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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended June 30, 2000
---------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
Commission file number 000-28183
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QUILCHENA RESOURCES, INC.
-------------------------
(Exact name of small business issuer as specified in its charter)
NEVADA 91-2006414
------ ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
#3400 - 666 BURRARD STREET
VANCOUVER, BRITISH COLUMBIA, CANADA V6C 3M7
--------------------------------------------
(Address of principal executive offices)
(604) 688-3929
--------------
(Issuer's telephone number)
N/A
---
(Former name, former address and former fiscal year, if changed since last
report)
<PAGE>
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
5,000,000 common shares issued and outstanding, as of July 31, 2000
-----------------------------------------------------------------------------
Transitional Small Business Disclosure Format (Check one): Yes [ ] No[X]
PART I- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
Quilchena Resources Inc.'s (the "Company") financial statements are stated in
United States Dollars (US$) and are prepared in accordance with United States
Generally Accepted Accounting Principles.
QUILCHENA RESOURCES, INC.
(AN EXPLORATION STAGE COMPANY)
FINANCIAL STATEMENTS
(EXPRESSED IN UNITED STATES DOLLARS)
JUNE 30, 2000
<PAGE>
<TABLE>
<CAPTION>
QUILCHENA RESOURCES, INC.
(An Exploration Stage Company)
BALANCE SHEETS
(Expressed in United States Dollars)
(Unaudited)
June 30, December 31,
2000 1999
<C> <S> <C> <C>
ASSETS
CURRENT
Cash and cash equivalents . . . . . . . . . . . . $ 4,868 $ 40,964
================================================== ============== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT
Accounts payable and accrued liabilities. . . . . $ - $ 4,424
-------------- ---------
STOCKHOLDERS' EQUITY
Capital stock (Note 5)
Authorized
200,000,000 common shares, par value of $0.001
Issued and outstanding
5,000,000 common shares 5,000 5,000
Additional paid in capital. . . . . . . . . . . . 45,000 45,000
Deficit accumulated during the exploration stage. (45,132) (13,460)
-------------- ---------
Total stockholders' equity. . . . . . . . . . . . 4,868 36,540
-------------- ---------
Total liabilities and stockholders' equity. . . . $ 4,868 $ 40,964
================================================== ============== =========
HISTORY AND ORGANIZATION OF THE COMPANY (Note 1)
GOING CONCERN (Note 2)
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
QUILCHENA RESOURCES, INC.
(An Exploration Stage Company)
STATEMENTS OF OPERATIONS
(Expressed in United States Dollars)
(Unaudited)
Cumulative
From Period From
Incorporation Incorporation
on Three Month Three Month Six Month on
March 3, 1999 Period Ended Period Ended Period Ended March 3, 1999
to June 30, June 30, June 30, June 30, to March 31,
2000 2000 1999 2000 1999
<S> <C> <C> <C> <C> <C>
--------------- --------------- -------------- ------------- --------------
EXPENSES
Incorporation costs . . . . . . $ 640 $ - $ 640 $ - $ -
Filing and transfer agent fees. 1,765 869 - 869 -
Legal and audit fees. . . . . . 29,743 10,100 1,523 27,819 -
Mineral property
acquisition costs . . . . . . 12,984 - - 2,984 -
--------------- --------------- -------------- ------------- --------------
LOSS FOR THE PERIOD . . $ 45,132 $ 10,969 $ 2,163 $ 31,672 $ -
================================ =============== =============== ============== ============= ==============
BASIC AND DILUTED LOSS PER SHARE $ (0.01) $ (0.01) $ (0.01) $ 0.00
================================ =============== =============== ============== =============
WEIGHTED AVERAGE SHARES
OUTSTANDING . . . . . . . . . . 5,000,000 5,000,000 5,000,000 2,586,207
================================ =============== =============== ============== =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
QUILCHENA RESOURCES, INC.
