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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM 10-QSB
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________________ to _____________________
Commission File Number 0-25786
---------------------------
NAPTAU GOLD CORPORATION
(Exact name of small business issuer as specified in its charter)
Delaware 22-3386947
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
9551 Bridgeport Road
Richmond BC
Canada V6X 1S3
(address of principal executive offices)
(604) 273-9992
(Issuer's telephone number)
------------------------------------
-----------------------------
(Former name, former address and former fiscal year
if changed since last report)
Check whether the issuer (1) 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 | | No |X|
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 6,933,500 shares of Common
Stock, $.001 par value, were outstanding, as of March 31, 1997.
Transitional Small Business Disclosure Format (check one):
Yes | | No |X|
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<PAGE>
Form 10-QSB
INDEX
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets 3
Statements of Operations and Deficit 4
Statements of Cash Flows 5
Notes to Financial Statements 6-12
Item 2. Plan of Operation 13
PART II. OTHER INFORMATION 13
SIGNATURES 14
<PAGE>
NAPTAU GOLD CORPORATION
Balance Sheets
(expressed in United States dollars)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31,
March 31, --------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Assets
Current asset:
Cash $ -- $ -- $ 1,000
Mineral properties (note 3) 2,988,850 2,988,850 2,374,726
Deferred financing costs (note 2(b)) 9,191 9,090 40,000
----------- ----------- -----------
$ 2,998,041 $ 2,997,940 $ 2,415,726
=========== =========== ===========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities (note 4) $ 183,280 $ 157,183 $ 45,000
Contracts payable (note 3) 1,494,831 1,494,831 2,154,500
Loans payable to related parties (note 4) 13,370 12,770 101,697
----------- ----------- -----------
1,691,480 1,664,784 2,301,197
Shareholders' equity:
Capital stock (note 5):
Authorized:
5,000,000 preferred shares with a par value of
$0.001 per share
20,000,000 common shares with a par value of
$0.001 per share
Issued and outstanding:
6,700,000 common shares 6,934 6,934 6,700
Additional paid-in capital (note 5) 1,534,105 1,534,105 168,339
Shares alloted but unissued (note 5(c)(ii)) -- -- 100
Deficit (234,478) (207,882) (60,610)
----------- ----------- -----------
1,306,561 1,333,157 114,529
Continuing operations (note 1)
Commitments (notes 3 and 6)
Subsequent events (notes 3, 4 and 5(c))
----------- ----------- -----------
$ 2,998,041 $ 2,997,940 $ 2,415,726
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements
<PAGE>
NAPTAU GOLD CORPORATION
Statements of Operations and Deficit
(expressed in United States dollars)
- --------------------------------------------------------------------------------
Three months Three months
ended ended
March 31, March 31,
1997 1996
--------- ---------
Expenses:
Management salary (note 6) $ 22,500 $ 22,500
Professional fees 4,095 400
Office and administrative -- 660
Stock grant program expense (note 5(c)(ii)) -- --
--------- ---------
Loss for the period (26,595) (23,560)
Deficit, beginning of period (207,882) (60,610)
--------- ---------
Deficit, end of period $(234,478) $ (84,170)
========= =========
Loss per share $ (0.01) $ (0.01)
========= =========
See accompanying notes to financial statements
<PAGE>
NAPTAU GOLD CORPORATION
Statements of Cash Flows (note 8)
(expressed in United States dollars)
- --------------------------------------------------------------------------------
Three months Three months
ended ended
March 31, March 31,
1997 1996
---------- ----------
Cash generated from (used in):
Operations:
Loss for the period $ (26,595) $ (23,560)
Stock grant program expense,
an item not involving cash -- --
Changes in non-cash operating working capital:
Accounts payable and accrued liabilities 26,097 22,500
--------- ---------
(499) (1,060)
Financing:
Deferred financing costs (101) (5,000)
Payment of contracts payable -- 68,384
Loans payable to related parties 600 6,060
--------- ---------
499 69,444
Investing activities:
Mineral properties -- (68,384)
--------- ---------
Increase in cash $ 0 $ 0
Cash, beginning of period 0 1,000
--------- ---------
Cash, end of period $ 0 $ 1,000
========= =========
See accompanying notes to financial statements.
<PAGE>
NAPTAU GOLD CORPORATION
Notes to Financial Statements
(expressed in United States dollars)
March 31, 1997
- --------------------------------------------------------------------------------
1. Continuing operations:
Naptau Gold Corporation (the "Company") was formed under the laws of the
State of Delaware on January 18, 1988 and was inactive until 1995 when it
entered into an agreement to acquire certain mineral properties (note 3).
