U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 June 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to .
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Commission file number 1-4799
EMPIRE GOLD INC.
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(Exact name of small business issuer as specified in its charter)
Indiana 35-0540454
-------------------------------- -------------------------------
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
802 - 1985 Belleville Ave.,
West Vancouver, British Columbia, Canada, V7V 1B6
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(Address of principal executive office)
604-921-2811
----------------------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.[ ] Yes [X] No
As of June 30, 1998, 74,972,331 shares of common stock, no par value, of
the Issuer were outstanding.
Transitional Small Business Disclosure Format (Check one): [ ] Yes [ X ] No
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<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
<CAPTION>
EMPIRE GOLD INC.
Consolidated Balance Sheets
as at June 30,
(unaudited)
June 30,1998
------------
Assets
<S> <C>
Current assets
Cash ................................................................ $ 0
Accounts receivable ................................................. 14,025
------------
14,025
Mineral property and deferred development costs ....................... 489,536
------------
Total Assets .......................................................... $ 503,561
============
Liabilities and Shareholders' Equity
Current liabilities
Bank indebtedness ................................................... $ 1,969
Accounts payable and accrued liabilities ............................ 200,058
Loans payable - related parties...................................... 16,438
------------
218,465
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Shareholders' equity
Common stock, no par value, 1,000,000,000 shares
authorized, 74,972,331 and 72,587,698 shares
issued and outstanding in 1998 and 1997
respectively ........................................................ 48,355,268
Common stock transferred by affiliate ............................... (46,000)
Accumulated deficit ................................................. (48,024,172)
------------
Total shareholders' equity ............................................ 285,096
------------
$ 503,561
============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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<PAGE>
<TABLE>
<CAPTION>
EMPIRE GOLD INC.
Consolidated Statements of Operations
(unaudited)
for the six months ended for the three months ended
June 30 June 30
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues
Interest income ................ 162 239 125 71
--------- --------- --------- ---------
Expenses
General and administrative ..... 21,746 34,503 6,613 24,297
Legal fees ..................... 12,274 34,961 5,201 20,434
Audit fees ..................... 19,089 21,936 17,684 0
Management fees ................ 44,578 25,313 22,031 14,308
Exploration expenses ........... 21,342 0 18,136 0
--------- --------- --------- ---------
119,029 116,713 69,665 59,039
Net Loss .......................... (118,867) (116,474) (69,540) (58,968)
Net earnings per share ............ (0) (0) (0) (0)
---------- ---------- ---------- ----------
Weighted average number of shares
of common stock outstanding ....... 74,242,705 72,587,698 74,242,705 72,587,698
---------- ---------- ---------- ----------
Weighted average number of shares
of common stock outstanding -
fully diluted ..................... 76,167,705 72,587,698 76,167,705 72,587,698
---------- ---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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<PAGE>
<TABLE>
<CAPTION>
EMPIRE GOLD INC.
Consolidated Statements of Cash Flow
For the six months ended June 30
(unaudited)
1998 1997
---- ----
<S> <C> <C>
Cash provided by (used in) operating activities
Net loss for the period ................................. (118,867) (116,474)
Change in non-cash working capital ...................... 27,641 141,592
---------- ----------
Cash provided (used) in continuing operations .............. (91,226) 25,118
---------- ----------
Cash used in investing activities
Mineral property and deferred development costs - Austria (50,029) (118,565)
---------- ----------
Net cash used in investing activities ...................... (50,029) (118,565)
---------- ----------
Cash provided (used) in financing activities
Proceeds from sale of common stock subscriptions ........ 126,490 0
Common stock issue costs ................................ 0 (36,000)
---------- ----------
Net cash provided (used) in financing activities ........... 126,490 (36,000)
---------- ----------
Decrease in cash ........................................... (14,765) (129,447)
Cash, beginning of period .................................. 12,796 170,150
---------- ----------
Cash (Bank indebtedness), end of period .................... (1,969) 40,703
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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<PAGE>
<TABLE>
<CAPTION>
EMPIRE GOLD INC.
Consolidated Statements of Changes in Shareholders Equity
for the six months ended June 30, 1998 and June 30, 1997
(unaudited)
Common Stock Common Stock Common Stock
---------------------------- Stock Transferred
Number Amount Subscriptions by Affiliate Deficit Total
------ ------ ------------- ------------- ------- -----
$ $ $ $
<S> <C> <C> <C> <C> <C> <C>
December 31, 1996 .................. 70,005,997 47,258,890 514,000 (46,000) (47,336,622) 390,268
Sale of common stock ............... 2,200,000 514,000 (514,000) -- -- --
Net loss ........................... 0 0 0 0 (116,474) (116,474)
------------ ------------ ----------- ---------- ----------- -----------
June 30, 1997 ...................... 72,205,997 47,772,890 -- (46,000) (47,453,095) 273,795
Sale of common stock ............... 1,925,000 455,988 -- -- -- 455,988
Cancellation of common stock ....... (2,000) (100) -- -- -- (100)
Net loss ........................... 0 0 0 0 (452,210) (452,210)
------------ ------------ ----------- ---------- ----------- -----------
December 31, 1997 .................. 74,128,997 48,228,778 0 (46,000) (47,905,306) 277,473
Sale of common stock ............... 843,334 126,490 -- -- -- 126,490
Net loss ........................... 0 0 0 0 (118,867) (118,867)
------------ ------------ ----------- ---------- ----------- -----------
June 30, 1998 ...................... 74,972,331 48,355,268 0 (46,000) (48,024,172) 285,096
============ ============ =========== ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
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<PAGE>
EMPIRE GOLD INC.
