SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
------------------
FOR QUARTER ENDED MARCH 31, 1997 COMMISSION FILE NO. 33-28562
TOUCAN GOLD CORPORATION
(Exact name of registrant as specified in charter)
DELAWARE 75-2661571
(State or other jurisdiction (IRS Employer Identification No.)
at incorporation)
8201 PRESTON ROAD, SUITE 600
DALLAS, TEXAS 75225
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (214) 890-8065
26 WELLINGTON STREET, SUITE 905
TORONTO, ONTARIO, CANADA M5E 1S2
(Former Name, Former Address and Former
Fiscal Year, if Changed Since Last Report)
Indicate by check mark whether the registrant (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 registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of April 7, 1997 was $6,015,062 based upon the average bid and ask
price of the common stock on such date of $1 5/8 per share on the OTC Electronic
Bulletin Board of NASDAQ. For purposes of this computation, all executive
officers, directors and 10% stockholders were deemed affiliates. Such a
determination should not be an admission that such executive officers, directors
or 10% stockholders are affiliates.
As of June 5, 1997, there were 7,264,600 shares of the common stock, $.01 par
value, of the registrant issued and outstanding.
Transitional Small Business Disclosure Format (check one)
YES X NO
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<PAGE>
TOUCAN GOLD CORPORATION
March 31, 1997
INDEX
PART I. FINANCIAL INFORMATION Page No.
Item 1. Financial Statements
Consolidated Balance Sheet as of March 31, 1997............F-1
Consolidated Statements of Operations for the three
months ended March 31, 1997 and 1996....................F-2
Consolidated Statement of Cash Flows for the three
months ended March 31, 1997 and for the three
months ended March 31, 1996.............................F-3
Notes to Consolidated Financial Statements.................F-4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................3
PART II. OTHER INFORMATION............................................5
Item 1. Legal Proceedings............................................5
Item 2. Changes in Securities........................................5
Item 3. Default Upon Senior Securities...............................5
Item 4. Submission of Matters to a Vote of Security Holders..........5
Item 5. Other Information............................................5
Item 6. Exhibits and Reports on Form 8-K.............................5
SIGNATURES.....................................................................7
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
TOUCAN GOLD CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1997 1996
-------------- ------------
<S> <C> <C>
Cash $ 1,781,917 $ 2,031,045
Prepaid expenses 33,584 6,374
----------- ------------
Total current assets 1,815,501 2,037,419
Mineral rights 1,911,320 1,691,442
----------- ------------
$ 3,726,821 $ 3,728,861
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Amounts payable to related parties $ 31,754 $ 9,051
Accrued expenses and other liabilities 287,389 29,311
----------- -----------
Total current liabilities 319,143 38,362
Stockholders' equity
Preferred stock, par value .01 per share; authorized, 2,000,000
shares; issued and outstanding, none - -
Common stock, $.01 par value per share; authorized 30,000,000
shares; issued and outstanding, 7,432,600 shares 74,326 74,326
Additional paid-in capital 4,050,679 4,050,679
Deficit accumulated during the development stage (717,327) (434,506)
----------- ----------
Total stockholders' equity 3,407,678 3,690,499
----------- ----------
$ 3,726,821 $ 3,728,861
=========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
CORPDAL:66654.5 29976-00001
F-1
<PAGE>
TOUCAN GOLD CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months ended March 31,
(unaudited)
<TABLE>
<CAPTION>
1997 1996
------ -----
Cost and expenses
<S> <C> <C>
Legal and professional fees $ 256,055 $ 21,886
Travel and entertainment 31,738 19,559
Public relations 7,110 -
Other 3,339 2,084
-------- --------
Total cost and expenses 298,242 43,529
Other (income) expense
Foreign currency gain - -
Interest income (15,421) -
Interest expense - 4,247
-------- --------
Total other (income) expense (15,421) 4,247
-------- --------
Net loss $ 282,821 $ 47,776
======== ========
Loss per share $ .04 $ .07
==== ====
Weighted average shares outstanding 7,432,600 647,857
========= =======
</TABLE>
The accompanying notes are an integral part of this statement.
