitments or
agreements on the part of any party at this time to provide any additional
capital to the Company and there can be no assurance that the Company will be
able to obtain sufficient additional capital in order to attain a meaningful
level of operations. If the Company is unable to raise additional capital, the
Company not be able to commence revenue producing operations or finance the
exercise of certain options to acquire mining properties prior to their
termination. During October and November 1997, warrant holders exercised
outstanding warrants for the purchase of 163,560 common shares of the Company at
an exercise price of Cdn $0.75, resulting in receipt of $87,619 by the Company.
The Company's plan of operations for the next 12 months includes the
completion of exploratory work and the commencement of production at all three
of its present mining properties, subject to the receipt of additional
financing. The Company intends to undertake the following activities at each of
its three properties, in the following order of priority. Subject to the
Company's receipt of an additional $2.5 million in capital to be applied
towards such purpose, the Company intends to complete site establishment,
including the development of roads, power, housing and water, and commence
mining operations at the Grasdrif Deposit. The Company believes that site
establishment will take approximately four months, after which the Company would
propose to commence production at the Grasdrif Deposit. The Company intends to
commence production at the Caerwinning Deposit, subject to its receipt of an
additional $1.5 million of capital to be applied towards this purpose. The
Company intends to commence a bulk sampling program at the Montrose Pipe subject
to its receipt of an additional $600,000 in capital to be applied towards this
purpose. If the results from the proposed bulk sampling program are successful,
the Company intends to conduct open pit mining to a depth of 30 meters which
would be followed by underground mining activity. The Company estimates that it
will require $3 million in capital expenditures and two years of development in
order to commence underground mining operations at the Montrose Pipe.
In February 1997, the FASB issued SFAS No. 128, "Earnings per Share". This
Statement specifies the computation, presentation, and disclosure requirements
for earnings per share for entities with publicly held common stock or potential
common stock. This Statement shall be effective for financial statements for
both interim and annual periods ending after December 15, 1997. Earlier
application is not permitted. At this time the Company does not believe that
this Statement will have a significant impact on the financial position or
results of operations for the year ending December 31, 1997.
In February 1997, the FASB issued SFAS No. 129, "Disclosure of Information
about Capital Structure." This Statement shall be effective for financial
statements for both interim and annual periods ending after December 15, 1997.
At this time the Company has determined that this Statement will have no
significant impact on the financial position or results of operations for the
year ending December 31, 1997.
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<PAGE>
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." This Statement established standards for reporting and display of
comprehensive income and its components (revenues, expenses, gains and losses)
in a full set of general-purposes financial statements. This Statement shall be
effective for fiscal years beginning after December 15, 1997. Reclassification
of financial statements for earlier periods provided for comparative purposes is
required. At this time the Company does not believe that this Statement will
have a significant impact on the financial position or results of operations for
the year ending December 31, 1998.
In June 1997, the FASB issued SFAS No. 131, "Disclosure about Segments of
an Enterprise and Related Information." This Statement established standards
for the way that public business enterprises report information about operating
segments in annual financial statements and requires that enterprises report
selected information about operating segments in interim financial reports
issued to stockholders. This Statement shall be effective for fiscal years
beginning after December 15, 1997. In the initial year of application,
comparative information for earlier years is to be restated. At this time the
Company does not believe that this Statement will have a significant impact on
the financial position or results of operations for the year ending December 31,
1998.
This report contains various forward-looking statements that are based on
the Company's beliefs as well as assumptions made by and information currently
available to the Company. When used in this report, the words "believe,"
"expect," "anticipate," "estimate" and similar expressions are intended to
identify forward-looking statements. Such statements are subject to certain
risks, uncertainties and assumptions, including, without limitation, that as of
this date the Company has not commenced mining operations at any of its three
mines; the Company requires an additional $6 million of capital to achieve a
meaningful level of revenue producing operations; the lack of proven reserves at
any of the Company's three mines; mining risks generally; political risks
associated with the Company's operations in the Republic of South Africa;
general economic conditions; currency fluctuations; and estimates of costs of
production. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may vary
materially from those anticipated, estimated, or projected. The Company
cautions potential investors not to place undue reliance on any such forward-
looking statements all of which speak only as of the date made.
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<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
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Inapplicable.
Item 2. Changes in Securities.
---------------------
Inapplicable.
Item 3. Defaults Upon Senior Securities.
-------------------------------
Inapplicable.
Item 4. Submission of Matters to a Vote of Security Holders.
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Inapplicable.
Item 5. Other Information.
-----------------
Inapplicable.
Item 6. Exhibits and Reports on Form 8-K.
--------------------------------
(a) Exhibits
--------
Inapplicable.
(b) Reports on Form 8-K
-------------------
The Company filed a Current Report on Form 8-K dated September 4,
1997 for purposes of reporting the sale of common shares pursuant
to Regulation S under the Securities Act of 1933.
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<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Global Diamond Resources, Inc.
(Registrant)
Dated: November 11, 1997 By: /s/ MERVYN J. McCULLOCH
-------------------------
Mervyn J. McCulloch,
Chief Financial Officer
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-START> JUL-01-1997 JUL-01-1996
<PERIOD-END> SEP-30-1997 SEP-30-1996
<CASH> 88,292 0
<SECURITIES> 22,500 0
<RECEIVABLES> 37,893 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 148,685 0
<PP&E> 1,023,649 0
<DEPRECIATION> 29,056 0
<TOTAL-ASSETS> 1,143,278 0
<CURRENT-LIABILITIES> 42,059 0
<BONDS> 0 0
0 0
0 0
<COMMON> 6,425 0
<OTHER-SE> 2,625,809 0
<TOTAL-LIABILITY-AND-EQUITY> 1,143,278 0
<SALES> 0 0
<TOTAL-REVENUES> 1,390 1,188
<CGS> 0 0
<TOTAL-COSTS> 298,238 72,186
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (296,848) (70,998)
<INCOME-TAX> 0 24
<INCOME-CONTINUING> (296,848) (71,022)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (296,848) (71,022)
<EPS-PRIMARY> (0.05) (0.01)
<EPS-DILUTED> (0.05) (0.01)
</TABLE>
