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 April 30, 2000
Commission file number 0-20722
NEWGOLD, INC.
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(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.)
14131 Midway Road, Suite 800, Addison, TX 75001
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(Address of principal executive offices)
(972) 851-5434
- - - - - - - - - - -
(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 April 30, 2000:
43,472,703
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Transitional Small Business Disclosure Format (check one): Yes No X
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PART I. Financial Information.
----------------------
1. Interim Financial Statements (unaudited)
Balance Sheet -
April 30, 2000........................................1
Statements of Operations -
Three months ended April 30, 2000 and April 30, 1999..2
Statements of Cash Flows -
Three months ended April 30, 2000 and April 30, 1999..3
Notes to Financial Statements..................................4
2. Management's Discussion and Analysis...........................5
PART II. Other information
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Signatures.....................................................9
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NEWGOLD, INC.
BALANCE SHEET
April 30, 2000
(Unaudited)
ASSETS
CURRENT ASSETS
Cash $ 279,964
Note Receivable 250,000
Deposits 164,351
Prepaid expenses 4,500
------------
Total current assets 698,815
PROPERTY, PLANT AND EQUIPMENT, including undeveloped
mineral properties of $800,000, net of $21,591 of
accumulated depreciation 819,928
OTHER ASSETS
Reclamation bonds 50,500
Investment in common stock warrants -0-
------------
Total assets $ 1,569,243
============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Account payable $ 336,288
Accrued expenses 352,860
Accrued reclamation costs 50,500
Note payable to individual 12,500
------------
Total current liabilities 752,148
DEFERRED REVENUE 800,000
------------
Total liabilities 1,552,148
STOCKHOLDERS' EQUITY
Common stock, $.001 par value,
50,000,000 shares authorized,
43,472,703 shares issued and outstanding 43,472
Additional paid in capital 10,841,540
Accumulated deficit (10,867,917)
------------
Total stockholders' equity 17,095
------------
Total liabilities and stockholders' equity $ 1,569,243
============
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<TABLE>
<CAPTION>
NEWGOLD, INC.
STATEMENTS OF OPERATIONS
For the Three Months Ended April 30, 2000 and April 30, 1999
(Unaudited)
Three Months Three Months
Ended Ended
April 30, 2000 April 30, 1999
-------------- --------------
<S> <C> <C>
SALES
Net sales $ -0- $ -0-
Cost of sales -0- -0-
----------- -----------
Gross margin -0- -0-
OPERATING EXPENSES
General and administrative expenses 309,950 108,212
Exploration costs 11,000 4,472
----------- -----------
Total operating expenses 320,950 112,684
----------- -----------
Loss from operations (320,950) (112,684)
OTHER INCOME (EXPENSE)
Interest expense (11,250) (43,738)
----------- -----------
Total other expense (11,250) (43,738)
----------- -----------
NET LOSS $ (332,200) $ (156,422)
=========== ===========
LOSS PER SHARE (after giving effect to the
Three-for-two stock split declared on June 8, 1999) (.008) (.004)
----------- -----------
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING (after giving effect to the
Three-for-two stock split declared on June 8, 1999) 42,161,036 37,866,882
=========== ===========
</TABLE>
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<TABLE>
<CAPTION>
NEWGOLD, INC.