The Company's principal business activity is the exploration and
development of mineral properties, with its principal mineral properties
comprising of various placer leases in the Cariboo Mining Division of
British Columbia, Canada (the "Placer Leases").
These financial statements have been prepared on the basis of accounting
principles applicable to a going concern. At March 31, 1997, the Company
had a working capital deficiency of approximately $1,700,000, a
significant portion which is due to related parties. The Company's
continuing operations and the ability of the Company to discharge its
liabilities are dependent upon the continued financial support of related
parties and the ability of the Company to obtain the necessary financing
to meet its liabilities as they come due.
The recoverability of the amounts shown as mineral properties is dependent
upon the existence of economically recoverable mineral reserves, the
ability of the Company to obtain the necessary financing to complete the
development of its mineral properties and upon future profitable
production or proceeds from the disposition thereof.
2. Significant accounting policies:
The financial statements have been prepared in accordance with generally
accepted accounting principles in the United States.
(a) Mineral property interests:
Mineral property acquisition costs and related exploration and
development expenditures are deferred until the property is placed
into production, sold or abandoned. These costs will be amortized on
a unit-of-production basis over the estimated proven and probable
reserves of the property following commencement of commercial
production or written off if the property is sold, allowed to lapse
or abandoned.
Mineral property acquisition costs include cash consideration and
the fair value of common shares issued for mineral properties.
Administrative expenditures are expensed in the period incurred.
On an on-going basis, the Company evaluates the status of its
mineral properties based on results to date to determine the nature
of exploration and development work that is warranted in the future.
If there is little prospect of further work on a property being
carried out, the deferred costs related to that property are written
down to their estimated recoverable amount.
The amounts shown for mineral properties represent costs incurred to
date and is not intended to reflect present or future values.
<PAGE>
NAPTAU GOLD CORPORATION
Notes to Financial Statements
(expressed in United States Dollars)
March 31, 1997
- --------------------------------------------------------------------------------
2. Significant accounting policies (continued):
(b) Deferred financing costs:
The Company defers costs associated with specific financing
activities and charges those costs against the related share capital
or to operations if the financing activity is unsuccessful.
(c) Loss per share:
Loss per share has been calculated using the weighted average number
of common shares outstanding during the year.
3. Mineral properties:
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Placer Leases, Cariboo Mining Division, British Columbia:
Acquisition costs:
Placer Leases acquired from Noble (note 3(a)) $1,775,000 $1,775,000 $1,775,000
Placer Leases acquired from an affiliate of the
Company (note 3(b)) 200,800 200,800 200,800
---------- ---------- ----------
1,975,800 1,975,800 1,975,800
Deferred interest and financing costs:
Paid or accrued to Noble (note 3(a)) 251,725 251,725 --
Paid to an affiliate of the Company (note 3(b)) 20,400 20,400 --
---------- ---------- ----------
272,125 272,125 --
Exploration and development expenditures:
Incurred by Noble 735,445 735,445 397,339
Incurred by the Company 5,480 5,480 1,587
---------- ---------- ----------
740,925 740,925 398,926
---------- ---------- ----------
$2,988,850 $2,988,850 $2,374,726
========== ========== ==========
</TABLE>
<PAGE>
NAPTAU GOLD CORPORATION
Notes to Financial Statements
(expressed in United States Dollars)
March 31, 1997
- --------------------------------------------------------------------------------
3. Mineral properties (continued):
(a) Placer Leases acquired from Noble:
During 1995, the Company entered into an agreement to acquire
certain Placer Leases owned by Noble Metal Group Incorporated (a
British Columbia company) ("Noble") in exchange for 4 million common
shares of the Company, representing an initial 59.7% interest in the
Company. As Noble acquired control of the Company by this exchange,
it is considered a common control transaction and, accordingly, the
common shares have been accounted for at the carrying value of the
Placer Leases in the accounts of Noble at December 31, 1994 of
$1,775,000 (Noble, in association with limited partnerships, had
also expended an additional $550,000 on exploration of the Placer
Leases which was recovered from these limited partnerships and
accordingly, is not reflected in the aforementioned carrying value).
A British Columbia Mineral Tenure Act "Bill of Sale Absolute" held
by the Company relating to the Placer Leases has not yet been
registered with the appropriate authorities and as a result,
registration of the Placer Leases remains in the name of the
operator, Noble. The Company can, at any time and without any
restriction, apply to conclude registration in its name.