Notes to Consolidated Financial Statements
for the six months ended June 30, 1998 and 1997
(unaudited)
1. Basis to Note Presentation
The notes to the consolidated financial statements do not present all disclosure
required under generally accepted accounting principles but instead, as
permitted by the Securities and Exchange Commission regulations, presume that
users of the interim financial statements have read or have access to the
audited consolidated financial statements and notes thereto contained in the
Company's Annual Report on Form 10-KSB for the year ended December 31, 1997 as
filed with the Securities and Exchange Commission, and that the adequacy of
additional disclosure needed for a fair presentation may be determined in that
context.
The accompanying consolidated interim financial statements include adjustments
which are, in the opinion of management, necessary for fair presentation of the
consolidated results of operation for the periods presented. All such
adjustments are of a normal recurring nature. The interim results of operation
for the six months ended June 30, 1998 are not necessarily indicative of the
results that may be expected for any other interim period of 1998 or for the
year ending December 31, 1998.
2. Continuity of Operations
The financial statements have been prepared assuming the Company will continue
as a going concern. At June 30, 1998, the Company has an accumulated deficit of
$48,024,172 and a working capital deficiency of $204,440. Furthermore,
additional funds will be required to proceed with the Company's exploration
program. Management intends to raise the necessary funds by way of Private
Placements. The ability of the Company to raise sufficient funds to operate in
the ordinary course of business and proceed with exploration plans, raise
substantial doubt about the Company's ability to continue as a going concern.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
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<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
General
This quarterly report contains certain forward looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Statements
which are not historical facts contained in this report are forward looking
statements that involve risks and uncertainties that could cause actual results
to differ from projected results. When used in this report, in future filings by
the Company with the Securities and Exchange Commission, in the Company's press
releases and in any oral statements made by the Company, the words or phrases
"will likely result," "expects," "intends," "will continue," "is anticipated,"
"estimates," "projects," "plans," and similar expressions are intended to
identify such "forward looking statements". These forward looking statements are
subject to risks, uncertainties, and other factors which could cause actual
results to differ materially. Forward looking statements included in this report
and in communications of the Company include the proposed business plan of the
Company, the planned development of the Company's mining properties in Austria,
the commencement dates and the costs of diamond core drilling and exploration
activities, the future acquisition of mining properties, the procurement of
future financing to fund the Company's operations, and the compliance with
environmental and other mining laws in Austria. Factors that could cause actual
results to differ materially from projected results include, among others, risks
and uncertainties relating to general domestic and international economic and
political conditions, risks associated with mining operations in Austria, the
selling price of metals, unanticipated ground and water conditions,
unanticipated grade and geological problems, metallurgical and other processing
problems, availability of materials and equipment, the timing of receipt of
necessary governmental permits, the occurrence of unusual weather or operating
conditions, force majeure events, lower than expected ore grades and higher than
expected stripping ratios, the failure of equipment or processes to operate in
accordance with specifications and expectations, labor relations, accidents,
delays in anticipated start-up dates, environmental costs and risks, the ability
of the Company to raise financing on a favorable basis to the Company or at all,
and general financial and stock market conditions. Many such factors are beyond
the Company's ability to control or predict. Readers are cautioned not to put
undue reliance on forward looking statements. In light of the significant
uncertainties inherent in forward looking statements, the inclusion of any such
statement should not be regarded as a representation by the Company or any other
person that the objectives or plans of the Company will be achieved or that the
Company will ever obtain significant revenue or profitability. The Company
disclaims any intent or obligation to update publicly the forward looking
statements contained in this report, whether as a result of new information,
future events or otherwise, except as required by applicable laws.
Prior to December 1996, the Company derived revenues from the operation of its
real estate development business. In December 1996, the Company discontinued
such operations and commenced new operations in the mineral exploration and
development industry.
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<PAGE>
Mineral Property and Deferred Development Costs
Mineral Property and Deferred Development Costs of $50,029 and $26,980 for the
six months and quarter ended June 30, 1998 respectively are capitalized as
"Mineral property and deferred development costs" on the Company's Balance
Sheet. Such costs were $118,565 and $87,871 for the comparable periods in the
prior year. These costs were incurred to further develop the Company's nine
Austrian properties, particularly preparatory work for the drilling program on
the Company's Schellgaden property.
