Newgold, Inc. - Form SB-2
As
filed
with the Securities and Exchange Commission on December 1, 2006
Registration
No. ______________
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
|
Washington,
D.C. 20549
|
|
FORM
SB-2
|
REGISTRATION
STATEMENT UNDER THE
SECURITIES
ACT OF 1933
|
|
NEWGOLD,
INC.
|
(Name
of Small Business Issuer in Its Charter)
|
|
|
Delaware
(State
or Other Jurisdiction of Incorporation or Organization)
|
1081
(Primary
Standard Industrial Classification Code Number)
|
16-1400479
(I.R.S.
Employer
Identification
No.)
|
|
|
400
Capitol Mall, Suite 900, Sacramento, CA 95814
(916)
449-3913
|
(Address
and Telephone Number of Principal Executive Offices)
|
|
400
Capitol Mall, Suite 900, Sacramento, CA 95814
(Address
of Principal Place of Business or Intended Principal Place of
Business)
|
|
A.
Scott Dockter
400
Capitol Mall, Suite 900, Sacramento, CA 95814
(916)
449-3913
|
(Name,
Address and Telephone Number of Agent For Service)
|
|
Copy
to:
|
|
Roger
D. Linn, Esq.
Weintraub
Genshlea Chediak Law Corporation
400
Capitol Mall, 11th
Floor, Sacramento, CA 95814
(916)
558-6000
|
Approximate
Date of Commencement of Proposed Sale to the Public: as soon as practicable
after the effective date of this Registration Statement.
If
any of
the securities being registered on this Form are to be offered on a delayed
or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, check
the following box. [X]
If
this
form is filed to register additional securities for an offering pursuant to
Rule
462(b) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If
this
form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. [ ]
If
this
form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. [ ]
If
delivery of the prospectus is expected to be made pursuant to Rule 434, please
check the following box. [ ]
CALCULATION
OF REGISTRATION FEE
Title
of Each Class of
Securities
to be Registered
|
Amount
to be
Registered
|
Proposed
Maximum Offering Price Per Share (1)
|
Proposed
Maximum
Aggregate
Offering Price (1)
|
Amount
of
Registration
Fee
|
|
|
|
|
|
Common
Stock
$.001
par value issuable upon conversion of convertible
debenture
|
20,618,750(2)
|
$0.33
|
$6,804,188
|
$728
|
Common
Stock
$.001
par value issuable upon exercise of warrants
|
4,246,843
|
$0.33
|
$1,401,458
|
$150
|
TOTAL
|
24,865,593
|
$0.33
|
$8,205,646
|
$878
|
(1) |
The
proposed maximum offering price per share is estimated solely for
purpose
of calculating the registration fee in accordance with Rule 457(c)
on the
basis of the average of the high and low sales price as reported
by the
Over-the-Counter Bulletin Board on November 22,
2006.
|
(2) |
Estimated
number of shares of common stock underlying Convertible Debentures
as
provided under the Securities Purchase Agreements dated September
26,
2006, as amended between the Registrant and Cornell Capital Partners,
LP
and October 10, 2006 between the Registrant and three individual
investors.
|
(3) |
If,
as a result of stock splits, stock dividends or similar transactions,
the
number of securities purported to be registered on this registration
statement increases, the provisions of Rule 416 under the Securities
Act
of 1933 shall apply, and this registration statement shall be deemed
to
cover any such additional shares of common
stock.
|
The
Registrant hereby amends this registration statement on such date or dates
as
may be necessary to delay its effective date until the registrant shall file
a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
TABLE
OF CONTENTS
PART
1 - INFORMATION REQUIRED IN PROSPECTUS
|
1
|
ABOUT
THIS PROSPECTUS
|
2
|
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
|
2
|
PROSPECTUS
SUMMARY
|
3
|
RISK
FACTORS
|
4
|
USE
OF PROCEEDS
|
12
|
MARKET
FOR NEWGOLD COMMON STOCK AND RELATED STOCKHOLDER MATTERS
|
12
|
BUSINESS
|
15
|
GOVERNMENT
CONTROLS AND REGULATIONS
|
23
|
DESCRIPTION
OF PROPERTY
|
26
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
|
27
|
LEGAL
PROCEEDINGS
|
39
|
MANAGEMENT
|
40
|
EXECUTIVE
COMPENSATION
|
42
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
|
46
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
|
47
|
DESCRIPTION
OF SECURITIES
|
48
|
SELLING
SECURITY HOLDERS
|
49
|
PLAN
OF DISTRIBUTION
|
50
|
DISCLOSURE
OF COMMISSION POSITION OF INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
|
52
|
LEGAL
MATTERS
|
52
|
EXPERTS
|
52
|
WHERE
YOU CAN FIND MORE INFORMATION
|
52
|
PART
II - INFORMATION NOT REQUIRED IN PROSPECTUS
|
II-1
|
SIGNATURES
|
II-9
|
PART
1 - INFORMATION REQUIRED IN PROSPECTUS
The
information in this prospectus is not complete and may be changed. The Selling
Security Holders may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This prospectus
is not an offer to sell securities, and we are not soliciting an offer to buy
these securities, in any state where the offer or sale is not
permitted.
SUBJECT
TO COMPLETION, DATED December 1, 2006.
PROSPECTUS
NEWGOLD,
INC.
24,865,593
Shares of Common Stock
This
prospectus relates to the disposition by certain selling stockholders identified
in this prospectus (the “Selling Stockholders”) of up to an aggregate of
24,865,593 shares of Common Stock, par value $0.001 per share (“Common Stock”)
which includes (i) up to 20,618,750 shares issuable upon the conversion of
convertible debentures, and (ii) 4,246,843 shares issuable upon the exercise
of
warrants . All of such shares of Common Stock are being offered for resale
by
the Selling Stockholders.
The
prices at which the Selling Stockholders may sell shares will be determined
by
the prevailing market price for the shares or in negotiated transactions. We
will not receive any of the proceeds from the sale of these shares by the
Selling Stockholders. However, we will receive proceeds from the exercise of
warrants if exercised by the Selling Stockholder.
We
will
bear all costs relating to the registration of the Common Stock, other than
any
Selling Stockholder’s legal or accounting costs or commissions.
Our
Common Stock is quoted on the Over-the-Counter (“OTC”) bulletin board under the
symbol “NGLD”. On October 31, 2006, the last sale price of our Common Stock on
the Over-the-Counter Bulletin Board was $0.34 per share.
Our
principal executive offices are located at 400 Capitol Mall, Suite 900,
Sacramento, CA 95814, and our telephone number is (916) 449-3913.
INVESTING
IN THE COMMON STOCK OFFERED HEREIN INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD
PURCHASE SHARES ONLY IF YOU CAN AFFORD A COMPLETE LOSS OF YOUR INVESTMENT.
YOU
SHOULD CONSIDER CAREFULLY THE “RISK FACTORS” CONTAINED IN THIS PROSPECTUS
BEGINNING ON PAGE 4.
NEITHER
THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION
HAS
APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS
IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The
date
of this prospectus is ______________, 2006.
TABLE
OF CONTENTS
PART
1 - INFORMATION REQUIRED IN PROSPECTUS
|
1
|
ABOUT
THIS PROSPECTUS
|
2
|
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
|
2
|
PROSPECTUS
SUMMARY
|
3
|
RISK
FACTORS
|
4
|
USE
OF PROCEEDS
|
12
|
MARKET
FOR NEWGOLD COMMON STOCK AND RELATED STOCKHOLDER MATTERS
|
12
|
BUSINESS
|
15
|
GOVERNMENT
CONTROLS AND REGULATIONS
|
23
|
DESCRIPTION
OF PROPERTY
|
26
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
|
27
|
LEGAL
PROCEEDINGS
|
39
|
MANAGEMENT
|
40
|
EXECUTIVE
COMPENSATION
|
42
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
|
46
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
|
47
|
DESCRIPTION
OF SECURITIES
|
48
|
SELLING
SECURITY HOLDERS
|
49
|
PLAN
OF DISTRIBUTION
|
50
|
DISCLOSURE
OF COMMISSION POSITION OF INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
|
52
|
LEGAL
MATTERS
|
52
|
EXPERTS
|
52
|
WHERE
YOU CAN FIND MORE INFORMATION
|
52
|
PART
II - INFORMATION NOT REQUIRED IN PROSPECTUS
|
II-1
|
SIGNATURES
|
II-9
|
ABOUT
THIS PROSPECTUS
We
have
not authorized anyone to provide information different from that contained
in
this prospectus. This prospectus is not an offer to sell nor is it seeking
an
offer to buy these securities in any jurisdiction where such offer or sale
is
not permitted. The information contained in this prospectus is accurate only
as
of the date of this prospectus, regardless of the time of delivery of this
prospectus or of any sale of the Common Stock. In this prospectus, references
to
“Newgold, Inc.,” the “Company,” “we,” “us” and “our” refer to Newgold, Inc., a
Delaware corporation.