STATEMENTS OF CASH FLOWS
For the Three Months Ended April 30, 2000 and April 30, 1999
(Unaudited)
Three Months Three Months
Ended Ended
April 30, 2000 April 30, 1999
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (332,200) $ (156,422)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 3,205 3,963
Changes in operating assets and liabilities:
Other assets -0- (2,000)
Accounts payable (36,940) (15,595)
Accrued expenses (90,007) (29,404)
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Net cash used in operating activities (455,942) (199,458)
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CASH FLOWS FROM INVESTING ACTIVITIES
Capital Expenditures (14,414) -0-
Funding of notes receivable (250,000) -0-
Funding of deposits (164,351) -0-
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Net cash used in investing activities (428,765) -0-
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CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of advances -0- (6,634)
Proceeds from issuance of notes payable -0- 280,000
Payments on notes payable (482,492) (56,605)
Proceeds from issuance of common stock 1,645,000 -0-
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Net cash provided by financing activities 1,162,508 216,761
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NET INCREASE IN CASH 277,801 17,303
CASH, beginning of period 2,163 886
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CASH, end of period $ 279,964 $ 18,189
========== ==========
SUPPLEMENTAL DISCLOSURES REGARDING CASH FLOWS
Cash paid for interest $ -0- $ -0-
========== ==========
Cash paid for income taxes $ -0- $ -0-
========== ==========
</TABLE>
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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 April 30
2000, are not necessarily indicative of the results that may be expected
for the fiscal year ended January 31, 2001.
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 would be spent 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 April 30, 2000 were $11,000.
6. In April 2000, the Company announced that it has signed a contract for the
sale of its Relief Canyon Mining Project including all mining assets,
leaseholds and subject to the related net smelter return royalty due to
Repadre Capital Corporation. The sale is expected to close in the second
quarter of fiscal 2001 and will be sold to an affiliate of the former
Chairman of the Company. The sales price is $960,000 and the Company will
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receive an equivalent amount of its shares (up to a maximum of 500,000
shares) based on the most recent 10-day average closing bid price of its
stock prior to closing. A separate independent valuation of the Company's
Relief Canyon assets will be performed to insure that at minimum a fair
market value is received.
7. Newgold, Inc., during the first quarter of fiscal 2001,established itself
as an Internet company focused on investing in and developing
business-to-business, or B2B, e-commerce and application service providers,
or ASPs, through the incubation of a portfolio of investments what are
called partner companies. Our goal is to become the premier B2B e-commerce
and ASP incubation company by creating an incubation environment for a
portfolio of partner companies that will enable them to emerge as
successful Internet firms withstanding the traditional tests for
investment: profitability and time. We believe that our sole focus on the
B2B e-commerce industry will allow us to capitalize rapidly on new
opportunities and to attract and develop leading B2B e-commerce companies.
8. Subsequent to April 30, 2000 the Company has announced plans to directly
invest in five Internet companies as well as the creation of a new
"concepts" division. Total investment in these companies is currently
estimated in excess of $25 million over the next 24 months. We will be
required to obtain additional financing in both the short term and the long
term to successfully carry out our new business plan. We currently have no
committed sources of additional capital. We can offer no assurances that
additional funds can be raised. In addition, even if we find outside
funding sources, we may be required to issue to such outside sources
securities with greater rights than those currently possessed by holders of
our common stock. We may also be required to take other actions that may
lessen the value of our common stock, including borrowing money on terms
that are not favorable to us.
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.
------------------------------------------------------
At the beginning of the current fiscal year, the Company began
to implement its new business strategy. Accordingly, the Company has begun to
hire executives and professional
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staff familiar with such companies. Five transactions have closed as of the date
of this filing; the operating expenses of the Company have increased
substantially since the prior year and are expected to continue to increase in
order to implement its new business strategy.
The new business strategy will require additional capital to
be raised, as current working capital is not sufficient to fund operations for
the remainder of the current fiscal year. Each new investment that the Company
makes will generally require additional capital from $500,000 to $5,000,000;
such amounts would typically be funded in the respective investment over a one
to two year period.
The Company does not conduct research and development per se,
but does expend considerable effort to source viable investment opportunities.
Currently most employees are utilized in this effort. As investments are being
made, some of the current management employees are becoming actively involved
with overseeing our investments in partner companies. Current plans are for the
company to have between 20 and 30 employees; the timing of the hiring of any
additional employees is dependent on how successful we are at finding qualified
investments.