(An Exploration Stage Company)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Expressed in United States Dollars)
(Unaudited)
Deficit
Accumulated
Additional During the
Common Stock Paid-in Exploration
Shares Amount Capital Stage Total
<S> <C> <C> <C> <C> <C>
------------ ----------- ------------ --------- ---------
Inception, March 3, 1999 . . - $ - $ - $ - $ -
Shares issued for cash . . . . . 5,000,000 5,000 45,000 - 50,000
Loss for the period. . . . . . . - - - (13,460) (13,460)
------------ ----------- ------------ --------- ---------
Balance at December 31, 1999 5,000,000 5,000 45,000 (13,460) 36,540
Loss for the period. . . . . . . - - - (31,672) (31,672)
------------ ----------- ------------ --------- ---------
Balance at June 30, 2000 . . 5,000,000 $ 5,000 $ 45,000 $(45,132) $ 4,868
================================ ============ =========== ============ ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
QUILCHENA RESOURCES, INC.
(An Exploration Stage Company)
STATEMENTS OF CASH FLOWS
(Expressed in United States Dollars)
(Unaudited)
Period From
Cumulative Incorporation
From on
Inception on Six Month March 3,
March 3, 1999 Period Ended 1999 to
to June 30, June 30, June 30,
2000 2000 1999
-------------- --------------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Loss for the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (45,132) $ (31,672) $ (2,163)
Changes in non-cash working capital items:
Increase (decrease) in accounts payable . . . . . . . . . . . . . . . . . . . - (4,424) 1,523
-------------- --------------- ----------
Net cash used in operating activities . . . . . . . . . . . . . . . . . . . . . (45,132) (36,096) (640)
-------------- --------------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of capital stock for cash. . . . . . . . . . . . . . . . . . . . . . . 50,000 - 12,500
-------------- --------------- ----------
Net cash provided by financing activities . . . . . . . . . . . . . . . . . . . 50,000 - 12,500
-------------- --------------- ----------
CHANGE IN CASH AND CASH EQUIVALENTS DURING THE PERIOD. . . . . . . . . . . . . . 4,868 (36,096) 11,860
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD . . . . . . . . . . . . - 40,964 -
-------------- --------------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD . . . . . . . . . . . . . . . $ 4,868 $ 4,868 $ 11,860
================================================================================ ============== =============== ==========
CASH PAID DURING THE PERIOD FOR INTEREST EXPENSE . . . . . . . . . . . . . . . . $ - $ -
================================================================================ ============== ===============
CASH PAID DURING THE PERIOD FOR INCOME TAXES . . . . . . . . . . . . . $ - $ -
================================================================================ ============== ===============
SUPPLEMENTAL DISCLOSURE FOR NON-CASH FINANCING AND INVESTING ACTIVITIES (Note 6)
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
QUILCHENA RESOURCES, INC.
(An Exploration Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in United States Dollars)
(Unaudited)
JUNE 30, 2000
1. HISTORY AND ORGANIZATION OF THE COMPANY
The Company was formed on March 3, 1999 under the Laws of the State of
Nevada and is in the business of exploration and development of mineral
properties. The Company has not yet determined whether its properties contain
mineral resources that may be economically recoverable.
The accompanying financial statements have been prepared by the Company
without audit. In the opinion of management, all adjustments (which include
only normal recurring adjustments) necessary to present fairly the financial
position, results of operations, changes in stockholders' equity and cash flows
at June 30, 2000 and for the periods then ended have been made. These financial
statements should be read in conjunction with the audited financial statements
of the Company for the year ended December 31, 1999. The results of operations
for the period ended June 30, 2000 are not necessarily indicative of the results
to be expected for the year ending December 31, 2000.
2. GOING CONCERN
These financial statements have been prepared in accordance with generally
accepted accounting principles applicable to a going concern which contemplates
the realization of assets and the satisfaction of liabilities and commitments in
the normal course of business. The general business strategy of the Company is
to acquire mineral properties either directly or through the acquisition of
operating entities. The continued operations of the Company and the
recoverability of mineral property costs is dependent upon the existence of
economically recoverable reserves, confirmation of the Company's interest in the
underlying mineral claims, the ability of the Company to obtain necessary
financing to complete the development and upon future profitable production.