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some
of
the statements in this prospectus and in any prospectus supplement we may file
constitute “forward-looking statements” within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
These statements relate to future events concerning our business and to our
future revenues, operating results, and financial condition. In some cases,
you
can identify forward-looking statements by terminology such as “may,” “will,”
“could,” “would,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,”
“estimate,” “forecast,” “predict,” “propose,” “potential,” or “continue” or the
negative of those terms or other comparable terminology.
Any
forward looking statements contained in this prospectus or any prospectus
supplement are only estimates or predictions of future events based on
information currently available to our management and management’s current
beliefs about the potential outcome of future events. Whether these future
events will occur as management anticipates, whether we will achieve our
business objectives, and whether our revenues, operating results, or financial
condition will improve in future periods are subject to numerous risks. The
section of this prospectus captioned “Risk Factors,” beginning on page 4,
provides a summary of the various risks that could cause our actual results
or
future financial condition to differ materially from forward-looking statements
made in this prospectus. The factors discussed in this section are not intended
to represent a complete list of all the factors that could adversely affect
our
business, revenues, operating results, or financial condition. Other factors
that we have not considered may also have an adverse effect on our business,
revenues, operating results, or financial condition, and the factors we have
identified could affect us to a greater extent than we currently anticipate.
Before making any investment in our securities, we encourage you to carefully
read the information contained under the caption “Risk Factors,” as well the
other information contained in this prospectus and any prospectus supplement
we
may file.
PROSPECTUS
SUMMARY
The
following summary is qualified in its entirety by the information contained
elsewhere in this prospectus. You should read the entire prospectus, including
“Risk Factors” and the financial statements before making an investment
decision.
Issuer:
|
|
Newgold,
Inc.
400
Capitol Mall, Suite 900
Sacramento,
CA 95814
(916)
449-3913
|
|
|
|
|
|
Description
of Business:
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|
Newgold’s
business will be to acquire, explore and, if warranted, develop
various
mining properties located in the state of Nevada with the objective
of
identifying, mining and processing gold and silver ore deposits.
Newgold
plans to carryout comprehensive exploration and development programs
on
its properties which currently consists of various mineral leases
associated with the Relief Canyon Mine located near Lovelock, Nevada.
A
description of our business begins on page 15 of this
prospectus.
On
January 25, 2006, Newgold entered into a joint venture with ASDi
LLC to
explore and, if warranted, develop two additional mining properties
known
as the Red Caps Project and the Crescent Valley Project located
in the
Battle Mountain - Eureka mineral belt in Nevada. A description
of this
joint venture begins on page 19 of this Prospectus.
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|
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|
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The
Offering:
|
|
This
offering relates to the resale of shares of our Common Stock that
may be
acquired from time to time upon conversion of an outstanding Secured
Convertible Debenture and upon exercise of outstanding warrants.
The
selling stockholders and the number of shares that may be sold
by each are
set forth on page 47 of this prospectus.
|
|
|
|
|
|
Shares:
|
|
24,865,593
shares of our Common Stock. A description of our Common Stock is
set forth
on page 46 of this prospectus.
|
|
|
|
|
|
Manner
of Sale:
|
|
The
shares of our Common Stock may be sold from time to time by the
selling
stockholders in open market or negotiated transactions at prices
determined from time to time by the selling stockholders. A description
of
the manner in which sales may be made is set forth in this prospectus
beginning on page 47 of this prospectus.
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|
|
|
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Use
of Proceeds:
|
|
We
will not receive any of the proceeds from the sale of our Common
Stock by
the Selling Stockholders. However, we will receive proceeds from
the
exercise of warrants.
|
|
|
|
|
|
Risk
Factors:
|
|
The
securities offered hereby involve a high degree of risk and will
result in
immediate and substantial dilution. A discussion of additional
risk
factors relating to our stock, our business and this offering begins
on
page 4 of this prospectus.
|
|
RISK
FACTORS
Please
carefully consider the specific factors set forth below as well as the other
information contained in this prospectus before purchasing shares of our Common
Stock. This prospectus contains forward-looking statements that involve risks
and uncertainties. Our actual results may differ significantly from the results
discussed in the forward-looking statements.
Risks
Related to Our Business
We
have a limited operating history and have not generated a profit since we
recommenced operations, consequently our long term viability cannot be
assured.
We
were
inactive from July 2001 to February 2003 at which time we resumed our mining
related activities and have incurred losses in each reporting period since
recommencing operations.
Our
prospects for financial success are difficult to forecast because we have a
relatively limited operating history and have not yet commenced exploration
at
two of our mining properties and have conducted limited exploration at the
Relief Canyon mining property. Our prospects for financial success must be
considered in light of the risks, expenses and difficulties frequently
encountered by exploration stage mining companies initiating exploration of
unproven properties. Our business could be subject to any or all of the
problems, expenses, delays and risks inherent in the establishment of a gold
and
silver exploration enterprise, including limited capital resources, possible
delays in mining explorations and development, failure to identify commercially
viable gold or silver deposits, possible cost overruns due to price and cost
increases in exploration and are processing, uncertain gold and silver market
prices, inability to accurately predict mining results and attract and retain
qualified employees. Therefore, there can be no assurance that our exploration
or mining will be successful, that we will be able to achieve or maintain
profitable operations or that we will not encounter unforeseen difficulties
that
may deplete our capital resources more rapidly than anticipated.
If
we do not obtain additional financing, our business will fail and our investors
could lose their investment.
We
had
cash in the amount of $160,736 and working capital deficit of $2,385,885 as
of
July 31, 2006. We currently do not generate revenues from our operations. Our
business plan calls for substantial investment and cost in connection with
the
acquisition and exploration of our mineral properties currently under lease
or
joint venture. Any direct acquisition of any of the claims under lease or joint
venture is subject to our ability to obtain the financing necessary for us
to
fund and carry out exploration programs on the subject properties. The
requirements are substantial. We do not currently have any arrangements for
financing and we can provide no assurance to investors that we will be able
to
find such financing if required. Obtaining additional financing would be subject
to a number of factors, including market prices for minerals, investor
acceptance of our properties, and investor sentiment. These factors may make
the
timing, amount, terms or conditions of additional financing unfavorable to
us.
The most likely source of future funds presently available to us is through
the
sale of additional equity capital and loans. Any sale of additional shares
will
result in dilution to existing stockholders
while
incurring additional debt will result in encumbrances on our property and future
cash flows.
Because
there is no assurance when we will generate revenues, we may deplete our cash
reserves and not have sufficient outside sources of capital to complete our
exploration or mining programs.
We
have
not earned any revenues as of the date of this prospectus and have never been
profitable. To date we have been involved primarily in financing activities
and
no exploration activities. We do not have an interest in any revenue generating
properties. Prior to our being able to generate revenues, we will incur
substantial operating and exploration expenditures without realizing any
revenues. We therefore expect to incur significant losses into the foreseeable
future. Our net loss for the fiscal year ended January 31, 2006 was $2,645,231
and our net loss for the six months ended July 31, 2006 was $1,608,539.
Due
to
our continuing losses from business operations, our independent auditor’s report
dated April 26, 2006, includes a “going concern” explanation relating to the
fact that our continued operations are dependent upon obtaining additional
working capital either through significantly increasing revenues or through
outside financing. We are currently operating with limited cash reserves and
no
revenues which could inhibit our ability to continue in business or achieve
our
business objectives.
Because
of the speculative nature of exploration of natural resource properties, there
is substantial risk that we will not find commercially viable gold or silver
ore
deposits which would reduce our realization of
revenues.
There
is
no assurance that any of the claims we explore or acquire will contain
commercially exploitable reserves of gold or silver minerals. Exploration for
natural resources is a speculative venture involving substantial risk. Hazards
such as unusual or unexpected geological formations and other conditions often
result in unsuccessful exploration efforts. Success in exploration is dependent
upon a number of factors including, but not limited to, quality of management,
quality and availability of geological expertise and availability of exploration
capital. Due to these and other factors, no assurance can be given that our
exploration programs will result in the discovery of new mineral reserves or
resources.
We
may not have access to all of the supplies and materials we need for
exploration, which could cause us to delay or suspend
operations.
Demand
for drilling equipment and limited industry suppliers may result in occasional
shortages of supplies, and certain equipment such as drilling rigs that we
need
to conduct exploration activities. While we have acquired a used mobile drilling
rig, we have not negotiated any long term contracts with any suppliers of
products, equipment or services. If we cannot find the trained employees and
equipment when required, we will have to suspend or curtail our exploration
plans until such services and equipment can be obtained.
