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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 AUGUST 31, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER
NEVADA MANHATTAN MINING, INCORPORATED
(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
NEVADA 88-0219765
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
</TABLE>
5038 N. PARKWAY CALABASAS, SUITE #100, CALABASAS, CA 91302
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(818) 591-4400
(ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE)
(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 3 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
[ ]
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: 12,593,536 of Common Stock and
228,319 of Series A Preferred Stock.
Traditional Small Business Disclosure Format (check one): Yes [X] No [ ]
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<PAGE> 2
NEVADA MANHATTAN MINING, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
AUGUST 31, 1997 MAY 31, 1997
--------------- ---------------
(UNAUDITED) (AUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents.................................. $ 143,371 $ 559,510
Accounts receivable........................................ 71,552 58,161
Prepaid expenses........................................... 1,464,559 622,710
------------- -------------
Total current assets............................... 1,679,482 1,240,381
------------- -------------
Property and equipment:
Mining properties:
Domestic................................................ 5,959,966 5,830,091
Indonesia............................................... 2,826,782 2,826,782
Brazilian timber Concession................................ 3,296,729 3,296,729
Furniture, fixtures, equipment............................. 721,154 431,840
Less accumulated depreciation........................... (106,585) (82,998)
------------- -------------
12,698,046 12,302,444
------------- -------------
$ 14,377,528 $ 13,542,825
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................ $ 235,844 $ 544,738
Accrued liabilities..................................... 936,508 441,535
Notes payable to stockholders........................... 611,369 712,321
Current portion of long-term debt....................... 60,000 303,818
------------- -------------
Total current liabilities.......................... 1,843,721 2,002,412
Convertible debentures....................................... 2,209,722 1,333,333
Long-term debt............................................... 2,549,269 2,669,427
------------- -------------
Total liabilities.................................. 6,602,712 6,005,172
------------- -------------
Commitments and contingencies
Stockholders' equity:
Common stock to be issued............................... -- 108
Preferred stock, $1 par, 250,000 shares authorized,
228,319 and 132,510 issued at August 31, 1997 and
1996.................................................. 228,319 228,319
Common stock, $0.1 par, 50,000,000 shares authorized,
12,593,536 and 12,273,565 shares issued............... 125,935 122,736
Additional paid-in capital.............................. 24,564,783 23,022,574
Accumulated deficit..................................... (17,144,221) (15,836,084)
------------- -------------
Total stockholders' equity......................... 7,774,816 7,537,653
------------- -------------
$ 14,377,528 $ 13,542,825
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 3
NEVADA MANHATTAN MINING, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(THREE MONTHS ENDED AUGUST 31, 1997 AND 1996)
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
----------- -----------
(UNAUDITED)
<S> <C> <C>
Revenues.......................................................... $ 156,776 $ --
Cost of sales..................................................... 80,595 --
----------- ----------
Gross profit.................................................... 76,181 --
Expenses:
General and administrative...................................... (1,354,981) (484,052)
----------- ----------
Net loss.......................................................... (1,278,800) (484,052)
Cumulative preferred dividends.................................... (29,337) (33,540)
----------- ----------
Net loss attributable to common shareholders...................... $(1,308,137) $ (517,592)
----------- ----------
Net loss per common share......................................... $ (0.10) $ (0.06)
----------- ----------
Weighted average shares outstanding............................... 12,467,496 8,702,364
=========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
NEVADA MANHATTAN MINING, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED AUGUST 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
----------- ---------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net loss....................................................... $(1,278,800) $(484,052)
Adjustments to reconcile net loss to net cash used in operating
activities:
Common stock issued for services............................ -- 240,000
Appreciation and amortization............................... 99,909 1,500
Accounts receivable......................................... (13,391) --
Prepaid expenses............................................ (320,849) (8,820)
Accounts payable and accrued liabilities.................... 481,109 (47,810)
----------- -----------
Net cash used in operating activities.................. (1,032,022) (299,182)
----------- -----------
Cash flows from investing activities:
Purchase of property and equipment............................. (419,189) (310,355)
Cash flows from financing activities:
Additions to convertible debentures............................ 1,500,000 --
Payments on debt............................................... (489,928) (2,000)
Proceeds from notes payable to stockholders.................... 25,000 --
Proceeds from issuance of stock and stock to be issued......... 0 415,984
----------- -----------
Net cash provided by financing activities.............. 1,035,072 413,984
----------- -----------
Net increase (decrease) in cash and cash equivalents............. (416,139) (195,553)
Cash and cash equivalents at beginning of period................. 559,510 (233,981)
----------- -----------
Cash and cash equivalents at end of period....................... $ 143,371 $ 38,428
=========== ===========
Supplemental cash flow information:
Cash paid during the year for interest......................... $ 0 $ 0
----------- -----------
</TABLE>
Non-Cash Transactions:
During the quarter ended August 31, 1997, the Company issued:
- - 100,000 shares of Common Stock valued at $441,000 for a consulting contract.