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F-2
<PAGE>
TOUCAN GOLD CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended March 31, 1997 and 1996
(unaudited)
<TABLE>
<CAPTION>
1997 1996
------ -----
Operating activities
<S> <C> <C>
Net loss $ (282,821) $ (47,776)
Net changes in operating assets and liabilities
Prepaid expenses (27,210) (10,000)
Accrued expenses 258,078 8,426
-------- --------
Net cash used in operating activities (29,250) (49,350)
Investing activities
Acquisition of mineral rights (219,878) (55,760)
Financing activities
Net repayments/borrowings from related parties 22,703 112,008
Issuance of common stock, net of expenses - -
Proceeds from merger with Starlight Acquisitions, Inc. - -
-------- --------
Net cash provided by financing activities 22,703 112,008
-------- --------
Net increase in cash (249,128) 6,898
Cash at beginning of period 2,031,045 13,208
--------- --------
Cash at end of period $1,781,917 $ 20,106
========= =======
</TABLE>
The accompanying notes are an integral part of this statement.
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F-3
<PAGE>
TOUCAN GOLD CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997
(unaudited)
NOTE A - BASIS OF PRESENTATION
Organization
The consolidated financial statements contained herein have been prepared
by the Company pursuant to the rules and regulations of the Securities and
Exchange Commission. In the opinion of management, all adjustments
necessary for a fair presentation of the consolidated financial position as
of March 31, 1997, and the consolidated results of operations for the three
(3) months ended March 31, 1997 and 1996, and the consolidated cash flows
for the three (3) months ended March 31, 1997 and 1996 have been made. In
addition, all such adjustments made, in the opinion of management, are of a
normal recurring nature. The results of operations for the periods
presented are not necessarily indicative of the results to be expected for
the full fiscal year.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the interim reporting
rules of the Securities and Exchange Commission. The interim consolidated
financial statements should be read in conjunction with the audited
consolidated financial statements and related notes for the year ended
December 31, 1996, included in the Company's 1996 Annual Report on Form
10-KSB
NOTE B - COMMITMENT AND CONTINGENCY
The Company had entered into a letter of intent (the "Letter of Intent")
with Eldorado Gold Corporation ("Eldorado") pursuant to which Eldorado
would earn a 50% interest in 10% of MBL mining claims to be selected by
Eldorado, through the expenditure of Canadian $5 million by Eldorado within
two years. The Letter of Intent was subject to a number of conditions,
including the negotiation and execution of a definitive agreement within a
certain time period. These conditions were not fulfilled, and the Letter of
Intent has expired by its terms. Eldorado has asserted the position that
the Letter of Intent constituted a binding agreement that it may seek to
enforce if definitive documents reflecting the terms of the Letter of
Intent are not executed. The Company believes that Eldorado's position is
without merit.
Under an agreement with a Brazilian individual, as of March 31, 1997, the
Company was committed to acquire 11 additional priority claims upon
clearance of title by the DNPM. The consideration for each claim will be
$36,000 in cash and 12,000 shares of the Company. In addition, a bonus
payment of 50,000 shares is due to the seller if all 11 claims are
delivered to the Company.
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F-4
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Effective May 10, 1996, Starlight Acquisitions, Inc., a Colorado
corporation ("Starlight") acquired all of the outstanding capital stock of
Toucan Mining Limited ("Toucan Mining") in exchange for shares of Starlight
Common Stock. As a result of the Share Exchange, a change in control of
Starlight occurred, whereby Toucan Mining is deemed to have acquired
Starlight. See Notes to the Consolidated Financial Statements.
Toucan Mining is a development stage company that conducts its
operations primarily through its wholly-owned subsidiary, Mineradora de
Bauxita Ltda. ("MBL"), which is an authorized mining company organized
under the laws of Brazil. MBL has been financed entirely by Toucan Mining
for the purpose of conducting mineral exploration, specifically gold
exploration.