We
have no known ore reserves and we cannot predict when and if we will find
commercial quantities of mineral ore deposits. The failure to identify and
extract commercially viable mineral ore deposits will affect our ability to
generate revenues.
We
have
no known ore reserves and there can be no assurance that any of the mineral
claims we are exploring contain commercial quantities of gold or silver. Even
if
we identify commercial reserves, we cannot predict whether we will be able
to
mine the reserves on a profitable basis, if at all.
We
have entered into one joint venture in which our joint venture partner is an
affiliate and we initially own a minority interest. Consequently, we may be
unable to influence or prevent actions pertaining to the joint venture property
which we disagree with.
We
have
acquired the exploration rights to two mining properties from ASDi LLC whose
sole manager and majority member is A. Scott Dockter, President and CEO of
Newgold. Consequently, Mr. Dockter has a conflict of interest in this joint
venture. Furthermore, ASDi LLC will initially hold a 77.78% interest in a newly
formed Nevada LLC through which the joint venture will be operated. While
Newgold will be the sole manager of the Nevada LLC, Mr. Dockter will be
able to control the joint venture activities through his position with the
Manager (Newgold) and through his ownership and control of the majority member
(ASDi LLC). While Mr. Dockter will endeavor to always act in the best interest
of Newgold and its stockholders, stockholders will have only limited ability
to
influence or object to actions taken by the Nevada LLC in exploring, developing
and capital spending on the joint venture properties.
In
addition, the lessors have given notices of termination of the leases covering
the joint venture property claiming that the contribution of the leases to
the
joint venture was a breach of the leases. While ASDi LLC disputes that a breach
has occurred and the lease terminations, the matter has yet to be resolved.
Should the lease terminations be held valid, we would lose the opportunity
to
explore and possibly develop this property in the future.
If
we are unable to hire and retain key personnel, we may not be able to implement
our business plan.
Newgold
is substantially dependent upon the continued services of A. Scott Dockter,
its
President. We have an employment agreement with Mr. Dockter, but do not have
either key person life insurance or disability insurance on Mr. Dockter. While
Mr. Dockter expects to spend the majority of his time assisting Newgold and
its
business, there can be no assurance that Mr. Dockter’s services will remain
available to Newgold. If Mr. Dockter’s services are not available to Newgold,
Newgold will be materially and adversely affected. However, in addition to
his
three year employment agreement, Mr. Dockter has been a significant
stockholder of Newgold since its inception and considers his investment of
time
and money in Newgold of significant personal value. Our success is also largely
dependent on our ability to hire highly qualified personnel. This is
particularly true in the highly technical business such as mineral exploration.
These individuals are in high demand and we may not be able to retain the
personnel we need. In addition, we may not be able to afford the high salaries
and fees demanded by qualified personnel, or may lose such employees after
they
are hired. Failure to hire key personnel when needed, or on acceptable terms,
to
carryout our exploration and mining programs would have a significant negative
effect on our business.
Because
the probability of many of the individual mining prospects explored will not
show commercially viable amounts of gold or silver ore deposits, substantial
amounts of funds spent on exploration will not result in identifiable
reserves.
The
probability of our exploration program identifying individual prospects having
commercially significant reserves cannot be predicted. It is likely that many
of
the properties explored will not contain any commercially significant reserves.
As such substantial funds will be spent on exploration which may identify only
a
few, if any, claims having commercial development potential.
Our
mining claims could be contested which would add significant costs and delays
to
our exploration programs.
Our
mining property rights consist of 146 mill site and unpatented mining claims
at
the Relief Canyon Mine; 96 unpatented mining claims at the Red Caps project;
and
39 unpatented mining claims at the Crescent Valley project. The validity of
unpatented mining claims is often uncertain and is always subject to contest.
Unpatented mining claims are generally considered subject to greater title
risk
than patented mining claims, or real property interests that are owned in fee
simple. If title to a particular property is successfully challenged, we may
not
be able to develop or retain our royalty interests on that property, which
could
reduce our future revenues.
Mining
operations are subject to extensive federal and state regulation which increases
the costs of compliance and possible liability for
non-compliance.
Mining
is
subject to extensive regulation by state and federal regulatory authorities.
State and federal statutes regulate environmental quality, safety, exploration
procedures, reclamation, employees’ health and safety, use of explosives, air
quality standards, pollution of stream and fresh water sources, noxious odors,
noise, dust, and other environmental protection controls as well as the rights
of adjoining property owners. We believe that we are currently operating in
compliance with all known safety and environmental standards and regulations
applicable to our Nevada properties or are in the process of remediating our
property to be compliant. However, there can be no assurance that our compliance
could be challenged or that future changes in federal or Nevada laws,
regulations or interpretations thereof will not have a material adverse affect
on our ability to resume and sustain mining operations.
Mining
operations are subject to various risks and hazards which could result in
significant costs or hinder ongoing operations.
The
business of gold mining is subject to certain types of risks, including
environmental hazards, industrial accidents, and theft. We expect to secure
insurance against certain property damage loss (including business interruption)
and comprehensive general liability insurance. While we will maintain insurance
consistent with industry practice, it is not possible to insure against all
risks associated with the mining business, or prudent to assume that insurance
will continue to be available at a reasonable cost. We have not obtained
environmental liability insurance because such coverage is not considered by
management to be cost effective. We currently carry no insurance on any of
our
properties due to the current status of our mine operations.
Compliance
with corporate governance and public disclosure regulations may result in
additional expenses.
Changing
laws, regulations and standards relating to corporate governance and public
disclosure, including the Sarbanes-Oxley Act of 2002, and new regulations issued
by the Securities and Exchange Commission, are creating uncertainty for
companies. In order to comply with these laws, we may need to invest substantial
resources to comply with evolving standards, and this investment would result
in
increased general and administrative expenses and a diversion of management
time
and attention from revenue-generating activities to compliance activities.
Our
officers and directors have limited liability and have indemnification rights
Our
Certificate of Incorporation and by-laws provide that we will indemnify our
officers and directors against losses sustained or liabilities incurred which
arise from any transaction in that officer’s or director’s respective managerial
capacity unless that officer or director violates a duty of loyalty, did not
act
in good faith, engaged in intentional misconduct or knowingly violated the
law,
approved an improper dividend, or derived an improper benefit from the
transaction.
Risks
Related to Our Stock
Our
Stock Price is Volatile.
The
market price of a share of our Common Stock has fluctuated significantly in
the
past and may continue to fluctuate significantly in the future. During the
first
nine months of fiscal year 2007, through October 31, 2006, the high and low
sales prices of a share of Newgold common stock were $0.53 and $0.14
respectively. During fiscal year 2006, through January 31, 2006, the high and
low sales prices of a share of Newgold Common Stock were $0.34 and $0.10,
respectively. During fiscal year 2005, the high and low sales prices of a share
of our Common Stock were $0.36 and $0.02, respectively. The market price of
a
share of our Common Stock may continue to fluctuate in response to a number
of
factors, including:
·
|
results
of our exploration program;
|
·
|
fluctuations
in our quarterly or annual operating results;
|
·
|
fluctuations
in the market price of gold and silver;
|
·
|
the
loss of services of one or more of our executive officers or other
key
employees;
|
·
|
adverse
effects to our operating results due to unforeseen difficulties affecting
our exploration program; and
|
·
|
general
economic and market conditions.
|
We
may need to raise funds through debt or equity financings in the future, which
would dilute the ownership of our existing stockholders and possibly subordinate
certain of their rights to the rights of new investors or
creditors.
We
may
choose to raise additional funds in debt or equity financings if they are
available to us on terms we believe reasonable to increase our working capital,
strengthen our financial position or to make acquisitions. Any sales of
additional equity or convertible debt securities would result in dilution of
the
equity interests of our existing stockholders, which could be substantial.
Additionally, if we issue shares of preferred stock or convertible debt to
raise
funds, the holders of those securities might be entitled to various preferential
rights over the holders of our Common Stock, including repayment of their
investment, and possibly additional amounts, before any payments could be made
to holders of our Common Stock in connection with an acquisition of the Company.
Such additional debt, if authorized, would create rights and preferences that
would be senior to, or otherwise adversely affect, the rights and the value
of
our Common Stock. Also, new investors may require that we and certain of our
stockholders enter into voting arrangements that give them additional voting
control or representation on our board of directors.
Inadequate
market liquidity may make it difficult to sell our stock.
There
is
currently a public market for our Common Stock, but we can give no assurance
that there will always be such a market. Only a limited number of shares of
our
Common Stock are actively traded in the public market and we cannot give
assurance that the market for our stock will develop sufficiently to create
significant market liquidity. An investor may find it difficult or impossible
to
sell shares of our Common Stock in the public market because of the limited
number of potential buyers at any time. In addition, the shares of our Common
Stock are not eligible as a margin security and lending institutions may not
accept our Common Stock as collateral for a loan.