- - 14,011 shares of Common Stock valued at $80,000 for liquidated damages to a
debenture holder.
- - 65,000 shares of Common Stock valued at $325,000 for services to Harrison
Western.
During the quarter ended August 31, 1997, $200,000 of debenture notes were
converted to 42,244 shares of Common Stock.
See accompanying notes to consolidated financial statements
4
<PAGE> 5
NEVADA MANHATTAN MINING, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. STATEMENT OF INFORMATION FURNISHED
The accompanying unaudited consolidated financial statements have been
prepared in accordance with Form 10-QSB instructions and in the opinion of
management contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the financial position as of August 31,
1997, the results of operations for the three months ending August 31, 1997 and
1996, and the cash flows for the three months ended August 31, 1997 and 1996.
These results have been determined on the basis of generally accepted accounting
principles and practices applied consistently with those used in the preparation
of the Company's audited financial statements for its fiscal year ended May 31,
1997.
2. BUSINESS
The Company's business is the harvesting of timber and the production of
rough sawn lumber and other finished wood products in Brazil and the exploration
and mining of precious metals and coal in Nevada and Indonesia. To this end, the
Company has within the last year acquired the right to conduct exploration
activities on several gold and coal properties in Indonesia, the right to
develop and/or harvest virgin timber properties on up to approximately 750,000
hectares (1,875,000 acres) located in the state of Para, Brazil, and the right
to complete its acquisition of a sawmill facility located near the town of San
Miguel do Guama, Brazil which it currently operates. The Company holds various
rights in and to the following properties: (i) various timber properties
aggregating up to approximately 750,000 hectares and sawmill facilities all of
which are located in the state of Para, Brazil (the "Brazilian Timber
Properties"); (ii) twenty-eight (28) patented and sixty-five (65) unpatented
claims aggregating approximately 1,800 acres (the "Nevada Property") which are
located near the town of Manhattan, Nevada (approximately 45 miles northeast of
Tonopha, Nevada); (iii) seven (7) gold concessions aggregating 39,400 hectares
(98,500 acres) which are located in both the gold belt area of Kalimantan,
Indonesia, and on the island of Sumatra (see "Indonesian Gold Concessions"); and
(iv) three (3) coal properties located in Kalimantan, Indonesia, comprising
290,000 hectares (725,000 acres) (the "Indonesian Coal Concessions").
3. CONVERTIBLE DEBENTURES
On April 14, 1997 and July 7, 1997, the Company entered into Subscription
Agreements related to two negotiated private placements. These transactions were
made in reliance upon the exemption from registration afforded by Section 4(2)
of the Securities Act of 1933. As a result, the Company issued an aggregate of
$3,500,000 of 8% Senior Secured Convertible Debentures (the "Debentures") due
March 31, 2000 (with respect to $2,000,000 of the Debentures) and July 1, 2000
(with respect to $1,500,000 of the Debentures) and granted to the purchasers
warrants to purchase 62,500 shares and 75,250 shares of the Company's Common
Stock (the "Warrants"), respectively.
The Debentures may be converted into shares of Common Stock at any time at
a price equal to the lesser of seventy-five percent (75%) of the closing bid
price of the Common Stock on the closing date (i.e. 75% X $8.00, or $6.00 per
share); seventy-five percent (75%) of the closing bid price of the Common Stock
on the day prior to the funding of any subsequent funding ("tranche"); or
seventy-five percent (75%) of the average closing bid price for the five trading
days immediately preceding the actual date of conversion of the Debentures. With
respect to the April 1997 funding, if conversion is made after August 16, 1997,
the discount will be seventy-two and one-half percent (72.5%) of the
above-referenced valuation standards. The Company has recorded financing charges
for the differences between the conversion price and the fair market value of
the stock at the date of each funding ($666,667 for the year ended May 31,
1997). The discount will be amortized over the life of the debentures.
