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, 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.)
PO Box 1626, Shingle Springs, 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
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The number of shares of Common Stock outstanding as of October 31, 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 -
October 31, 2000............................................1
Statements of Operations -
Three months ended October 31, 2000 and October 31, 1999....2
Statements of Cash Flows -
Three months ended October 31, 2000 and October 31, 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
October 31, 2000
(Unaudited)
================================================================================
ASSETS
CURRENT ASSETS
Cash $ 885
Note Receivable 250,000
Deposits 284,001
Prepaid expenses 4,500
------------
Total current assets 539,386
PROPERTY, PLANT AND EQUIPMENT, including undeveloped
mineral properties of $800,000, net of $28,004 of accumulated
depreciation 817,508
OTHER ASSETS
Reclamation bonds 50,500
Investment in common stock warrants -0-
------------
Total assets $ 1,407,394
============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Account payable $ 612,755
Accrued expenses 835,533
Accrued reclamation costs 50,500
Notes payable to officers 262,750
Note payable to individual 12,500
------------
Total current liabilities 1,774,038
DEFERRED REVENUE 800,000
------------
Total liabilities 2,574,038
STOCKHOLDERS' EQUITY
Common stock, $.001 par value,
50,000,000 shares authorized,
43,872,703 shares issued and outstanding 43,872
Additional paid in capital 10,908,140
Accumulated deficit (12,118,657)
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Total stockholders' equity (1,166,644)
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Total liabilities and stockholders' equity $ 1,407,394
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F-1
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NEWGOLD, INC.
STATEMENTS OF OPERATIONS
For the Three Months Ended October 31, 2000 and October 31, 1999
(Unaudited)
================================================================================
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
October 31, 2000 October 31, 1999
---------------- ----------------
<S> <C> <C>
SALES
Net sales $ -0- $ -0-
Cost of sales -0- -0-
---------------- ----------------
Gross margin -0- -0-
OPERATING EXPENSES
General and administrative expenses 396,369 33,572
Exploration costs 38,142 25,800
---------------- ----------------
Total operating expenses 434,511 59,372
---------------- ----------------
Loss from operations (434,511) (59,372)
OTHER INCOME (EXPENSE)
Interest expense (5,172) -0-
---------------- ----------------
Total other expense (5,172) -0-
---------------- ----------------
NET LOSS $ (439,683) $ (59,372)
================ ================
LOSS PER SHARE (after giving effect to the
Three-for-two stock split declared on June 8, 1999) (.010) (.002)
---------------- ----------------
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING (after giving effect to the
Three-for-two stock split declared on June 8, 1999) 43,872,703 37,866,882
================ ================
</TABLE>
F-2
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NEWGOLD, INC.
STATEMENTS OF CASH FLOWS
For the Three Months Ended October 31, 2000 and October 31, 1999
(Unaudited)
================================================================================
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
October 31, 2000 October 31, 1999
---------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (439,683) $ (59,372)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 3,206 3,963
Changes in operating assets and liabilities:
Accounts payable 42,378 (29,642)
Accrued expenses 175,125 14,087
Deposits 350 -0-
Due to Business Web, Inc. -0- 10,000
Due to affiliate -0- (300)
Notes payable to stockholder -0- 59,839
---------------- ----------------
Net cash used in operating activities (218,624) (1,425)
---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash used in investing activities -0- -0-
---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of notes payable 144,550 -0-
Proceeds from issuance of common stock 67,000 -0-
---------------- ----------------
Net cash provided by financing activities 211,550 -0-
---------------- ----------------
NET DECREASE IN CASH (7,074) (1,425)
CASH, beginning of period 7,959 1,966
---------------- ----------------
CASH, end of period $ 885 $ 541
================ ================
SUPPLEMENTAL DISCLOSURES REGARDING CASH FLOWS
Cash paid for interest $ -0- $ -0-
================ ================
Cash paid for income taxes $ -0- $ -0-
================ ================
</TABLE>
F-3
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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 October 31 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 $50,000. 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
and nine months ended October 31, 2000 were $38,142 and $60,142,
respectively.
6. Newgold, Inc., in February 2000, established itself as an Internet
company focused on incubating, funding and developing a portfolio of
Internet companies: business-to-business companies (B2B), e-commerce
enterprises and application service providers (ASPs). Since that time
the capital markets environment has changed dramatically. Valuations
for similar
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types of companies have generally fallen to 5% to 10% of their market
price per share in March 2000. Accordingly the Company has been
unsuccessful in obtaining short term funding to meets its current
needs. The Company currently must reach settlement with its creditors
before it can implement new business plans. If it is successful Newgold
will attempt to establish operations in the area of natural resources
including the exploration and mining / drilling of gold and silver as
well as natural gas and oil.
7. 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.
Depending on how rapidly we are able to implement this business plan
will impact how much additional financing we will require over the next
24 months; we could require up to an additional $5 to $25 million in
funding. 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.
8. As part of the redirection of Newgold's business, A. Scott Dockter was
reappointed Chairman, President and CEO in December 2000. Mr. Dockter
was hired at an annual salary of $60,000. Additionally, Mr. Dockter has
an incentive stock option plan that is based strictly on the market
price performance of Newgold, Inc. common stock. Mr. Dockter will earn
one million options at each of the following market prices, which must
be maintained for 10 consecutive business days: $1.00 per common share;
$2.00 per common share; $3.00 per common share; $4.00 per common share
and $5.00 per common share.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
------------------------------------
Introduction.
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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 a new business strategy of investing in Internet start-up
companies. Since that time the capital markets have treated such companies
poorly as it relates to the market price per share. Because of this
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and other factors the Company has determined that it is no longer feasible to
solely focus on business development in this area. The Company will focus during
the next quarter on stabilizing its financial condition. When and if it is
successful at its stabilization efforts, new business opportunities will be
evaluated, specifically in the natural resources industry and in providing
capital market services. The operating expenses of the Company have increased
substantially since the prior year and are expected to continue to increase in
order to implement a new business strategy.
We will be required to obtain additional financing in both the
short term and the long term to successfully carry out any new business plan;
current working capital is not sufficient to fund operations for the remainder
of the current fiscal year. Depending on how rapidly we are able to implement a
new business plan will impact how much additional financing we will require over
the next 24 months; we could require up to an additional $5 to $25 million in
funding. 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.
The Company does not conduct research and development per se.
If the Company can stabilize its financial condition and decides to pursue new
business opportunities in the natural resource industry then it most likely
incur these types of expense. Until it is determined that such business will
occur it is not reasonable to estimate what these costs may be.
As of the date of this filing, the Company has derived no
significant revenue from its operations. As a mine owner, 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 October 31, 2000
---------------------------------------------------------
As of October 31, 2000, the Company had $885 in cash and
working capital deficit of ($1,234,652). If the Company were to attempt to
continue pursuing mining operations, the Company would require approximately
$2.5 million in additional 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 not continuing its efforts to obtain funding for its mining
operations, and will not do so until such time that its financial condition can
be stabilized.
The Company obtained funding for its Internet business
operations earlier this year. The Company raised approximately $1.75 million
based on its new operating strategy in the first fiscal quarter of this year.
There can be no assurance that additional financing will be available when
needed, on commercially reasonable terms, or at all. The Company's independent
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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 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.
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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.
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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.
(4) In September 2000 the Company closed a private
placement offering for 400,000 shares at $0.1675
per share.
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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8
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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).
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/ A. Scott Dockter Date: December 20, 2000
--------------------
A. Scott Dockter
Chief Executive Officer
/s/ James W. Kluber Date: December 20, 2000
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James W. Kluber
Chief Financial Officer
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