The Company has incurred operating losses and requires additional funds to meet
its obligations and maintain its operations. Management's plan in this regard
is to raise equity financing as required. These conditions raise substantial
doubt about the Company's ability to continue as a going concern. These
financial statements do not include any adjustments that might result from this
uncertainty.
June 30, December 31,
2000 1999
---- -----
Deficit accumulated during the exploration stage $ (45,132) $ (13,460)
Working capital 4,868 36,540
================ ====== =======
3. SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include highly liquid investments with original
maturities of three months or less. These are recorded at cost which
approximates market.
ESTIMATES
<PAGE>
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
<PAGE>
QUILCHENA RESOURCES, INC.
(An Exploration Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in United States Dollars)
(Unaudited)
JUNE 30, 2000
3. SIGNIFICANT ACCOUNTING POLICIES (cont'd )
FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash and cash equivalents,
accounts payable and accrued liabilities. Unless otherwise noted, it is
management's opinion that the Company is not exposed to significant interest,
currency or credit risks arising from these financial instruments. The fair
value of these financial instruments approximate their carrying values, unless
otherwise noted.
FOREIGN CURRENCY TRANSLATION
Translation amounts denominated in foreign currencies are translated into
United States currency at exchanges rates prevailing at transactions dates.
Carrying values of monetary assets and liabilities are adjusted at each balance
sheet date to reflect the exchange rate at that date. Gains and losses from
restatement of foreign currency monetary assets and liabilities are included in
income.
NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 133 "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133") which establishes accounting and reporting
standards for derivative instruments and for hedging activities. SFAS 133 is
effective for all fiscal quarters of fiscal years beginning after June 15, 1999.
The Company does not anticipate that the adoption of the statement will have a
significant impact on its financial statements.
RESOURCE PROPERTIES
Costs of acquisition, exploration, carrying, and retaining unproven
properties are expenses as incurred. Costs incurred in proving and developing a
property ready for production are capitalized and amortized over the life of the
mineral deposit or over a shorter period if the property is shown to have an
impairment in value.
INCOME TAXES
Income taxes are provided in accordance with Statement of Financial
Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income Taxes". A
deferred tax asset or liability is recorded for all temporary differences
between financial and tax reporting and net operating loss carryforwards.
Deferred tax expenses (benefit) result from the net change during the year of
deferred tax assets and liabilities.
Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or all of
the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on the
date of enactment.
LOSS PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128").
Under SFAS 128, basic and diluted earnings per share are to be presented. Basic
earnings per share is computed by dividing income available to common
<PAGE>
shareholders by the weighted average number of common shares outstanding in the
period. Diluted earnings per share takes into consideration common shares
outstanding (computed under basic earnings per share) and potentially dilutive
common shares.
<PAGE>
QUILCHENA RESOURCES, INC.
(An Exploration Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in United States Dollars)
(Unaudited)
JUNE 30, 2000
3. SIGNIFICANT ACCOUNTING POLICIES (cont'd )
STOCK-BASED COMPENSATION
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," encourages, but does not require, companies to record
compensation cost for stock-based employee compensation plans at fair value.
The Company has chosen to account for stock-based compensation using Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees."
Accordingly compensation cost for stock options is measured as the excess, if
any, of the quoted market price of the Company's stock at the date of the grant
over the amount an employee is required to pay for the stock.
COMPREHENSIVE INCOME
The Company has adopted Statement of Financial Accounting Standards No. 130
("SFAS 130"), "Reporting Comprehensive Income". This statement establishes
rules for the reporting of comprehensive income and its components. The
adoption of SFAS 130 had no impact on total shareholders' equity as of June 30,
2000.
4. MINERAL PROPERTY
On July 20, 1999, the Company acquired a 100% interest in the Hi-Ho 1-10
mining claims located in the New Westminster Mining Division of British Columbia
for $10,000 (paid). As the claims do not contain any known reserves, the
acquisition costs were expensed during the period ended December 31, 1999. To
exercise its option, the Company must complete a recommended work program in the
amount of CDN$8,495 by December 31, 2000. As at June 30, 2000, the Company
contributed CDN$4,280 to the work program.