5
<PAGE> 6
NEVADA MANHATTAN MINING, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
The Company is required to use its "best efforts" to cause the Registration
Statement with the Securities and Exchange Commission to become effective. If
the Registration Statement does not become effective within 120 days of each
respective funding, the Company is required to pay liquidated damages equal to
two percent (2%) of the Debentures for the first thirty days and three percent
(3%) per month thereafter until the Registration Statement becomes effective.
Pursuant to action taken by management on October 8, 1997, the Company requested
the right from the Securities and Exchange Commission to withdraw its
application for registration of certain securities (including the stock subject
the above described conversion rights) on Form SB-2. If the Commission grants
the Company's request, the Company will not have a Registration Statement
pending.
With regard to the April 1997 funding, until at least seventy-five percent
(75%) of the Debentures are converted, a deed of trust on the Nevada Property
and a pledge of 1,000,000 shares of Common Stock will secure the Debentures. No
such security is given on the Debentures issued in July 1997.
The Company has issued warrants to the Subscribers of the April 14 and July
7 offerings. The Subscribers of the April 14 offering have been granted 62,500
warrants with an exercise price of $8 per share and an expiration date of April
16, 2002. The Subscribers of the July 17, 1997 offering have been granted 75,250
warrants with an exercise price of $6.75 per share and an expiration date of
July 16, 2002. The exercise price is subject to adjustment to account for
payments of dividends, stock splits, reverse stock splits, and similar events.
6
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
RESULTS OF OPERATION
Net loss for the first quarter ended August 1997 was $1,308,137 as compared
to a net loss of $517,592 for the same quarter ended August 1996. The principal
increases in expenses during the three months ended August 31, 1997 were
attributed to expenses in Brazil (approximately $371,000); office salaries
(approximately $132,000); travel (approximately $120,000); legal fees
(approximately $108,000); consulting (approximately $89,000); debt-related
expenses (approximately $155,000) and general increase in other expenses
attributable to the Company's increased development activities from the previous
year. During the first quarter ended August 31, 1997, the Company paid
approximately $364,000 to retire long-term debt and approximately $250,000 in
improvements on its sawmill, located near the town of San Miguel do Guama, Para,
Brazil.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital position as of August 31, 1997 was a deficit
of approximately $164,000. Almost since inception, the Company has experienced
pressure on its working capital position due to operating losses and the need to
continually invest in exploration activities on the Nevada Property and, more
recently, the Silobat Property, the remainder of the Indonesian Concessions, and
the Brazilian Concessions.
To raise funds in the past, the Company has relied upon private placements
of its equity securities. Over the past three years, the Company has raised
approximately $5,000,000 pursuant to three such private placements and notes
payable to stockholders. The Brazilian operations represent an immediate
opportunity for the Company to generate significant cash flows for the first
time. The Company believes that with the anticipated increase in daily
production at its Brazilian operations to 140 cubic meters per day, much of its
continued operations in Brazil, Indonesia, and on the Nevada Property will be
funded by the cash flow generated from its operations in Brazil. The Company has
also recently concluded privately-negotiated placements of approximately Three
Million Five Hundred Thousand Dollars ($3,500,000) of 8% Senior Convertible
Debentures within certain investments. This private placement, together with the
cash flow anticipated from the Company's operations in Brazil, should satisfy
the Company's immediate need for the significant amounts of capital for its
overseas acquisitions and operations in both Indonesia and Brazil.
7
<PAGE> 8
NEVADA MANHATTAN MINING, INCORPORATED AND SUBSIDIARIES
PART II -- OTHER INFORMATION
1. LEGAL PROCEEDINGS
On November 4, 1996, the Company filed a complaint (the "Action") in Nye
County, Nevada against Marlowe Harvey, Maran Holdings Inc., Calais Resources
Inc., and Argus Resources, Inc. (the "Harvey Entities"). The complaint in the
Action alleges, amongst other things, that the Harvey Entities breached their
obligations under various agreements more particularly described in the
Company's Form 10, as amended. The Action, as amended is seeking a judicial
declaration that the Harvey Entities do not have any joint venture or real
property interest in the mining claims included within the Nevada property. The
Action also seeks compensatory damages and other financial relief based on the
Harvey Entities' breach of contract and other causes of action.