Results of Operations
General and administrative expenses for the six months and the quarter ended
June 30, 1998, were $21,746 and $6,613 respectively compared to $34,503 and
$24,297 for the same periods in 1997. Management did a general cut-back of all
expenses which resulted in a reduction of the general and administrative costs.
Legal fees for the six months and quarter ended June 30, 1998, were $12,274 and
$5,201 compared to $34,961 and $20,434 for the same periods in 1997. The costs
were higher in 1997 due to efforts in bringing its regulatory filings up to
date.
Audit fees for the six months and quarter ended June 30, 1998, were $19,089 and
$17,684 respectively, compared to $21,936 and NIL for the same period in 1997.
The 1997 audit cost has been accrued in this quarter and remains to be paid.
Management fees for the six months and quarter ended June 30, 1998, were $44,578
and have accrued and remain to be paid, and $22,031 respectively compared to
$25,313 and $14,308 for the same periods in 1997. The contract with United
Tri-Star Resources Limited is now ended and therefore management fees will
reduce appreciably in the future.
Exploration expenses for the six months and quarter ended June 30, 1998, were
$21,342 and $18,136 respectively as compared to NIL and NIL for the same period
in 1997.
The net loss from continuing operations for the six months and quarter ended
June 30, 1998, was $118,867 and $67,540 compared to $116,474 and $58,968 for the
same periods in 1997.
Liquidity and Capital Resources
In 1996, the Company discontinued its real estate development operations, a
change of control of the Company occurred and subsequently nine gold exploration
properties in Austria were acquired. The Company entered into its new business
plan after management determined to enter the mineral exploration business.
However, the Company does not have sufficient capital with which to pursue its
new business plan. The Company, therefore, continues to consider various
capital-raising options, including, but not limited to, an equity financing.
There can be no assurance that the Company will be successful in its efforts to
raise capital sufficient to enable it to pursue its new business plan
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<PAGE>
The Company's working capital deficiency (current assets less current
liabilities) amounted to $204,440 at June 30, 1998. The Company has $218,465 in
current liabilities and the current assets at June 30, 1998, amounted to
$14,025.
Operating activities of the Company used net cash of $91,226 for the six months
ended June 30, 1998, compared to provision of $25,118 for the same period in
1997. The cash used in operations for the six months ended June 30, 1998
consisted of a net loss of $118,868 offset by an increase of $28,292 in accounts
payable and accrued liabilities and a decrease of $4,007 in the accounts
receivable and a decrease of $4,657 in the loans payable to related parties.
The Company used $50,029 and $118,565 in net cash for investing activities for
the six months ended June 30, 1998 and 1997, respectively. Net cash used in
investing activities for the six months ended June 30, 1998 was used for the
further development of the Company's nine Austrian properties.
The Company issued 843,334 shares for net proceeds of $126,490. Any share issue
costs will be accrued in the next quarter. During the three months ended March
31, 1997, the Company incurred common stock issue costs of $36,000.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports of Form 8-K
(a) Exhibits.
The following is a list of exhibits filed as part of this Form 10-QSB. Where
so indicated by footnote, exhibits which were previously filed are incorporated
by reference. For exhibits incorporated by reference, the location of the
exhibits in the previously filed is indicated in parenthesis.
Item 601
Category Exhibit
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3.1 Amended and Restated Articles of Empire Gold Inc.,
adopted September 2, 1997. (Exhibit 1)
27* Financial Data Schedule.
*Filed herewith.
(1) Filed as an Exhibit to Form 10-QSB of National Enterprises Inc. filed
November 13, 1997, for the quarter ended September 30, 1997.
(b) Reports on Form 8-K. During the quarter ended June 30,1998, the registrant
filed a current report on form 8-K on June 2, 1998 reporting a change in
the registrant's certifying accountant.
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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.
EMPIRE GOLD INC.
By: /s/ Florian Riedl-Riedenstein Date: August 14, 1998
-----------------------------------------------
Florian Riedl-Riedenstein, Chairman, President,
Chief Executive Officer (Principal
Executive Officer), and Director
By: /s/ Eunice Ludlow Date: August 14, 1998
--------------------------------------------------
Eunice Ludlow,( Principal Financial and Accounting Officer)
and Secretary.)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Empire Gold
Inc.'s Consolidated Balance Sheets at June 30, 1998 and Consolidated Statements
of Operations and Deficit for the six months then ended and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 14,025
<ALLOWANCES> 489,536
<INVENTORY> 0
<CURRENT-ASSETS> 14,025
<PP&E> 489,536
<DEPRECIATION> 0
<TOTAL-ASSETS> 503,561
<CURRENT-LIABILITIES> 218,465
<BONDS> 0
0
0
<COMMON> 48,355,268
<OTHER-SE> (48,070,172)
<TOTAL-LIABILITY-AND-EQUITY> 503,561
<SALES> 0
<TOTAL-REVENUES> 162
<CGS> 0
<TOTAL-COSTS> 119,029
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (118,867)
<INCOME-TAX> 0
<INCOME-CONTINUING> (118,867)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (118,867)
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