The Company and Noble also entered into an operating agreement
whereby Noble will remain the operator for the mining activities on
the Placer Leases for a term of ten years, with Noble having the
option of renewing the agreement for a further ten year term. The
Company agreed to pay Noble $1,000,000 in consideration for entering
into this operating agreement. In addition, the Company is obligated
to pay $1,000,000 in respect of 1995 exploration and development
expenditures and agreed to fund future annual operating expenditures
on the Placer Leases, including the lease of certain equipment and
facilities owned by Noble. These required payments have been accrued
in contracts payable (See below). However, as this is a common
control transaction, the amount of $1,602,661, being the excess of
these amounts over the estimated book value of the related assets in
the accounts of Noble was charged against additional paid-in capital
during 1995 (note 5). During 1996, this amount was reduced by
$45,500 to reflect the actual book value of the related assets in
the accounts of Noble at December 31, 1995. To December 31, 1995,
the Company had advanced $45,500 to Noble with respect to
exploration and development expenditures on the Placer Leases which
has been recorded as a reduction in the Company's contracts payable.
During 1996, the Company entered into an extension agreement with
Noble with respect to its contract payable to Noble, whereby the
Company issued 85,000 common shares to Noble at an agreed price of
$2.40 per share and agreed to pay Noble 300 ounces of gold from the
Company's share of gold produced from mining operations on its
placer mining leases, if any, to initially extend the due date for
the amount outstanding under the contract payable to June 30, 1996.
The value ascribed to the common shares issued has been included in
deferred interest and financing costs in mineral properties,
however, the value of the gold to be paid to Noble has not been
accrued in these financial statements due to the uncertainty of
ultimate payment.
The Company and Noble subsequently agreed to amend certain of the
terms of the operating agreement originally entered into whereby the
Company was obliged to pay $1,000,000 to Noble as consideration for
entering into the operating agreement. The amending agreement
cancelled the Company's obligation to pay $1,000,000 to Noble and
the Company agreed to pay Noble 3,421 ounces of gold from the
Company's share of gold produced from mining operations on its
<PAGE>
NAPTAU GOLD CORPORATION
Notes to Financial Statements
(expressed in United States Dollars)
March 31, 1997
- --------------------------------------------------------------------------------
placer mining leases, if any. Noble also granted the Company an
extension to June 30, 1997 of the revised balance due of $954,500 as
at December 31, 1995 in consideration for the Company agreeing to
pay interest on such balance at a rate of 10% per annum. The Company
reduced contracts payable and increased additional paid-in capital
by $1,000,000 each during 1996 as a result of this amending
agreement. The value of the gold to be paid to Noble has not been
accrued in these financial statements due to the uncertainty of
ultimate payment.
In addition to funding future annual operating expenditures on the
Placer Leases, the operating agreement provides that the proceeds
from production from the Placer Leases, if any, will be divided
between the Company and Noble as follows:
o for the first $1,000,000 of proceeds or 2,500 ounces of raw
gold (converted to a dollar amount), whichever is lesser, 10%
of such proceeds to Noble;
o for the next $1,000,000 of proceeds or 2,500 ounces of raw
gold (converted to a dollar amount), whichever is lesser,
17.5% of such proceeds to Noble; and
o for cumulative operating revenues in excess of $2,000,000 or
5,000 ounces of raw gold (converted to a dollar amount),
whichever is lesser, 25% of such proceeds to Noble.
(b) Placer Lease acquired from an affiliate of the Company:
During 1995, the Company acquired a Placer Lease owned by an
affiliate of the Company (the "Affiliate"), for $200,000 (accrued
but not yet paid) and 800,000 common shares of the Company that have
been assigned their par value of $0.001 per share.
During 1996 the Company entered into extension agreements with the
Affiliate with respect to its contract payable to the Affiliate,
whereby the Company issued 8,500 common shares at an agreed price of
$2.40 per share to initially extend the due date for the amount
outstanding under the contract payable to June 30, 1996 and
subsequently agreed to pay the Affiliate 100 ounces of gold produced
from mining operations on all of its placer mining leases, if any,
for extending the due date to October 12, 1997. The ascribed value
for the common shares issued has been included in deferred interest
and financing costs in mineral properties, however, the value of the
gold to be paid to the Affiliate has not been accrued in these
financial statements due to the uncertainty of ultimate payment.
4. Amounts payable to related parties:
Loans payable to related parties consist of amounts received from
directors and officers are non-interest bearing and have no specific terms
of repayment. During 1996, the directors and officers converted $96,000 of
these loans into 40,000 shares at a price of $2.40 per share.