During April 1997, the Company through its counsel, filed a first amendment
to its Complaint in the Action. Counsel for the Harvey Entities filed an answer
and a counterclaims in the action during July 1997. In their answer, the Harvey
Entities have generally denied the allegations of the first amended complaint
and have raised various affirmative defenses. In their Counterclaims, the Harvey
Entities are seeking an injunction preventing the Company from conducting
activities related to the Manhattan Project pending resolution of the issues in
the action and compensatory and punitive damages and other financial relief
based on breach of contract and other causes of action.
In July 1997, the Harvey Entities moved for a preliminary injunction
against the Company preventing it from conducting further activities at the
Manhattan Project without their consent, from issuing press releases describing
certain real property as being wholly owned by the Company, and from using the
same as security for loans. After a two-hour hearing on September 4, 1997, the
court refused to issue an injunction against the Company. Pursuant to
stipulation, the parties have agreed not to interfere with one another's
operations on the Nevada Property. Additionally, the Company has agreed not to
further encumber the Nevada Property pending trial. A trial date has been set
for April 30, 1998.
If the Company is successful in obtaining specific performance of the
agreements alleged in the Action, it will effectively continue to own or control
an undivided 100% interest in the Nevada Property. Regardless of whether the
Company is successful in the Action, it will continue to own at least a fifty
percent (50%) undivided interest in the Nevada Property by virtue of its
contractual rights.
2. CHANGES IN SECURITIES
Reference is hereby made to the description of the Issuance of $1,500,000
of 8% Senior Convertible Debentures on July 17, 1997 described elsewhere in this
Form 10-QSB.
3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
5. OTHER INFORMATION
On October 8, 1997, the Company requested that the Securities and Exchange
Commission grant it the right to withdraw its Registration Statement on Form
SB-2. At that time, the Commission had provided, amongst other things, the
following comment:
"NEVADA PROPERTY -- We note in your response that 'the mineral deposits
associated with the Nevada Property do not yet meet the various
definitions of a commercially mineable ore body
8
<PAGE> 9
including the Commission's standards under Industry Guide No. 7'. As
such, we see no basis for reasonable cash flow estimates. Accordingly,
mining costs should be written off as incurred until economically
recoverable reserves are identified. Revise accordingly.
IDONESIAN CONCESSIONS -- It appears to us that the costs of acquiring
the Indonesian Concessions and exploring the unevaluated mining
Properties should be expensed as incurred. We see no basis for
reasonable cash flow estimates and the Company has stated that 'any cash
flow analysis related to the Indonesian Concessions is premature'.
Accordingly, revise to expense the costs associated with the Indonesian
properties. When the properties are determined to have proven and
probable reserves, then further exploration and development costs can be
capitalized."
The Company and its accountants currently disagree with the position of the
staff of the Commission relative to the Nevada Property and the Indonesian
Concessions. The Company intends to continue its discussions with the staff of
the Commission at which time a decision will be made by management of the
Company as to whether the financial statements submitted herewith will require
adjustment consistent with the position of the staff.
6. EXHIBITS AND REPORTS ON FORM 8-K
The Company hereby incorporates by reference the exhibits filed in
connection with its Registration Statement filed under the Securities Act of
1933, as amended (Registration Nos. 333-17423 and 333-27923) and its
Registration Statement filed on Form 10, as amended (Registration Nos.
001-12867).
9
<PAGE> 10
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NEVADA MANHATTAN MINING, INCORPORATED
October 14, 1997
--------------------------------------------
Jeffrey S. Kramer, Chief Financial Officer
--------------------------------------------
Neil Sharda, Controller
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF AUGUST 31, 1997 AND THE CONSOLIDATED STATEMENT
OF OPERATIONS FOR THE THREE MONTHS ENDED AUGUST 31, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1997
<PERIOD-END> AUG-31-1997
<CASH> 143,371
<SECURITIES> 0
<RECEIVABLES> 71,552
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,679,482
<PP&E> 12,804,631
<DEPRECIATION> 106,585
<TOTAL-ASSETS> 14,377,528
<CURRENT-LIABILITIES> 1,843,721
<BONDS> 0
0
228,319
<COMMON> 125,935
<OTHER-SE> 7,420,562
<TOTAL-LIABILITY-AND-EQUITY> 14,377,528
<SALES> 156,776
<TOTAL-REVENUES> 156,776
<CGS> 80,595
<TOTAL-COSTS> 80,595
<OTHER-EXPENSES> 1,354,981
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,278,800)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,278,800)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,278,800)
<EPS-PRIMARY> (.10)
<EPS-DILUTED> (.10)
</TABLE>