5. CAPITAL STOCK
The authorized common stock of the Company is 200,000,000 shares of common
stock with a par value of $0.001 per share. All of the issued and outstanding
shares are fully paid and non-assessable. All shares have equal voting rights
and, when validly issued, are entitled to one vote per share in all matters to
be voted upon by the stockholders. The shares have no pre-emptive,
subscription, conversion or redemption rights and may be issued only as fully
paid and non-assessable shares. Holders of common shares are entitled to share
rateable in dividends, as may be declared from time to time by the Board of
Directors in its discretion, from funds legally available for dividend payments.
<PAGE>
6. SUPPLEMENTAL DISCLOSURE FOR NON-CASH FINANCING AND INVESTING
ACTIVITIES
There were no significant non-cash transactions during the periods presented.
<PAGE>
QUILCHENA RESOURCES, INC.
(An Exploration Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in United States Dollars)
(Unaudited)
JUNE 30, 2000
7. INCOME TAXES
The Company's total deferred tax asset at June 30 is as follows:
June 30, December 31,
2000 1999
---- ----
Tax benefit of net operating loss carryforward $ 6,770 $ 2,019
Valuation allowance (6,770) (2,019)
------- -------
$ - $ -
==== ====
The Company has a net operating loss carryforward of approximately $45,132. The
Company has provided a full valuation allowance on the deferred tax asset
because of the uncertainty regarding realizability.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
There have been no material developments since the Company filed its Form 10-KSB
Annual Report on March 30, 2000, and its Form 10-QSB Quarterly Report on May 15,
2000.
General
On July 20, 1999, the Company entered into an Assignment Agreement (the
"Assignment Agreement") with Wet Coast Capital Corporation ("Wet Coast"),
pursuant to which the Company paid Wet Coast the sum of $10,000 and in return,
was assigned Wet Coast's interest in an Option Agreement between Wet Coast and
Gerry Diakow, dated July 20, 1999 (the "Option Agreement"). Pursuant to the
Option Agreement, Mr. Diakow granted Wet Coast an option (the "Option") to
acquire a 100% undivided interest in property known as the "Hi-Ho 1 - 10 Mining
Claims", located in the New Westminster Mining Division, 121, 36 West Longitude
and 49 23, 30 North Latitude, British Columbia, Canada (the "Hi-Ho Claims").
Pursuant to the terms of the Assignment Agreement, in order to exercise the
Option, the Company must finance the work program on the Hi-Ho Claims (the "Work
Program"), as recommended by Douglas H. Hopper, Consulting Geologist, in his
report entitled "Exploration Potential of Hi-Ho Claims, Garnet Creek", dated
March 11, 1999 (the "Exploration Report"). In the Exploration Report, Mr.
Hopper estimates the total cost of the Work Program at CDN$8,495. Pursuant to
the terms of an Amending Agreement dated February 9, 2000 (the "Amending
Agreement"), between Gerry Diakow and the Company, the Work Program must be
financed by December 31, 2000.
In partial satisfaction of the Work Program and under the terms of the Option
Agreement, Gerry Diakow spent five (5) days between November 22, 1999 and
November 27, 1999 examining, mapping, hand trenching and sampling the Hi-Ho
Claims (the "Initial Reconnaissance"). As required by the Work Program, on
February 3, 2000, Mr.