The
application of the “penny stock regulation” could adversely affect the market
price of our Common Stock
Penny
stocks generally are equity securities with a price of less than $5.00 per
share
other than securities registered on certain national securities exchanges or
quoted on the NASDAQ Stock Market, provided that current price and volume
information with respect to transactions in such securities is provided by
the
exchange or system. Our securities may be subject to “penny stock rules” that
impose additional sales practice requirements on broker-dealers who sell such
securities to persons other than established customers and accredited investors
(generally those with assets in excess of $1,000,000 or annual income exceeding
$200,000 or $300,000 together with their spouse). For transactions covered
by
these rules, the broker-dealer must make a special suitability determination
for
the purchase of such securities and have received the purchaser’s written
consent to the transaction prior to the purchase. Consequently, the “penny stock
rules” may restrict the ability of broker-dealers to buy and sell our securities
and may have the effect of reducing the level of trading activity of our Common
Stock in the secondary market.
We
may engage in future acquisitions that dilute our stockholders and cause us
to
incur debt or assume contingent liabilities.
As
part
of our strategy, we expect to review opportunities to acquire or participate
in
the exploration of other mining properties that would complement our current
exploration or mining program, or that may otherwise offer growth opportunities.
In the event of any future acquisitions, we could:
·
|
issue
stock that would dilute current stockholders' percentage ownership;
|
These
acquisitions also involve numerous risks, including:
·
|
problems
combining additional exploration or mining opportunities with current
business operations:
|
·
|
holding
a minority interest in other joint ventures or
partnerships;
|
·
|
possible
financial commitments to fund
development;
|
·
|
risks
associated with exploring new mining property with negative results;
and
|
·
|
possible
shared control with other persons or
entities;
|
We
cannot
assure you that we will realize positive exploration results from the newly
acquired Red Caps and Crescent Valley projects or any additional mining rights
we may participate in or acquire in the future.
Risks
Relating to Our Current Financing Arrangement
We
have significant "equity overhang" which could adversely affect the market
price
of our Common Stock and impair our ability to raise additional capital through
the sale of equity securities.
As
of
October 31, 2006, Newgold had approximately 74,644,240 shares of Common Stock
outstanding and convertible debentures which are convertible into up to
21,704,543 shares of our Common Stock. Additionally, warrants to purchase a
total of 25,521,366 shares and options to purchase 1,850,000 shares of our
Common Stock were outstanding as of October 31, 2006. Furthermore, up to an
additional 10,000,000 shares of Common Stock could become issuable to the
convertible debenture holders if a default were to occur. The possibility that
substantial amounts of our outstanding Common Stock may be sold by investors
or
the perception that such sales could occur, often called "equity overhang,"
could adversely affect the market price of our Common Stock and could impair
our
ability to raise additional capital through the sale of equity securities in
the
future.
The
continuously adjustable conversion price feature of our secured convertible
debenture could require us to issue a substantially greater number of shares
upon conversion, which will cause immediate and substantial dilution to our
existing stockholders.
At
the
time of entering into the $3,000,000 Secured Convertible Debenture (“Convertible
Debenture”) with Cornell Capital Partners, the Fixed Conversion Price was
$0.4735 per share which would equal approximately 6,335,797 if the entire
principal were converted into Newgold Common Stock. This represents the minimum
number of shares issuable upon the conversion of the Convertible Debentures.
However, the Convertible Debenture provides for the conversion rate at any
given
time to be the lower
of the
Fixed Conversion Price or 95% of the lowest Volume Weighted Average Price of
Newgold’s Common Stock during the 30 trading days immediately preceding the
Conversion Date as quoted in Bloomberg, LP (“Market Conversion Price”).
Consequently, if the market price for Newgold Common Stock should remain below
$0.4735 per share, we would be required to issue substantially more shares
of
Common Stock upon the conversion of the Convertible Debenture. The issuance
of
significantly more shares at a lower conversion price would have a dilutive
effect to our current stockholders. See the Table on page 15.
If
an event of default occurs under the Securities Purchase Agreement dated
September 26, 2006, Secured Convertible Debenture or the Security Agreement,
the
investors could take possession of all our mining rights held in the Relief
Canyon property.
In
connection with the Securities Purchase Agreement dated September 26, 2006,
as
amended, we executed a Security Agreement in favor of Cornell Capital Partners
granting them a first priority security interest in all of our leasehold
interests and mining rights to the Relief Canyon property as well as any
equipment or improvements located on such property. The Security Agreement
states that if an event of default occurs under the Securities Purchase
Agreement, Secured Convertible Debenture or Security Agreement, Cornell Capital
Partners have the right to take possession of the collateral, to operate our
business using the collateral, and have the right to assign, sell, lease or
otherwise dispose of and deliver all or part of the collateral, at public or
private sale or otherwise to satisfy our obligations under these
agreements.
In
the event a default occurs under the Secured Convertible Debenture, we may
be
required to issue up to an additional 10,000,000 shares of Newgold Common Stock
as an additional penalty for such default. If such shares were to be issued,
we
would be required to file a subsequent registration statement covering those
additional shares and resulting in further dilution to existing stockholders
and
expense to Newgold.
As
an
additional inducement to Cornell Capital Partners to enter into the Securities
Purchase Agreement, the event of a default in the Convertible Debenture, we
would be required, in addition to other remedies provided, to issue up to an
additional 10,000,000 shares of our Common Stock to Cornell Capital Partners
as
an additional penalty for such default. (The exact number of shares dependent
on
the amount of principal debt remaining unpaid at the time a default was
declared). In addition to having a dilutive affect on our existing stockholders,
we
would
be
required to file a subsequent registration statement covering such additional
shares. The filing of an additional registration statement would result in
substantial costs to us.
Our
financial condition and the restrictive covenants contained in our outstanding
debt may limit our ability to borrow additional funds or to raise additional
equity as may be required to fund our future
operations.
The
terms
of our outstanding Secured Convertible Debenture with Cornell Capital Partners
may limit our ability, without Cornell Capital’s consent, to, among other
things:
·
|
enter
into certain transactions;
|
·
|
create
additional liens on our assets;
|
·
|
issue
preferred stock or Common Stock at certain discounts below market
prices;
or
|
·
|
merge
or consolidate with other entities.
|
These
restrictions could adversely affect our liquidity and our ability to attract
additional funding as required.
We
may not be able to pay our debt and other obligations and our assets may be
seized as a result.
We
do not
have sufficient funds to repay our outstanding debt at maturity and we may
not
generate the cash flow required to pay our liabilities as they become due.
Our
outstanding debt includes approximately $3,000,000 and accrued interest on
the
Convertible Debentures with Cornell Capital Partners due between September
26,
2009, and November 1, 2009. If Cornell Capital Partners determines not to
convert the Debentures into shares of Newgold Common Stock they may require
us
to repay all of the principal and interest outstanding under the Debentures
under certain circumstances. We may not have sufficient cash reserves to repay
the Debentures at such time, which would cause an event of default under the
Debentures and may force us to declare bankruptcy. If we raise additional funds
to repay the Debentures by selling equity securities, the relative equity
ownership of our existing investors could be diluted and new investors could
obtain terms more favorable than previous investors.
USE
OF PROCEEDS
The
Shares offered by this prospectus are being registered for the account of the
selling stockholders. We will not receive any proceeds from the sale of Common
Stock by the selling stockholders.
MARKET
FOR NEWGOLD COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Market
for Our Common Stock
In
July
1997, our Common Stock was approved for quotation on the National Association
of
Securities Dealers’ Over-the-Counter (“OTC”) Bulletin Board where it traded
under the symbol “NGLD” until June 2001. In June 2001, our Common Stock was
moved to the “Pink Sheets” published by the Pink Sheets LLC (previously National
Quotation Bureau, LLC). On June 7, 2005, our Common Stock was again approved
for
quotation on the OTC Bulletin Board with its symbol of “NGLD.” As of October 31,
2006, the closing bid price of our Common Stock was $0.34 per
share.
Price
Range of Our Common Stock
A
public
trading market having the characteristics of depth, liquidity and orderliness
depends upon the existence of market makers as well as the presence of willing
buyers and sellers, which are circumstances over which we do not have control.
The following table sets forth the high and low sales prices reported by the
OTC
Bulletin Board for our Common Stock in the periods indicated. The quotations
below reflect inter-dealer prices, without retail mark-up, markdown or
commission, and may not represent actual transactions.