At March 31, 1997, accounts payable and accrued liabilities include
accruals totaling $157,500 (1996 - $90,000, 1995 - $45,000) for salaries
to a director and officer pursuant to an employment agreement (note 6),
which are included in management salary expense for the period.
<PAGE>
NAPTAU GOLD CORPORATION
Notes to Financial Statements
(expressed in United States Dollars)
March 31, 1997
- --------------------------------------------------------------------------------
5. Capital stock:
(a) Authorized:
During 1995, the Company increased the authorized capital stock from
200 common shares with a par value of $0.001 per share to 25,000,000
shares consisting of 5,000,000 preferred shares and 20,000,000
common shares, each with a par value of $0.001 per share, of which
1,900 common shares were outstanding. The Company subsequently split
the 1,900 common shares outstanding on a 10,000 new for 1 old basis.
The number of shares issued as at December 31, 1994 have been
restated to reflect this share split as if it had occurred on
inception.
(b) Issued:
A continuity of the Company's issued and outstanding capital stock
is as follows:
<TABLE>
<CAPTION>
Common shares
--------------------------- Additional
Year Consideration Number Amount Paid-in capital Total
- ---- ------------------------------- ----------- ----------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1994 (note 5(a)) 1,900,000 $ 1,900 $ $ 1,900
1995 Mineral properties (note 3(a)) 4,000,000 4,000 1,771,000 1,775,000
1995 Reduction in additional
paid-in capital relating to
operating agreements with
Noble (note 3(a)) (1,602,661) (1,602,661)
1995 Mineral properties (note 3(b)) 800,000 800 800
----------- ----------- ------------ ------------
Balance, December 31, 1995 6,700,000 6,700 168,339 175,039
1996 Services under stock grant
program (note 5(c)(ii)) 100,000 100 - 100
1996 On conversion of loans payable
to related parties(note 4) 40,000 40 95,960 96,000
1996 As consideration for extending
the due dates of contracts
payable (note 3) 93,500 94 224,306 224,400
1996 Increase in additional paid-in
capital resulting from
amendment to operation
agreement with Noble (note 3(a)) 1,000,000 1,000,000
1996 Increase in additional paid-in
capital resulting from
amendment to operation
agreement with Noble (note 3(a)) 45,500 45,500
----------- ----------- ------------ ------------
Balance, December 31, 1996 and
March 31, 1997 6,933,500 $ 6,934 $ 1,534,105 $ 1,541,039
=========== =========== ============ ============
</TABLE>
<PAGE>
NAPTAU GOLD CORPORATION
Notes to Financial Statements
(expressed in United States Dollars)
March 31, 1997
- --------------------------------------------------------------------------------
5. Capital stock: (continued)
(c) Stock option plan and stock grant program:
In June, 1995 the Company adopted a non-qualified stock option plan
and a stock grant program with the following provisions:
(i) Stock option plan:
The Company has reserved 300,000 shares of its authorized
common stock for issuance to key employees or consultants of
the Company and affiliates. Under this plan, no employee may
receive more than 100,000 stock options. Options are
non-transferable and expire if not exercised within two years.
The options may not be exercised by the employee until after
the completion of two years of employment with the Company.
The options are issuable to officers, key employees and
consultants in such amounts and prices as determined by the
Board of Directors. As of March 31, 1997, no options were
granted pursuant to this plan.
(ii) Stock grant program:
The Company has reserved 300,000 shares of its authorized
common stock for issuance to key employees and directors.
Under this plan, no employee may receive more than 100,000
shares. The program requires the employee to remain in the
employ of the Company for at least one year following the
grant and to agree not to engage in any activity which would
be considered in competition with the Company's business. If
the employee violates any one of these conditions the
ownership of the shares issued under the program shall revert
back to the Company. The shares issued under the program are
non-transferable for two years. As of December 31, 1995, a
total of 100,000 shares had been granted to five directors
pursuant to this plan which were issued during in 1996. These
shares were recorded during the period granted at their par
value of $0.001 per share and were presented as shares
allotted but unissued as at December 31, 1995.
6. Commitments:
On June 30, 1995, the Company entered into a five-year employment
agreement with the President of the Company that provides for a salary of
$7,500 per month beginning July 1, 1995 (plus a cost of living adjustment
to be made on the first day of each calendar year). The agreement also
provides for additional incentive compensation equal to 1/2 of 1% of net
sales up to $5,000,000, 3/4 of 1% on the next $20,000,000 in net sales and
1 percent of net sales above $25,000,000.