Funding will be required for investments and to cover
operating expenses. During the first quarter of fiscal 2001 the Company raised
$1.75 million in this regard. Additional funding is currently required to
continue to implement the Internet investment strategy.
As of the date of this filing, the Company has derived no
significant revenue from its operations. As a mine owner, and until the mining
assets are sold, the Company's capital requirements have been and will continue
to be significant. The Company has been dependent primarily on the private
placements of its securities as its sole source of funding its operations.
Financial Condition of the Company as of April 30, 2000
-------------------------------------------------------
As of April 30, 2000, the Company had $279,964 in cash and a
working capital deficit of ($53,333). If the Company were to attempt to continue
pursuing mining operations, the Company would require approximately $2.5 million
in additional working capital above the current working capital to bring the
mine into full production. Since January 1998, the Company had pursued several
possible funding opportunities including the sales of royalties on other gold
properties and on industrial minerals. 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 is no longer continuing its efforts to obtain funding
for its mining operations.
Currently the Company is attempting to obtain funding for its
Internet investment operations. During the quarter ended April 30, 2000, the
Company raised approximately $1.75 million based on its new operating strategy
and is continuing its efforts to raise additional capital for future investments
and to fund current operating expenses. There can be no assurance that any of
such opportunities will result in actual funding or that additional financing
will be available when needed, on commercially reasonable terms, or at all. 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, 2000, indicating substantial doubt about the Company's
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ability to continue as a going concern.
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,
2000, 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.
PART II. OTHER INFORMATION.
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ITEM 1. Legal Proceedings.
-----------------
Environmental Obligations - The Company's mining and
exploration activities are subject to various federal and state laws and
regulations governing the protection of the environment. These laws and
regulations are continually changing and are generally becoming more
restrictive. The Company strives to conduct its operations so as to protect the
public health and environment and believes its operations are in compliance with
all applicable laws and regulations. The Company has made, and expects to make
in the future, expenditures to comply with such laws and regulations.
The Company is involved in various other claims and legal
actions arising in the ordinary course of business. In the opinion of
management, the ultimate dispositions of these matters will not have a material
adverse effect on the Company's financial position, results or operations or
liquidity.
ITEM 2. Changes in Securities.
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Private Placements
(1) In February 2000, the Company closed a private placement offering or
1,200,000 shares to raise $600,000 at $.50 per share. Additionally, a
warrant was issued with each share to purchase an additional share of
common stock at $1 per share. The warrants expire four years from the
original date of closing. In connection with this offering $60,000 were
paid as commission to brokers.
(2) In April 2000, the Company closed a private placement offering for
500,000 shares to raise $500,000 at $1.00 per share. Additionally, a
warrant was issued with each share to purchase an additional share of
common stock at $1 per share. The warrants expire four years from the
original date of closing. In connection with this offering $45,000 were
paid and 50,000 warrants issued with the same terms as those above as
commission to brokers.
(3) In April 2000, a $200,000 note payable and a $250,000 judgment payable
were settled and paid off in full by a shareholder of the company. The
total balances due including interest and legal fees had grown to
approximately $650,000 at the time of settlement. The shareholder has
received an additional 650,000 shares of stock as reimbursement for the
payment of these amounts on behalf of the Company.
ITEM 3. Defaults on Senior Securities.
-----------------------------
None.
ITEM 4. Matters Submitted to a Vote of Shareholders.
-------------------------------------------
None.
ITEM 5. Other Information.
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None.
ITEM 6. Exhibits and Reports on Form 10-K.
---------------------------------
a) Exhibits.
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Exhibit 3.1 Certificate of Incorporation of the
Registrant (1).
Exhibit 3.2 Certificate of Amendment to
Certificate of Incorporation of the
Registrant (2).
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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.
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/ James H. Cutburth Date: June 20, 2000
---------------------
James H. Cutburth
Chief Executive Officer
/s/ James W. Kluber Date: June 20, 2000
-------------------
James W. Kluber
Chief Financial Officer
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