NEWGOLD,
INC. COMMON STOCK
|
Low
|
High
|
Year Ending January 31,
2007
|
|
|
Third
Quarter (August-October)
|
$0.30
|
$0.47
|
Second
Quarter (May-July)
|
$0.19
|
$0.53
|
First
Quarter (February-April)
|
$0.14
|
$0.245
|
Year
Ending January 31, 2006
|
|
|
Fourth
Quarter (November-January)
|
$0.12
|
$0.225
|
Third
Quarter (August-October)
|
$0.10
|
$0.29
|
Second
Quarter (May-July)
|
$0.20
|
$0.34
|
First
Quarter (February-April)
|
$0.15
|
$0.33
|
Year
Ended January 31, 2005
|
|
|
First
Quarter (November-January)
|
$0.08
|
$0.33
|
Second
Quarter (August-October)
|
$0.02
|
$0.25
|
Third
Quarter (May-July)
|
$0.15
|
$0.26
|
Fourth
Quarter (February-April)
|
$0.16
|
$0.36
|
Stockholders
As
of
January 31, 2006, there were approximately 1,065 holders of record of our Common
Stock. This
amount does not include stockholders whose shares are held in street
name.
Dividend
Policy
We
have
never declared or paid any cash dividends on our Common Stock. We currently
anticipate that we will retain all future earnings for the expansion and
operation of our business and do not anticipate paying cash dividends in the
foreseeable future.
Securities
Authorized For Issuance Under Equity Compensation Plans
Subsequent
to Newgold’s fiscal year end, our Board of Directors adopted the 2006 Stock
Option Plan. The 2006 Plan will be submitted for approval by stockholders at
the
next annual stockholders meeting. Under the terms of the 2006 Plan, we may
grant
options to purchase up to 5,000,000 shares of our common stock which can include
Incentive Stock Options issued to employees and Nonstatutory Stock Options
issuable to employees or consultants providing services to Newgold on such
terms
as are determined by our board of directors. Our Board administers the 2006
Plan. Under the 2006 Plan, options vest not less than 20% per year and have
10-year terms (except with respect to 10% stockholders which have five-year
terms). If an option holder terminates his/her employment with us or becomes
disabled or dies, the option holder or his/her representative will have a
certain number of months to exercise any outstanding options. If we sell
substantially all of our assets or are a party to a merger or consolidation
in
which we are not the surviving corporation, then we have the right to accelerate
unvested options and will give the option holder written notice of the
exercisability and specify a time period in which the option may be exercised.
All options will terminate in their entirety to the extent not exercised on
or
prior to the date specified in the written notice unless an agreement governing
any change of control provides otherwise. As of October 31, 2006, options to
purchase 1,850,000 shares of common stock had been issued as follows: 500,000
options issued to A. Scott Dockter; 400,000 options issued to James Kluber;
500,000 options issued to Terrence Lynch; 250,000 options issued to Stephen
Akerfeldt; and 200,000 options issued to an employee for the purchase of Newgold
restricted common stock.
Shares
Issuable Upon Conversion of Convertible Debenture
The
$3,000,000 principal amount of Convertible Debentures held by Cornell Capital
are convertible into shares of our Common Stock at a per share conversion rate
at the time of conversion which will be the lower
of
$0.4735 per share or 95% of the lowest Volume Weighted Average Price of
Newgold’s common stock during the 30 trading days immediately preceding the
Conversion Date as quoted by Bloomberg, LP (the “Market Conversion Price”).
The
following table sets forth the number of shares which would be issued to Cornell
Capital upon the conversion of the $3,000,000 principal amount of the Debenture
at various assumed Market Conversion Prices:
Assumed
Market
Conversion
Price Per
Share
|
|
Total
Shares Issued to Cornell Capital Under the Debenture if Full
Conversion(1)
|
$
0.4735 or higher
|
|
6,335,797
|
$
0.40
|
|
7,500,000
|
$
0.30
|
|
10,000,000
|
$
0.20
|
|
15,000,000
|
$
0.10
|
|
30,000,000
|
(1)
Does
not
include conversion of accrued but unpaid interest on the Debenture
BUSINESS
General
Newgold
has embarked on a business strategy whereby it will invest in, explore and
if
warranted, conduct mining operations of its current mining properties and other
mineral producing properties. Newgold is a public company that in the past
has
been engaged in the exploration, acquisition and development of gold-bearing
properties in the continental United States. Currently, Newgold’s principal
assets include various mineral leases associated with the Relief Canyon Mine
located near Lovelock, Nevada along with various items of mining equipment
and
improvements located at that site. Newgold has also entered into a joint venture
to explore additional mining properties known as the Red Caps Project and
Crescent Valley Project, both of which are located in Lander County,
Nevada.
From
1995
until the beginning of 2000, Newgold had followed the above described business
activity focusing on the exploration and mining of gold and silver ore deposits.
At the beginning of 2000, Newgold’s business strategy became focused on
investing in Internet start-up companies. That strategy was not successful
and
by mid-2001 Newgold had abandoned such investments. From approximately July
2001
until February 2003 Newgold had been inactive. During the period of inactivity,
ASDi LLC, an entity controlled by A. Scott Dockter who is also the Chairman
and
CEO of Newgold, has made the necessary expenditures to maintain the current
status of the Relief Canyon mining claims. In February 2003, Newgold resumed
its
business of acquiring, exploring and if warranted developing its mining
properties.
Newgold's
mailing address is 400 Capitol Mall, Suite 900, Sacramento, CA 95814; and its
telephone number is (916) 449-3913.
The
Company
Newgold,
Inc., a Delaware corporation, has been engaged in the acquisition, development
and exploration of gold-bearing properties in the continental United States
since 1995. In fiscal 1999 Newgold placed its only remaining property, the
Relief Canyon Mine, located in Pershing County, Nevada, on a care and
maintenance status. During fiscal 2000, Newgold executed a contract to sell
the
Relief Canyon Mine to A. Scott Dockter, Chairman of Newgold; however the
sale
was
never completed and the asset remains the property of Newgold. It is now
Newgold’s intention to resume mining at the Relief Canyon Mine. See “Business”
below for further detail.
Newgold’s
independent accountants have included a “going concern” explanatory paragraph in
their report dated April 26, 2006 on Newgold’s financial statements for the
fiscal year ended January 31, 2006, indicating substantial doubt about Newgold’s
ability to continue as a going concern (See Note 2 of Financial Footnotes).
If
Newgold’s exploration program is not successful or if insufficient funds are
available to carry out Newgold’s development plans, then Newgold will not be
able to execute its business plan.
For
financial information regarding Newgold, see “Financial
Statements.”
Business
Newgold
is an “exploration stage” company engaged in the search and/or verification of
ore deposits (reserves) in its property. Our business will be to acquire,
explore and, if warranted, develop various mining properties located in the
state of Nevada. We plan to carryout comprehensive exploration and development
programs on our properties. While we currently plan to fund and conduct these
activities ourselves, we may in the future outsource some of these activities
through the use of various joint venture, royalty or partnership arrangements
pursuant to which other companies would agree to finance and carryout the
exploration and development programs on our mining properties. Consequently,
our
current plan will require the hiring of various mining employees to perform
exploration and mining activities for our various mining
properties.
Properties
Relief
Canyon Mine
The
Relief Canyon Mine is an open-pit, heap leaching operation located approximately
110 miles northeast of Reno, Nevada. Newgold held 50 unpatented mining claims
covering approximately 1000 acres until October 2004 at which time Newgold
completed re-staking the Relief Canyon mill site and lode claims. Newgold
currently holds a total of 146 claims including 120 mill site claims and 26
unpatented mining claims. The annual payments to maintain these claims are
approximately $15,600. The mine is readily accessible by improved roads. Water
for mining and processing operations is provided by two wells located on the
property in close proximity to the mine and processing facilities. Power is
provided by a local rural electric association and phone lines are present
at
the mine site. Relief Canyon is located in the Humboldt Range, a mining district
in Pershing County, Nevada.
Background
and History
On
January 10, 1995, Newgold purchased the Relief Canyon mine from J.D. Welsh
&
Associates for $500,000. The mine at that time consisted of 39 unpatented lode
mining claims covering approximately 780 acres and a lease for access to an
additional 800 acres contiguous to the 39 claims located on Newgold’s property.
Located on the property are, a building containing five carbon tanks and a
boiler for carbon strip solution, four detoxified leach pads, a preg pond for
gold bearing solution, a barren pond for solution from which gold had been
removed, water
rights,
and various permits. From acquisition through November 1997, Newgold refurbished
the processing facilities by the purchase and installation of all equipment
required to process the gold bearing leach solution when the mine was returned
to production in 1997. During 1997, Newgold staked an additional 402 claims.
However, subsequent to January 31, 1998, Newgold reduced the total claims to
50
(covering approximately 1,000 acres). In 1999 Newgold placed the mine in a
care
and maintenance status.