During July 1996, Starlight formed the Toucan Gold Corporation (the
"Company") as a wholly-owned subsidiary. On July 29, 1996, Starlight merged
into the Company, and pursuant to the terms of the Merger, the outstanding
shares of Starlight Common Stock were canceled in exchange for shares of
the Company's Common Stock.
The consolidated financial statements for the three months ended March
31, 1997, reflect the results of the Company's operations, which consisted
primarily of legal, accounting and consulting fees, travel and
entertainment expenses, public relations expenses and expenses related to
the establishment of the Company's Canadian Office. The Company's Canadian
office was closed effective May 31, 1997.
The Company intends to undertake a program of mineral exploration to
target and explore selected areas of its Brazilian mining claims to
determine which areas are most likely to contain economic gold
mineralization or to effectuate this program through joint ventures. A
mapping program based upon satellite imagery will precede field
investigation, which will include detailed geologic mapping, geochemical
sampling and drilling in accordance with standard exploration practice. A
program of this nature is likely to take several years. In the event of
encouraging results in a particular area, a more concentrated study will be
undertaken to provide the basis of a feasibility study for mineral
development. MBL will also be working to acquire additional claims in the
Cuiaba Basin in the State of Mato Grosso, Brazil.
The Company will incur major expenses to establish the existence of
gold reserves. Accordingly, to fund the Company's exploration program for
up to two years and to pay for normal expenses, the Company will need to
raise substantial funds or enter into joint ventures with industry partners
who agree to provide such funds. There can be no assurance that the Company
will be able to raise such capital if needed or on terms that are favorable
to the Company or to enter into such joint ventures on terms favorable to
the Company. The plan will be subject to review depending upon the results
obtained. Costs could rise if, among other things, the weather proves
untypically harsh, unforeseen ground conditions are encountered, equipment
becomes difficult to source or negotiations with surface owners become
prolonged. MBL may spend more or less on claim acquisitions than currently
estimated. There can be no assurance that the exploration program will
result in the discovery of economic gold mineralization. The matters
discussed herein contain forward-looking statements that involve certain
risks, uncertainties and additional costs detailed herein. The actual
results that are achieved may differ materially from any forward-looking
projections, due to such risks, uncertainties and additional costs.
The Company has raised approximately $3.6 million in net proceeds
through the issuance of 1,600,000 Units at $2.50 per Unit, each Unit
consisting of one share of Company Common Stock and a warrant to purchase a
share of Company Common Stock at an exercise price of $3.50, in an offering
exempt from registration under the Securities Act pursuant to Regulation S.
This offering was completed on November 1, 1996.
The Company has used certain of the proceeds from the sale of the Units
to finance the purchase of additional mining claims in the Cuiaba Basin, to
begin its exploration program, and for general working capital purposes. If
the purchase of all of such claims is consummated, the aggregate purchase
price would consist of approximately U.S. $1,400,000 in cash and 350,000
shares of Company Common Stock, of which $1,076,000 has been paid to date
and 192,000 shares of Company Common Stock are to be issued for claims that
have been acquired to date. While the Company has an agreement with the
owner of such claims with respect to the purchase terms with respect to the
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<PAGE>
remaining claims, the Company's obligations thereunder are subject to its
review of documentation relating to such claims. There can be no assurance
that the acquisition of the remaining claims will be consummated.
The Company had entered into a letter of intent (the "Letter of
Intent") with Eldorado Gold Corporation ("Eldorado") pursuant to which
Eldorado would earn a 50% interest in 10% of MBL mining claims to be
selected by Eldorado, through the expenditure of Canadian $5 million by
Eldorado within two years. The Letter of Intent was subject to a number of
conditions, including the negotiation and execution of a definitive
agreement within a certain time period. These conditions were not
fulfilled, and the Letter of Intent has expired by its terms. Eldorado has
asserted the position that the Letter of Intent constituted a binding
agreement that it may seek to enforce if definitive documents reflecting
the terms of the Letter of Intent are not executed. The Company believes
that El Dorado's position is without merit.
