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 June 30, 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
(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
----- -----
As of August 18, 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 NO X
----- -----
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TOUCAN GOLD CORPORATION
June 30, 1997
INDEX
PART I. FINANCIAL INFORMATION Page No.
--------
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1997
and December 31, 1996................................F-1
Consolidated Statements of Operations for the three
months ended June 30, 1997 and 1996.................F-2
Consolidated Statements of Operations for the six
months ended June 30, 1997 and 1996.................F-3
Consolidated Statements of Cash Flows for the six
months ended June 30, 1997 and 1996.................F-4
Notes to Consolidated Financial Statements.............F-5
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.................................................................6
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Toucan Gold Corporation
(a development stage company)
CONSOLIDATED BALANCE SHEETS
(unaudited)
June 30, December 31,
ASSETS 1997 1996
---------- ------------
Cash $ 1,166,488 $ 2,031,045
Prepaid expenses 21,846 6,374
----------- -----------
Total current assets 1,188,334 2,037,419
Mineral rights 2,169,243 1,691,442
----------- -----------
$ 3,357,577 $ 3,728,861
LIABILITIES AND STOCKHOLDERS' EQUITY
Amounts payable to related parties $ - $ 9,051
Accrued expenses and other liabilities 90,475 29,311
----------- -----------
Total current liabilities 90,475 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, 7,456,600, and 7,432,600 shares,
respectively 74,566 74,326
Additional paid-in capital 4,080,439 4,050,679
Deficit accumulated during the development
stage (887,903) (434,506)
----------- -----------
Total stockholders' equity 3,267,102 3,690,499
----------- -----------
$ 3,357,577 $ 3,728,861
=========== ===========
The accompanying notes are an integral part of this statement.
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F-1
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Toucan Gold Corporation
(a development stage company)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months ended June 30,
(unaudited)
1997 1996
------ -----
Cost and expenses
Legal and professional fees $ 162,413 $ 47,147
Consulting fees - 65,358
Travel and entertainment 21,647 22,369
Public relations - 10,108
Other 10,808 14,140
----------- -----------
Total cost and expenses 194,868 159,122
Other income
Interest income (24,292) -
----------- -----------
Net loss $ 170,576 $ 159,122
=========== ===========
Loss per share $ .02 $ .03
=========== ===========
Weighted average shares outstanding 7,432,600 5,355,182
=========== ===========
The accompanying notes are an integral part of this statement.
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F-2
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Toucan Gold Corporation
(a development stage company)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the six months ended June 30,
(unaudited)
1997 1996
------ ------
Cost and expenses
Legal and professional fees $ 418,468 $ 56,234
Consulting fees - 117,020
Travel and entertainment 53,385 51,028
Public relations 7,110 10,108
Other 14,147 15,851
----------- -----------
Total cost and expenses 493,110 250,241
Other income
Interest income (39,713) -
----------- -----------
Net loss $ 453,397 $ 250,241
=========== ===========
Loss per share $ .06 $ .05
=========== ===========
Weighted average shares outstanding 7,442,600 5,228,320
=========== ===========
The accompanying notes are an integral part of this statement.
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F-3
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Toucan Gold Corporation
(a development stage company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended June 30,
1997 1996
------ ------
Operating activities
Net loss $ (453,397) $ (250,241)
Net changes in operating assets and
liabilities
Prepaid expenses (15,472) (10,000)
Accrued expenses 61,164 48,000
----------- -----------
Net cash used in operating
activities (407,705) (212,241)
Investing activities
Acquisition of mineral rights (447,801) -
Financing activities
Net repayments/borrowings from related
parties (9,051) 38,808
Issuance of common stock, net of expenses - 112,535
Proceeds from merger with Starlight
Acquisitions, Inc. - 100,000
----------- -----------
Net cash (used in) provided
by financing activities (9,051) 251,343
----------- -----------
Net (decrease) increase in
cash (864,557) 39,102
Cash at beginning of period 2,031,045 45,208
----------- -----------
Cash at end of period $ 1,166,488 $ 84,310
=========== ===========
The accompanying notes are an integral part of this statement.
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F-4
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Toucan Gold Corporation
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 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 June 30, 1997, and the
consolidated results of operations for the three (3) months and six (6) months
ended June 30, 1997 and 1996, and the consolidated cash flows for the six (6)
months ended June 30, 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 June 30, 1997, the Company
had acquired fourteen (14) priority mineral claims in the Cuiba Basin, Brazil
and was committed to acquire nine (9) 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 nine (9) claims are delivered to the Company. The
192,000 shares of Common Stock that the Company is obligated to issue with
respect to such fourteen (14) claims pursuant to such agreement have not been
issued as of June 30, 1997 but are reflected in the number of issued and
outstanding shares of Common Stock in the June 30, 1997 balance sheet contained
in the financial statements contained herein.
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F-5
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Toucan Gold Corporation
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
June 30, 1997
(unaudited)
NOTE C - NEW ACCOUNTING PRONOUNCEMENT
The FASB has issued Statement of Financial Accounting Standards No. 128,
Earnings Per Share, which is effective for financial statements issued after
December 15, 1997. Early adoption of the new standard is not permitted. The new
standard eliminates primary and fully diluted earnings per share and requires
presentation of basic and diluted earnings per share together with disclosure of
how the per share amounts were computed. The adoption of this new standard is
not expected to have an effect on the disclosure of earnings per share in the
financial statements.
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F-6
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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 six months ended June 30,
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 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
CORPDAL:69742.3 29976-00001
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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.
CORPDAL:69742.3 29976-00001
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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
Form 8-K: No reports on Form 8-K have been filed with the Securities and
Exchange Commission in the quarter ended June 30, 1997.
CORPDAL:69742.3 29976-00001
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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: August 19, 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
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(Replace this text with the legend)
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<CIK> 0000850083
<NAME> Toucan Gold Corporation
<MULTIPLIER> 1
<CURRENCY> 1.00
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1.00
<CASH> 1,166,488
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,188,334
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,357,577
<CURRENT-LIABILITIES> 90,475
<BONDS> 0
0
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<COMMON> 74,566
<OTHER-SE> 3,192,536
<TOTAL-LIABILITY-AND-EQUITY> 3,357,577
<SALES> 0
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<CGS> 0
<TOTAL-COSTS> 493,110
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
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<INCOME-PRETAX> (453,397)
<INCOME-TAX> 0
<INCOME-CONTINUING> (453,397)
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