If
mining
operations are not resumed at the Relief Canyon mine, it is possible Newgold
may
be required to reclaim the mine. Reclamation consists of recontouring the four
heaps to a 3:1 slope, sale and removal of the building and its contents,
evaporation of all water in both ponds and burial of the building foundation
and
floor within the ponds' liners under the soil contained in the pond berms.
Finally, native vegetation must be re-established in all areas of
disturbance.
During
1996, Repadre Capital Corporation (“Repadre”) purchased for $500,000 a net
smelter return royalty (Repadre Royalty). Repadre was to receive a 1.5% royalty
from production at each of the Relief Canyon Mine and Mission Mines. In July
1997, an additional $300,000 was paid by Repadre for an additional 1% royalty
from the Relief Canyon Mine. In October, 1997, when the Mission Mine lease
was
terminated, Repadre exercised its option to transfer the Repadre Royalty solely
to the Relief Canyon Mine resulting in a total 4% royalty. The total amount
received of $800,000 has been recorded as deferred revenue in the accompanying
financial statements.
Plan
for Relief Canyon Production
Based
on
past exploration by us and work done by others, we believe the Relief Canyon
Mine presents the potential for gold bearing ore deposits which will hopefully
be validated through further exploration of additional mining
claims.
As
of
September 30, 2006 the Relief Canyon properties include 146 millsite claims
and
unpatented mining claims contained in about 1,000 acres.
Newgold’s
operating plan is to place the most promising mining targets into production
during the 2007 fiscal year, and use the net proceeds from these operations
to
fund expanded exploration and development of its entire property holdings.
By
this means, Newgold intends to progressively enlarge the scope and scale of
the
mining and processing operations, thereby increasing both Newgold’s annual
revenues and its net profits.
Newgold’s
goals for environmental protection and reclamation are for minimal environmental
disturbance during mining, and reclamation and/or restoration of the disturbed
area after mining ceases. The economics of Newgold’s operations will permit this
environmentally responsible plan of operations.
We
will
initially focus on exploring the North Relief Canyon mining property. We
recently posted a $243,204 reclamation bond with the Nevada Bureau of Mining
Regulations and Reclamation (“BMRR”) which allows us to apply for new permits
for mining and processing on the property. In addition to posting the
reclamation bond, the property must be brought into compliance with the Bureau
of Land Management (“BLM”) and Nevada Department of Environmental Protection
(“NDEP”) before any work can commence. We have completed approximately 75% of
all the environmental work required by NDEP in the Administrative
Order
of
Consent issued May 2005 (the AOC). The purpose of the AOC is to bring the Relief
Canyon mine up to current environmental compliance.
In
September 2006, we submitted our “Application for Water Pollution Control Permit
and Design Report” with the NDEP. This document provides the BLM and NDEP with
information regarding the characteristics of the site, proposed management
of
process fluids, monitoring and tentative plans for the eventual closure of
operations. In addition, this fulfills Nevada state requirements and illustrates
the plan to prevent undue degradation of public lands while the Relief Canyon
Mining Project is in operation.
On
September 25, 2006 we submitted our “Plan of Operations” for the Relief Canyon
Mining Project to the NDEP. The Plan contains extensive details on how the
mine
will operate once in production. The Plan includes an intention to reprocess
the
existing heaps containing approximately 8 million tons of ore and the
construction of a new heap leach pad. The Plan also includes facilities and
processes which are compliant with our “Green Initiative” to construct and
operate an environmentally conscience project.
On
October 19, 2006 we received notice from the NDEP that we would be allowed
to
attach our current Plan of Operations as an amendment to a previous Plan of
Operations submitted in 1996. This consolidation of Plans is expected to
significantly reduce the processing time and documentation necessary to secure
our production permit from the NDEP which will allow us to commence processing
ore at the Relief Canyon Mining Project.
To
assist
us in this effort, we have retained Dyer Engineering Consultants, Inc. as our
lead engineering firm for the permitting and compliance engineering work at
the
Relief Canyon, Crescent Valley and Red Caps exploration projects in
Nevada.
Once
we
have achieved environmental compliance, we can proceed with the permits to
commence full scale exploration and mining activities. The estimated time for
completing the permitting process is between six months to nine months. However,
upon posting the reclamation bond, we are able to carry on limited operations
pending full permitting for full mining operations.
Description
of Past Exploration and Existing Development Efforts
Over
400
reverse circulation holes have been drilled at the Relief Canyon project. Of
the
400 holes drilled, 106 had intercepts of gold bearing ore structures of 0.1
gold/ton content. Additionally there are numerous holes with several feet of
0.09 - 0.099 gold/ton content.
The
ore
zone of Relief Canyon is open ended on three sides. It is projected that
additional drilling will increase the size of possible reserves. Most of the
drilling to date was targeted for open pit mining, resulting in shallow holes
which did not test for possible deeper ore deposits. A significant number of
deep holes with 0.3 gold/ton and better were drilled on the North end of the
property. This area is targeted for initial underground mining development.
Additional exploration holes will be drilled when underground mining commences
throughout the various ore zones to determine future development. Newgold has
acquired one mobile drilling rig to conduct this drilling program and is seeking
to acquire or rent a second drilling rig.
Typically,
grade values of the Relief Canyon drill holes are reduced as a result of finds
being lost down the hole or vented out as dust. Actual mining and recovery
of
gold in the milling process will determine the loss if any which could be as
much as 30%.
Proposed
Underground Mining Efforts
We
will
pursue exploration drilling to further identify areas of possible gold-bearing
ore deposits. Results of this additional drilling will allow us to better plan
our eventual underground mining efforts. Further development of our underground
mining activity will also be dependent on the availability of adequate capital
to initiate and sustain this effort. Underground mining is very expensive
costing in the range of $600 to $1,000 per linear foot of underground
development.
Ore
Processing
In
October 2006, we commenced revitalization of our process solution ponds. The
existing Pregnant and Barren ponds, which manage the process solutions, are
being cleaned and relined with the latest technology of fluid containment.
In
keeping with our “Green Initiative,” this will include new leak detection
equipment and protocols. In addition, a new solution transmission channel will
be constructed between the site of the proposed heap leach pad and the existing
solution ponds. Upon completion, we plan to process approximately 8 million
metric tons of existing lower grade oxide ores by heap leaching. Heap leaching
consists of stacking crushed or run-of-mine ore in impermeable ponds, where
a
weak cyanide solution is applied to the top surface of the heaps to dissolve
the
gold.
Higher-grade
oxide ores are processed through mills, where the ore is ground into a fine
powder and mixed with water in slurry, which then passes through a cyanide
leaching circuit. In both cases, the gold-bearing solution is then collected
and
pumped to facilities to remove the gold by collection on carbon or by zinc
precipitation directly from leach solutions.
Some
gold-bearing sulfide ores may be processed through a flotation plant. In
flotation, ore is finely ground, turned into slurry, then placed in a tank
known
as a flotation cell. Chemicals are added to the slurry causing the
gold-containing sulfides to float in air bubbles to the top of the tank, where
they can be separated from waste particles that sink to the bottom. The sulfides
are removed from the cell and converted into a concentrate that can then be
processed in an autoclave or roaster to recover the gold. The ore is then
processed through an oxide mill.
Crescent
Valley and Red Caps Mine
Overview
Newgold
is the owner of a 22.22% joint venture interest and is the operator of the
Crescent Red Caps Joint Venture (“Crescent Red Caps”). The remaining 77.78%
interest is held by ASDi LLC, a California limited liability company owned
by A.
Scott Dockter, Chairman and CEO of Newgold. Additionally, Newgold, by making
expenditures over the next three years (January 2006 - January 2009) aggregating
$2,700,000, will end up with a 66.66% overall interest in the joint venture.
Newgold will then have the opportunity to purchase the remaining joint venture
interest
held by Mr. Dockter based on the results of the exploration work contemplated
by
these additional expenditures.
The
properties are subject to two leases held by individuals and trusts affiliated
with Sam Bida and Leon Belaustagi. The two leases include approximately 135
unpatented mining claims and cover approximately 2700 acres. All gold, silver
and other mineral production by Crescent Red Caps is subject to a 3% net smelter
return (“NSR”) royalty payable to the lessors except for barite which is subject
to a 10% royalty on ore produced from claims covered by the leases. On
October 13, 2006 and November 1, 2006 the lessors gave notices of termination
of
the Crescent Valley and Red Caps leases, respectively. The lessors are claiming
that the contribution of the leases by ASDi LLC to Crescent Red Caps was in
breach of the leases. While ASDi LLC disputes the lease terminations, the matter
has yet to be resolved. Newgold will delay any exploration program of the
properties until this lease dispute is resolved.
Property
The
Crescent Red Caps Properties are located in northeastern Nevada, approximately
60 miles southwest of Elko, Nevada in Lander County. The properties are accessed
via Nevada State Highway 306, which extends southward from U.S. Interstate
80,
both of which are paved roads.