<PAGE>
NAPTAU GOLD CORPORATION
Notes to Financial Statements
(expressed in United States Dollars)
March 31, 1997
- --------------------------------------------------------------------------------
7. Income taxes:
Under the asset and liability method of accounting for income taxes,
deferred income tax assets and liabilities are measured using enacted tax
rates for the future income tax consequences attributable to differences
between the financial statement carrying amount of existing assets and
liabilities and their respective tax bases.
For all periods presented, the Company has not recognized any deferred tax
assets or liabilities as the available benefits, primarily as a result of
loss carry forwards of approximately $222,000 arising in 1995 and l996,
are fully offset by a valuation allowance of the same amount.
8. Supplementary cash flow information:
The following non-cash financing and investing activities occurred during
the period:
<TABLE>
<CAPTION>
Inception to Three months Year end December 31,
March 31, to March 31, ------------------------------------
1997 1997 1996 1995 1994
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Expenditures on mineral properties
by way of increase in contracts
payable $ 340,330 $ 0 $ 340,330 $ 0 $ 0
Acquisition of mineral properties
for contracts payable 2,200,000 2,200,000
Reduction of contracts payable on
amendment of operating agreement
with Noble and resulting increase
in additional paid-in capital 1,000,000 1,000,000
Issue of common shares: For
mineral properties, net of
reduction of additional paid-in
capital relating to agreements
with Noble 443,039 269,900 173,139
On settlement of loans payable
to related parties 96,000 96,000
</TABLE>
The Company did not pay any interest or income taxes during the periods
ended December 31, 1996, 1995 or 1994.
<PAGE>
Item 2. Plan of Operation
The Company is engaged in the acquisition, exploration and development
of mineral properties, primarily gold properties located in the Cariboo mining
district. The Company's properties are comprised of five adjacent placer mining
leases and two adjacent staked placer claims (collectively, the "Properties")
located in the Cariboo Mining District, British Columbia, Canada.
It is estimated that the Company and prior owners of the properties have
expended an aggregate of approximately $4,000,000 in exploring and developing
the Properties. Because of the inconsistence of placer golds, none of the
Company's prospects or properties may be defined as containing proven or
probable reserves. Although prior exploration programs have produced in excess
of 300 ounces of new gold from the Properties, the Company has not generated
meaningful revenues and will not generate revenues until commencement of placer
mining operations which are subject to the Company's ability to raise additional
funds.
The Company intends to complete exploratory activities on the Properties
during the early part of the 1997 mining season, which generally runs from late
April to mid-November. Based upon results of exploratory activities to date, the
Company intends to move a production plant on site with a processing capacity of
approximately 400,000 cubic yards of material over the course of the mining
season. The Company anticipates that it will process between 150,000 to 200,000
cubic yards of material during the 1997 mining season. This estimate assumes
shakedown time will be required during start-up to production and the necessity
to process marginal pay gravels while working its way into the main channel
deposits.
The processing plant will cost approximately $250,000. Funds necessary
to acquire the plant and to commence operations will be loaned by Noble. It is
anticipated that operating costs for the 1997 mining season estimated at
approximately $1,500,000 will be offset, in part, with funds from inital
operating activities. Currently, the Company is obligated to Noble in the amount
of $1,294,831 pursuant to the Operating Agreement entered into in 1995.
The Company will need to raise cash, in the form of either debt of
equity, to conduct operations as planned. Currently, the Company anticipates
that cash sufficient to carry it through the 1997 mining season will be provided
by Noble. Nevertheless, the Company intends to seek to raise up to $3,000,000
through a private placement of either debt or equity. There is no assurance that
any monies will be made available to the Company or whether, if available, the
terms thereof will be acceptable to the Company.
At March 31, 1997, the Company had a working capital deficit of
$1,691,480,000. A substantial portion of which is owned to affiliated parties.
During the first three months of 1997 the Company's operating expenses
consisted primarily of amounts accrued in respect of officer salaries and
professional fees. The Company's continuing operations and ability to realize
the amounts shown on mineral properties on the balance sheet are dependent upon
the Company's ability to obtain the financing necessary to meet its obligations
and continue its exploration and development activities. To date, substantially
all of the financing for the Company's mining activities has been provided by
Noble. There is no assurance that Noble will continue to fund the Company or
that necessary financing will be made available by third parties or, if made
available, be on terms acceptable to the Company.
PART II. OTHER INFORMATION
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NAPTAU GOLD CORPORATION
/s/ Edward D. Renyk
-----------------------------------
Dated: April 23, 1998 By: Edward D. Renyk
President and
Principal Accounting Officer
