U.S. Securities And Exchange Commission
Washington, D.C. 20549
Form 10QSB
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the quarterly period ended October 31, 1999
Commission file number 0-20722
NEWGOLD, INC.
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 16-1400479
- - - - - - - - - - - - - - - - -
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
3090 Boeing Road, Cameron Park, CA 95682
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(Address of principal executive offices)
(530) 672-1116
- - - - - - - - - - -
(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
---
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 court. Yes X ; No
The number of shares of Common Stock outstanding as of October 31, 1999:
37,866,882
- ----------
Transitional Small Business Disclosure Format (check one): Yes No X
<PAGE>
PART I. Financial Information.
----------------------
1. Interim Financial Statements (unaudited)
Balance Sheet -
July 31, 1999..................................................1
Statements of Operations -
Three months ended July 31, 1999 and July 31, 1998.............2
Statements of Cash Flows -
Three months ended July 31, 1999 and July 31, 1998.............3
Notes to Financial Statements.......................................4
2. Management's Discussion and Analysis................................5
PART II. Other information
-----------------
Signatures..........................................................8
<PAGE>
NEWGOLD, INC.
Balance Sheet
October 31, 1999
(Unaudited)
Assets
Cash and cash equivalents $ 541
Prepaid expenses 3,600
--------------
Total current assets 4,141
--------------
Property, plant and equipment including undeveloped
mineral properties of $800,000, net of $57,350
accumulated depreciation 841,413
Reclamation bonds 50,500
--------------
Total assets $ 896,054
==============
Liabilities and Stockholder's Equity
Current liabilities
Accounts payable $ 368,001
Accrued expenses 476,137
Due to affiliate 77,775
Notes payable to Business Web Inc. 425,000
Notes payable to stockholders 249,180
Notes payable to individuals 462,500
--------------
Total current liabilities 2,058,593
Other Liabilities
Accrued reclamation costs 50,500
Deferred revenue 800,000
--------------
Total other liabilities 850,500
--------------
Total liabilities 2,909,093
Stockholders' equity
Common stock - Authorized 50,000,000 shares par
value $0.001; 37,866,882 shares outstanding 37,867
Additional paid-in capital 7,932,497
Accumulated deficit (9,983,403)
--------------
Total stockholders' equity (2,013,039)
--------------
Total liabilities and stockholders' equity $ 896,054
==============
1
<PAGE>
NEWGOLD, INC.
Statements of Operations
(Unaudited)
<TABLE>
For the three months ended
October 31 October 31
1999 1998
<S> <C> <C>
Sales
Net sales $ - $ -
Cost of sales - -
--------------- ---------------
Gross Margin - -
Operating expenses
General and administrative expenses 33,572 125,119
Exploration costs 25,800 14,882
--------------- ---------------
Total operating expenses 59,372 140,001
--------------- ---------------
Loss from operations (59,372) (140,001)
Other income (expense)
Interest income
Other income (loss) - -
Loss on disposal of assets - -
Interest expense - (56,563)
--------------- ---------------
Total other expense - (56,563)
Income tax provision - -
--------------- ---------------
Net loss $ (59,372) $ (196,564)
=============== ===============
Loss per share $ (0.002) $ (0.008)
=============== ===============
Weighted average number of shares outstanding 37,866,882 24,942,611
=============== ===============
</TABLE>
2
<PAGE>
NEWGOLD, INC.
Statements of Cash Flows
(Unaudited)
<TABLE>
For the three months ended
October 31 October 31
1999 1998
<S> <C> <C>
Cash flows from operating activities
Net loss $ (59,372) $ (196,564)
-------- ---------
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation 3,963 5,074
Changes in operating assets and liabilities
Other assets (10,000)
Accounts payable (29,642) (27,155)
Accrued expenses 14,087 120,829
Due to Business Web, Inc. 10,000
Due to affiliate (300) 8,052
Notes payable to stockholders 59,839 13,791
---------- ----------
Total adjustments to net loss 57,947 110,591
---------- ----------
Net cash provided (used) by operations (1,425) (85,973)
Cash flows from investing activities
Capital expenditures - -
---------- ----------
Net cash used in investing activities - -
---------- ----------
Net increase (decrease) in cash (1,425) (85,973)
Cash and cash equivalents, beginning of period 1,966 87,617
---------- ----------
Cash and cash equivalents, end of period $ 541 $ 1,644
========== ==========
</TABLE>
3
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Preparation of Interim Financial Statements: The accompanying financial
statements have been prepared in accordance with the instructions to
Form 10-QSB and, therefore, do not include all information and
footnotes necessary for a presentation of financial position, results
of operations and cash flows in conformity with generally accepted
accounting principles. In the opinion of management, the referenced
financial statements reflect all normal and recurring adjustments
necessary for a fair presentation of the results of operations and
financial position for the interim periods presented. Operating results
for the three month period ended October 31, 1999, are not necessarily
indicative of the results that may be expected for the fiscal year
ended January 31, 2000.