The
Cortez area of interest comprises approximately 640,000 acres along the
Cortez/Battle Mountain trend. The two leases controlled by Crescent Red Caps
include approximately 135 unpatented mining claims and cover approximately
2700
acres located along the Cortez/Battle Mountain trend. Currently no exploration,
development or mining permits have been granted for the areas covered by the
leases.
Geology
and Mineralization
The
Crescent Red Caps properties are situated along the Cortez/Battle Mountain
trend
in north-central Nevada. The principal gold deposits and mining operations
are
located on the southwest and south sides of Crescent Valley, which was formed
by
basin and range extensional tectonism. Mineralization is sedimentary rock-hosted
and consists of micron-sized free gold particles that are disseminated
throughout the host rock, commonly in association with secondary silica, iron
oxides or pyrite.
Exploration
and Development
Approximately
23,000 feet of exploration drilling has been completed in two different drill
programs conducted in 1991 and 1996. Gold mineralization encountered both in
drilling and in surface sampling is tightly structurally controlled and is
confined to narrow shears and fractures developed mainly in the non-reactive
cherts and argillites. Future drill programs will test for more extensive bodies
of mineralization. Upward migration of gold mineralization from a stockwork
system or replacement mineralization of a more reactive host rock at depth
could
produce the type of anomalous gold concentrations found at the prior drill
sites.
The
exploration potential in the immediate project areas remains positive. The
focus
in fiscal 2007 will be to conduct 40,000 feet of additional exploration drilling
at the Red Caps property adjoining Barrick Gold’s Pipeline projects in the
Eureka-Cortez-Battle Mountain Trend, to better
delineate
the extent of mineralization at the Red Caps area. The deep hole drilling
program involves drilling exploratory holes to a depth of between 1000 ft.
and
3000 ft.
Industry
Overview
The
gold
mining and exploration industry has experienced several factors recently that
are favorable to Newgold as described below.
The
spot
market price of an ounce of gold has increased from a low of $253 in February
2001 to a high of $730 in May 2006. The price was $604 as of October 31, 2006.
This current price level has made it economically more feasible to produce
gold
as well as made gold a more attractive investment for many. Newgold is
projecting a cash cost per ounce of gold produced in a range of $170 to $210.
Accordingly, the gross margin per ounce of gold produced per the historical
spot
market price range above provides significant profit potential if we are
successful in identifying and mining gold at Relief Canyon mine.
By
industry standards, there are generally four types of mining companies. Newgold
is considered an “exploration stage” company. Typically, an exploration stage
mining company is focused on exploration to identify new, commercially viable
gold deposits. “Junior mining companies” typically have proven and probable
reserves of less then one million ounces of gold, generally produces less then
100,000 ounces of gold annually and / or are in the process of trying to raise
enough capital to fund the remainder of the steps required to move from a staked
claim to production. “Mid-tier” and large mining (“senior”) companies may have
several projects in production plus several million ounces of gold in
reserve.
Generally
gold reserves have been declining for a number of years for the following
reasons:
·
|
The
extended period of low gold prices from 1996 to 2001 made it economically
unfeasible to explore for new deposits for most mining
companies.
|
·
|
The
demand for and production of gold products have exceeded the amount
of new
reserves added over the last several consecutive
years.
|
Reversing
the decline in lower gold reserves is a long term process. Due to the extended
time frame it takes to explore, develop and bring new production on line, the
large mining companies are facing an extended period of lower gold reserves.
Accordingly, junior companies that are able to increase their gold reserves
more
quickly should directly benefit with an increased valuation.
Additional
factors causing higher gold prices over the past two years have come from a
weakened United States dollar. Reasons for the lower dollar compared to other
currencies include the historically low US interest rates, the increasing US
budget and trade deficits and the general worldwide political instability caused
by the war on terrorism.
Competition
Of
the
four types of mining companies, we believe junior companies represent the
largest group of gold companies in the public stock market. All four types
of
mining companies may have projects located in any of the gold producing
continents of the world and many have projects located near the Relief Canyon,
Red Caps and Crescent Valley mines in Nevada. Many of our competitors have
greater exploration, production, and capital resources than we do, and may
be
able to compete more effectively in any of these areas. Newgold’s inability to
secure capital to fund exploration and production capacity near-term, would
establish a competitive cost disadvantage in the marketplace which would have
a
material adverse effect on its operations and potential profitability.
We
also
compete in the hiring and retention of experienced employees. Consequently,
we
may not be able to hire qualified miners or operators in the numbers or at
the
times desired.
Mining
Property Rights
Relief
Canyon Property
Our
mining property rights are represented by 146 unpatented mill site and mining
lode claims which were re-staked in October 2004 and June 2006. Unpatented
mining claims are generally considered subject to greater title risks than
patented mining claims or real property interests that are owned in fee simple.
To remain valid, such unpatented claims are subject to annual maintenance fees.
As of July 31, 2006, we were current in the payment of such maintenance fees.
Red
Caps Property
Our
mining property rights are represented by 96 unpatented mining lode claims.
Unpatented mining claims are generally considered subject to greater title
risks
than patented mining claims or real property interests that are owned in fee
simple. To remain valid, such unpatented claims are subject to annual
maintenance fees. As of July 31, 2006, the joint venture was current in the
payment of such maintenance fees. ASDi
LLC
received notice on November 1, 2006 that the lease pertaining to this property
was being terminated due to a breach of the lease caused by ASDi LLC’s
contribution of the lease to the Crescent Red Caps joint venture of which we
are
a party. While ASDi LLC disputes the breach and the termination, the matter
has
not yet been resolved.
Crescent
Valley Property
Our
mining property rights are represented by 39 unpatented mining lode claims.
Unpatented mining claims are generally considered subject to greater title
risks
than patented mining claims or real property interests that are owned in fee
simple. To remain valid, such unpatented claims are subject to annual
maintenance fees. As of July 31, 2006, the joint venture was current in the
payment of such maintenance fees. ASDi
LLC
received notice on October 13, 2006 that the lease pertaining to this property
was being terminated due to a breach of the lease caused by ASDi LLC’s
contribution of the lease to the Crescent Red Caps joint venture of which we
are
a party. While ASDi LLC disputes the breach and the termination, the matter
has
not yet been resolved.
Dalton
Livestock and Winchell Ranch Mineral Lease
On
October 24, 2006, we entered into a Mineral Lease Agreement with the owners
of
approximately 35,000 acres of property located in Elko County, Nevada (the
“Antelope Peak” property). The Lease allows Newgold the exclusive right to
explore for and, if warranted, develop gold, silver and barite minerals on
the
leased property. The Lease includes exploration, mining and access rights,
deposit of waste material, mineral processing and water rights. The Lease has
an
initial term of five (5) years; however the term can be automatically extended
thereafter for so long as Newgold is engaged in mining operations.
Newgold
paid $20,000 upon the signing of the Lease and is required to pay rent of
$50,000 per year. In addition, should mining operations be commenced, the
Lessors would be entitled to a percentage of net smelter returns ranging
from 2%
to 5% depending on the price of gold. A finder’s fee of 2,000,000 common shares
and 2,000,000 warrants to purchase common shares at a price of $0.50 per
common
share were issued to an unrelated third party at the date of signing the
Lease.
The warrants have a term of three years. Pursuant
to EITF 00-19, "Accounting for Derivative Financial Instruments Indexed to,
and
Potentially Settled in, a Company's Own Stock",
we
have
performed an EITF 00-19 analysis of the warrants issued pursuant to the
agreement and determined that they will be treated as equity.
Upon
conclusion of all mineral exploration and mining operations, if any, Newgold
is
required to restore the property.
Employees
As
of
September 30, 2006, we had four full-time employees and one part-time employee.
We anticipate hiring additional employees during the current year to work on
the
mining sites in Nevada as our exploration program is initiated. While skilled
equipment and operations personnel are in demand, we believe we will be able
to
hire the necessary workers to implement our exploration program. Our employees
are not expected to be subject to a labor contract or collective bargaining
agreement. We consider our employee relations to be good.
Consulting
services, relating primarily to geologic and geophysical interpretations, and
relating to such metallurgical, engineering, and other technical matters as
may
be deemed useful in the operation of our exploration activities, will be
provided by independent contractors.
GOVERNMENT
CONTROLS AND REGULATIONS
Our
exploration, mining and processing operations are subject to various federal,
state and local laws and regulations governing prospecting, exploration,
development, production, labor standards, occupational health, mine safety,
control of toxic substances, and other matters involving environmental
protection and employment. United States environmental protection laws address
the maintenance of air and water quality standards, the preservation of
threatened and endangered species of wildlife and vegetation, the preservation
of certain archaeological sites, reclamation, and limitations on the generation,
transportation, storage and disposal of solid and hazardous wastes, among other
things. There can be no assurance that all the required permits and governmental
approvals necessary for any mining project with which we may be associated
can
be obtained on a timely basis, or maintained. Delays in obtaining or failure
to
obtain government permits and approvals may adversely impact our operations.