Certain of the information contained in this Quarterly Report on Form
10-QSB constitutes forward looking statements within the meaning of Section
27A of the Securities Act and Section 21E of the Securities Exchange Act of
1934, as amended, that involves certain risks, uncertainties and additional
costs described herein. The actual results that are achieved may differ
materially from any forward looking projections, due to such risks,
uncertainties and additional costs. Although the Company believes that the
expectations reflected in such forward looking statements are based upon
reasonable assumptions, it can give no assurance that its expectations will
be achieved. Subsequent written and oral forward looking statements
attributable to the Company or persons acting on its behalf are expressly
qualified in their entirety by reference to such risks, uncertainties and
additional costs.
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<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None
ITEM 2. CHANGES IN SECURITIES.
(a) None
(b) None
(c) Certain of the net proceeds of an offering completed by
the Company on November 1, 1996 were to be used by MBL or another
Brazilian mining subsidiary of the Company to acquire mining claims in
the Cuiaba Basin. These claims, which number up to twenty-five (25) in
the aggregate, are in the process of being acquired pursuant to an
agreement whereby the Company has agreed, inter alia, to issue to the
seller 12,000 shares of Company Common Stock for each claim that the
National Mineral Production Department ("DNPM") of Brazil certifies is
held with priority, having good, clean and transferrable title. In
addition, the Company has agreed to issue to the seller a bonus payment
of 50,000 shares of Company Common Stock if and when the seller
transfers good and clean title to all twenty-five (25) claims to the
Company.
In December 1996, fourteen (14) of the twenty-five (25) claims
were certified by the DNPM as held in priority, with good, clean and
transferable title. In April 1997, two (2) additional claims were
certified by the DNPM as held in priority, with good, clean and
transferrable title. Accordingly, as of the date hereof, the Company is
obligated to issue to the seller 192,000 (16 x 12,000) shares of
Company Common Stock with respect to such claims.
If all remaining nine (9) claims are so certified by the DNPM,
the Company is obligated to issue to the seller an additional 158,000
shares of Company Common Stock. The shares of Common Stock issued to
the seller shall be issued in a transaction exempt from registration
under the Securities Act of 1933, as amended (the "Securities Act"),
pursuant to Section 4(2) of the Securities Act and, therefore, are
restricted securities.
ITEM 3. DEFAULT UPON SENIOR SECURITIES.
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION.
Effective May 31, 1997, Oliver Lennox-King resigned as the
Chief Executive Officer and as a member of the Board of Directors of
the Company. In connection with such resignation, Mr. Lennox-King
agreed to the termination of all stock options with regard to the
Company's Common Stock that had been granted to him by the Company.
Further, Mr. Lennox-King relinquished any claim against the Company
that he held at the time of such resignation.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
EXHIBITS
The following exhibits are furnished in accordance with Item 601 of
Regulation S-B.
27 Financial Data Schedule
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<PAGE>
Form 8-K: No reports on Form 8-K have been filed with the Securities and
Exchange Commission in the quarter ended March 31, 1997.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Quarterly Report to be signed on its
behalf by the undersigned thereunto duly authorized.
TOUCAN GOLD CORPORATION
(Registrant)
Date: June 16, 1997 By:/s/Robert P. Jeffcock
---------------------
Robert P. Jeffcock, President and Chief
Executive Office (Principal Executive
Officer) and Vice President-Chief
Financial Officer (Principal Financial
Officer
CORPDAL:66654.5 29976-00001
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<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000850083
<NAME> TOUCAN GOLD CORPORATION
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,781,917
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,815,501
<PP&E> 1,911,320
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,726,821
<CURRENT-LIABILITIES> 319,143
<BONDS> 0
0
0
<COMMON> 74,326
<OTHER-SE> 3,333,352
<TOTAL-LIABILITY-AND-EQUITY> 3,726,821
<SALES> 0
<TOTAL-REVENUES> 15,421
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 298,242
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (282,821)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (282,821)
<EPS-PRIMARY> (0.04)
<EPS-DILUTED> 0
</TABLE>