2. Income Taxes: No income tax provisions have been made due to losses
incurred. Deferred income tax benefits have been fully reserved due to
the uncertainty of future realization.
3. Net (Loss) Per share: Net (loss) per share has been computed on the
basis of the weighted average number of shares outstanding during the
period. No options were outstanding at the end of the period.
4. Reclamation of Mining Areas: Reclamation costs, including the removal
of production facilities at the end of their useful lives, are
estimated and accrued on an undiscounted basis over the productive
lives of properties. Remediation costs are expensed when the liability
is probable and estimable. Based on current environmental regulations
and known reclamation requirements, management has included its best
estimate of these obligations in its reclamation accruals. However, it
is reasonably possible that the Company's estimates of its ultimate
reclamation liabilities could change as a result of changes in
regulations or cost estimates. The Company performs concurrent
reclamation to the extent possible. However, most of the accrued costs
are anticipated to be expended at the end of the mine life.
5. The Company placed the Relief Canyon Mine, a developed exploration
project, on care and maintenance in December 1997. The Company
estimates the annual cost of maintaining the mine in this status may be
approximately $100,000. Included in this cost estimate are the annual
BLM rent for the claims, water testing for Nevada Department of
Environmental Protection, and costs of utilities and security at the
site. Charges for care and maintenance of Relief Canyon in the quarter
ended October 31, 1999 were $25,800.
4
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
Introduction.
The Company formerly was engaged in the business of acquiring
dormant, potential gold-producing properties located in the continental United
States and developing such properties into commercial gold mining operation. The
Company is the result of a merger (the "Merger") between Warehouse Auto Centers,
Inc., a Delaware corporation ("WAC"), and Newgold, Inc., a Nevada corporation
("NGNV"), pursuant to a Plan of Reorganization (the "Plan") approved by the U.S.
Bankruptcy Court for the Western District of New York, effective as of November
21, 1996. For accounting purposes, under the terms of the Merger, NGNV was
treated as the acquirer.
Financial Plan of Operation for the Next Twelve Months.
On April 2, 1999, the Company issued a Letter of Intent to
Business Web, Inc. (BWI) to effect a reverse merger of Newgold, Inc. and BWI
with BWI being the acquirer corporation. A merger agreement, which has been
approved by the Boards of Directors, will be submitted to the shareholders of
both companies for their expected approval. Terms of the agreement allow a 3:2
split of the Company stock in June 1999, which will be treated as a dividend.
After the merger, the Company shareholders will receive one share of BWI stock
for each twelve shares of Newgold stock. This exchange of shares will give the
Company shareholders approximately a 14% interest in BWI.
BWI, a Texas corporation, is an Internet company specializing
in the development of web sites for communities of like businesses and the
development of e-trade shows on the Internet for industries and professional
organizations. To date, of the capital raised by BWI, $425,000 has been loaned
to Newgold for payment of liabilities and current operating costs. Other Newgold
liabilities will be settled with BWI stock and cash as required. The Relief
Canyon Mine will be transferred to another corporation and a portion of any
funds raised by this corporation will be committed to repay BWI for loans and
other payments made for the benefit of Newgold.
As of October 31, 1999, the Company had $541 in cash and a negative
working capital of $2,054,452.. As the Company has been unable to obtain
additional financing, it was required to curtail its development plans in
November 1997 and cease operations except for care and maintenance of the Relief
Canyon Mine. The Company's independent accountants have included an explanatory
paragraph in their report on the Company's financial statements for the year
ended January 31, 1999, indicating substantial doubt about the Company's ability
to continue as a going concern.