<PAGE>
Diakow prepared the initial engineering report, entitled "Prospecting Report on
Rock Sampling over the Hi-Ho Property" (the "Prospecting Report"). In order to
fulfil the requirements of the Work Program, Mr. Diakow will spend a further
period of time (as yet undetermined), prior to December 31, 2000, examining,
mapping, hand trenching and sampling the Hi-Ho Claims (the "Secondary
Reconnaissance"). Following the Secondary Reconnaissance, and within two
months, Mr. Diakow will prepare a final engineering report (the "Final
Engineering Report"). The Final Engineering Report, together with the
Prospecting Report, will fulfil the terms of the Work Program, as well as the
requirements to hold the Hi-Ho Claims in good standing for between 3 and 4
years. Depending upon the economics of developing either an industrial mineral
property or a precious metal property, a second phase of exploration may be
commenced. The determination with respect to a second phase of exploration will
be made by the President of the Company, Derek Herman. The Company anticipates
that the Secondary Reconnaissance under the Work Program will be completed by
December 31, 2000.
The Work Program
The Company has completed the Initial Reconnaissance under the Work Program with
respect to the Hi-Ho Claims, and intends to implement the Secondary
Reconnaissance prior to December 31, 2000. As set out in the Option Agreement
and in accordance with the Work Program, Gerry Diakow will spend a further
period of time (as yet undetermined) conducting the Secondary Reconnaissance,
following which the Final Engineering Report will be completed. The Final
Engineering Report will fulfil the Work Program and the requirements to hold the
Hi-Ho Claims in good standing for between 3 and 4 years. Depending upon the
economics of developing either an industrial mineral property or a precious
metal property, a second phase of exploration may be commenced. A determination
with respect to a second phase of exploration will be made by the President of
the Company, Derek Herman, and will be dependent upon whether further
exploration of the Hi-Ho Claims is deemed to be economically and commercially
viable.
Cash Requirements
The Company's cash requirements for the period ending June 30, 2001 are
estimated at $100,000, including CDN$4,215 for completion of the Work Program.
The Company currently has limited funds available, and should it require
additional funds over the next 12 months, the Company anticipates that it will
raise additional capital through a private placement.
Exploration and Development
To date, the Company has not expended significant funds for exploration and
development. The Exploration Report was prepared prior to Company entering into
the Assignment Agreement. Pursuant to the Assignment Agreement, the Company
paid the sum of $10,000 to Wet Coast to acquire Wet Coast's interest in the
Option Agreement. The Company anticipates that it will spend approximately
$50,000 on further exploration and development (including CDN$4,215 on the
completion of the Work Program) through June 30, 2001, in the form of financing
of the Final Reconnaissance under the Work Program, and in the event that
further exploration and development is deemed economically and commercially
viable, a further $50,000 in this regard. The Company does not anticipate that
it will expend additional funds for exploration and development through June 30,
2001, and will not know whether it will expend any funds after that date until
it receives and reviews the Final Engineering Report.
Purchase of Significant Equipment
The Company does not intend to purchase any significant equipment through June
30, 2001.
Employees
At this time, the Company does not anticipate a change in the number of
employees it retains (currently one employee).
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company knows of no material, active or pending legal proceedings against
it, nor is the Company involved as a plaintiff in any material proceedings or
pending litigation. There are no proceedings in which any director, officer or
affiliate of the Company, or any registered or beneficial shareholder is an
adverse party of has a material interest adverse to the Company.
ITEM 2. CHANGES IN SECURITIES.
The Company did not issue any securities during the quarter ended June 30, 2000.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
Report on Form 8-K
The Company did not file any reports on Form 8-K during the quarter ended June
30, 2000.
Financial Statements Filed as a Part of the Quarterly Report
The Company's unaudited financial statements include:
Balance sheets
Statements of Operations
Statements of Changes in Stockholders' Equity
Statements of Cash Flows
Notes to the Financial Statements
Exhibits Required by Item 601 of Regulation S-B
Exhibit Description
Number
(3) Articles of Incorporation and By-laws:
3.1 Articles of Incorporation effective March 3, 1999 (incorporated by
reference from the Company's Form 10-SB (amended), filed on
March 30, 2000)
3.2 By-Laws effective March 4, 1999 (incorporated by reference from the
Company's Form 10-SB (amended), filed on March 30, 2000)
(27) Financial Data Schedule
<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.
QUILCHENA RESOURCES INC.
By: /s/ Derek Herman
Derek Herman, President/Director
Date: August 11, 2000