At the Relief Canyon Mine, the Company had placed all mining
operations on hold and has placed the mine into care and maintenance. The
Company has two experienced personnel in place at the mine site. The personnel
have evaporated 80% of the water in the preg and barren ponds so these ponds can
contain snow melt and rain run-off from the leach pads as required by a plan
approved and monitored by the Nevada Department
5
<PAGE>
of Environmental Protection (NDEP).
This report, as well as certain of the notes to the financial
statements, contain "forward-looking statements" within the meaning of Section
27A of the Securities Exchange Act of 1934, as amended. Such statements include,
but are not limited to, (i) expectations as to the funding of future capital
expenditures and other cash needs, (ii) statements as to the projected
development of certain ore deposits, including estimates of development and
other capital costs and financing plans with respect thereto, (iii) estimates of
future costs and other liabilities for certain environmental matters and (iv)
statements as to the likelihood of the outcome of litigation matters. These
forward-looking statements are subject to risks, uncertainties and other factors
that could cause actual results to differ materially from the forward-looking
statements or the results projected or implied by the forward-looking
statements.
For a more detailed discussion of the foregoing risks and
uncertainties affecting the Company and its operations, see "Cautionary
Statement for Purposes of the Safe Harbor Provisions of the Private Securities
Litigation Reform Act of 1995." and "Risk Factors" contained in Item 1 and 2 of
the Company's annual Report on Form 10-KSB for the period ended January 31,
1999, as well as other filings made by the Company from time to time with the
Securities and Exchange Commission. Many of these factors are beyond the
Company's ability to control or predict. Readers are cautioned not to put undue
reliance on forward-looking statements. The Company disclaims any intent or
obligation to update publicly any forward-looking statements set forth in this
discussion, whether as a result of new information, future events or otherwise.
6
<PAGE>
PART II. OTHER INFORMATION.
ITEM 1. Legal Proceedings.
a) On December 3, 1996, the case of Christiansen v. Newgold,
et al., a purported breach of contract action was filed in the Second Judicial
District, Washoe County, Reno, Nevada. Christiansen prevailed in this action and
the Company accrued the $250,000 judgement as of January 31, 1998; the Company
is waiting for funds to complete the transaction.
ITEM 2. Changes in Securities.
Stock split 3:2 on June 17, 1999 for shareholders of
record June 10, 1999.
ITEM 3. Defaults on Senior Securities.
None.
ITEM 4. Matters Submitted to a Vote of Shareeholders.
None.
ITEM 5. Other Information.
None.
ITEM 6. Exhibits and Reports on Form 8-K.
a) Exhibits.
Exhibit 3.1 Certificate of Incorporation of the Registrant (1).
Exhibit 3.2 Certificate of Amendment to Certificate of
Incorporation of the Registrant (2).
Exhibit 3.3 Bylaws of the Registrant (1).
Exhibit 27 Financial Data Schedule.
(1) Incorporated by reference to the Registrant's
Registration Statement on Form SB-2 (File No.
33-49920) filed with the Commission on October 14, 1993.
(2) Incorporated by reference to the Registrant's Annual
Report on Form 10-KSB-40 for the fiscal year ended
January 31, 1996 filed with the Commission on January
22, 1997.
7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto authorized.
NEWGOLD, INC.
/s/ A. Scott Dockter Date: December 14, 1999
- --------------------
A. Scott Dockter
Chief Executive Officer
/s/ Robert W. Morris Date: December 14, 1999
- --------------------
Robert W. Morris
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-2000
<PERIOD-END> OCT-31-1999
<CASH> 541
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,141
<PP&E> 898,763
<DEPRECIATION> 57,350
<TOTAL-ASSETS> 896,054
<CURRENT-LIABILITIES> 1,827,578
<BONDS> 0
0
0
<COMMON> 37,867
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 898,763
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 59,372
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (59,372)
<INCOME-TAX> 0
<INCOME-CONTINUING> (59,372)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (59,372)
<EPS-BASIC> (0.002)
<EPS-DILUTED> (0.002)
</TABLE>