The
regulatory environment in which we operate could change in ways that would
substantially increase costs to achieve compliance. In addition, significant
changes in regulation could have a material adverse effect on our operations
or
financial position.
Outlined
below are some of the more significant aspects of governmental controls and
regulations which materially affect our interests in the Relief Canyon, Red
Caps
and Crescent Valley mines.
Regulation
of Mining Activity
Newgold’s
mining properties, including care and maintenance, exploration, development
and
production activities, is subject to environmental laws, policies and
regulations. These laws, policies and regulations regulate, among other matters,
emissions to the air, discharges to water, management of waste, management
of
hazardous substances, protection of natural resources, protection of endangered
species, protection of antiquities and reclamation of land. The mines are also
subject to numerous other federal, state and local laws and regulations. At
the
federal level, the mines are subject to inspection and regulation by the
Division of Mine Safety and Health Administration of the Department of Labor
("MSHA") under provisions of the Federal Mine Safety and Health Act of 1977.
The
Occupation and Safety Health Administration ("OSHA") also has jurisdiction
over
certain safety and health standards not covered by MSHA. Mining operations
and
all future exploration and development will require a variety of permits.
Although we believe the permits can be obtained in a timely fashion, permitting
procedures are complex, costly, time consuming and subject to potential
regulatory delay. We do not believe that existing permitting requirements or
other environmental protection laws and regulations would have a material
adverse effect on our ability to explore and eventually operate the mines.
However, we cannot be certain that future changes in laws and regulations would
not result in significant additional expenses, capital expenditures,
restrictions or delays associated with the operation of our properties. We
cannot predict whether we will be able to obtain new permits or whether material
changes in permit conditions will be imposed. Granting new permits or the
imposition of additional conditions could have a material adverse effect on
our
ability to explore and operate the mining properties in which we have an
interest.
On
June
9, 2005, we received permission from the NDEP to commence designated
environmental activities previously requested by us. In January 2006, we made
a
cash deposit of $243,204 to cover future reclamation costs as required by the
NDEP for the Relief Canyon Mine. As indicated previously, in September 2006
we
submitted our Application for Water Pollution Control Permit and Design Report
for the Relief Canyon project. We are now moving forward with the permitting
process that will allow us to perform additional exploration, development and
mining operations. The Red Caps and Crescent Valley properties currently are
not
part of any permitting process. During fiscal 2007 we plan on filing the
necessary permits to allow initial exploration activities to begin at both
properties.
On
October 19, 2006 we received notice from the NDEP that we would be allowed
to
attach our current Plan of Operations for Relief Canyon submitted on September
15, 2006 as an amendment to the previous Plan of Operations submitted in 1996.
This consolidation of Plans is expected to significantly reduce the processing
time and documentation necessary to secure our production permit from the NDEP
for the Relief Canyon project. We are also required to increase the reclamation
cost deposit from $243,204 to $613,500 which will be placed in a blocked account
with our bank in Sacramento, California.
Legislation
has been introduced in prior sessions of the U.S. Congress to make significant
revisions to the U.S. General Mining Law of 1872 that would affect our
unpatented mining claims on federal lands, including a royalty on gold
production. It cannot be predicted whether any of these proposals will become
law. Any levy of the type proposed would only apply to unpatented federal lands
and accordingly could adversely affect the profitability of portions of any
future gold production from the Relief Canyon mine.
The
State
of Nevada, where our mine properties are located, adopted the Mined Land
Reclamation Act (the “Nevada Act”) in 1989 which established design, operation,
monitoring and closure requirements for all mining facilities. The Nevada Act
has increased the cost of designing, operating, monitoring and closing mining
facilities and could affect the cost of operating, monitoring and closing
existing mine facilities. The State of Nevada also has adopted reclamation
regulations pursuant to which reclamation plans must be prepared and financial
assurances established for existing facilities. The financial assurances can
be
in the form of cash placed on deposit with the State or reclamation bonds
underwritten by insurance companies. The State of Nevada has requested financial
assurances from or a posting of a bond by us in the amount of $464,000. We
developed a specific reclamation plan of the Relief Canyon Mine and began
implementation of the plan in April 2005. This work was completed in the summer
of 2005. As a result of completing the work, the State of Nevada reduced the
financial assurance amount to $243,204 which we have deposited in a blocked
account with our bank in Sacramento, California. Our ability to commence full
mining operations at the Relief Canyon Mine is now subject to our obtaining
all
necessary mining permits.
Environmental
Regulations
Legislation
and implementation of regulations adopted or proposed by the United States
Environmental Protection Agency ("EPA"), the BLM and by comparable agencies
in
various states directly and indirectly affect the mining industry in the United
States. These laws and regulations address the environmental impact of mining
and mineral processing, including potential contamination of soil and water
from
tailings discharges and other wastes generated by mining companies. In
particular, legislation such as the Clean Water Act, the Clean Air Act, the
Federal Resource Conservation and Recovery Act ("RCRA"), the Environmental
Response, Compensation and Liability Act and the National Environmental Policy
Act require analysis and/or impose effluent standards, new source performance
standards, air quality standards and other design or operational requirements
for various components of mining and mineral processing, including gold-ore
mining and processing. Such statutes also may impose liability on us for
remediation of waste we have created.
Gold
mining and processing operations by an entity would generate large quantities
of
solid waste which is subject to regulation under the RCRA and similar state
laws. The majority of the waste which is produced by such operations is
"extraction" waste that EPA has determined not to regulate under RCRA's
"hazardous waste" program. Instead, the EPA is developing a solid waste
regulatory program specific to mining operations under the RCRA. Of particular
concern to the mining industry is a proposal by the EPA entitled "Recommendation
for a Regulatory Program for Mining Waste and Materials Under Subtitle D of
the
Resource Conservation and Recovery Act" (“Strawman II”) which, if implemented,
would create a system of comprehensive Federal regulation of the entire mine
site. Many of these requirements would be duplicates of
existing
state regulations. Strawman II as currently proposed would regulate not only
mine and mill wastes but also numerous production facilities and processes
which
could limit internal flexibility in operating a mine. To implement Strawman
II
the EPA must seek additional statutory authority, which is expected to be
requested in connection with Congress' reauthorization of RCRA.
We
also
are subject to regulations under (i) the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (“CERCLA" or "Superfund”) which regulates
and establishes liability for the release of hazardous substances and (ii)
the
Endangered Species Act (“ESA”) which identifies endangered species of plants and
animals and regulates activities to protect these species and their habitats.
Revisions to “CERCLA” and “ESA” are being considered by Congress; however, the
impact of these potential revisions on us is not clear at this
time.
The
Clean
Air Act, as amended, mandates the establishment of a Federal air permitting
program, identifies a list of hazardous air pollutants, including various metals
and cyanide, and establishes new enforcement authority. The EPA has published
final regulations establishing the minimum elements of state operating permit
programs. Newgold will be required to comply with these EPA standards to extent
adopted by the State of Nevada.
In
addition, we are required to mitigate long-term environmental impacts by
stabilizing, contouring, resloping, and revegetating various portions of a
site.
While a portion of the required work was performed concurrently with prior
operations, completion of the environmental mitigation occurs once removal
of
all facilities has been completed. These reclamation efforts are conducted
in
accordance with detailed plans which have been reviewed and approved by the
appropriate regulatory agencies. We have made the necessary cash deposits and
we
made provision to cover the estimated costs of such reclamation as required
by
permit.
We
believe that our care and maintenance operation at the Relief Canyon Mine,
as it
exists today, is in substantial compliance with federal and state regulations
and is consistent with our Green Initiative approach to environmental impact
and
that no further significant capital expenditures for environmental control
facilities will be required until production resumes at the site. We also
believe we are in substantial compliance with the same federal and state
regulations at the Red Caps and Crescent Valley properties as no exploration,
development or mining activities have yet commenced there.
DESCRIPTION
OF PROPERTY
Newgold’s
executive office is located at 400 Capitol Mall, Suite 900, Sacramento,
California 95814.
Newgold
owns 146 unpatented mill site and mining claims covering 1000 acres representing
the Relief Canyon mining property located in the Humboldt Range mining district
in Nevada. This property also contains various improvements and equipment.
See
“Business - Relief Canyon Mine.”
Newgold
has entered into a joint venture to explore and develop the following mining
properties:
Approximately
96 unpatented mining claims covering over 1900 acres representing the Red Caps
mining property located in the Battle Mountain-Eureka mineral belt in
Nevada.
Approximately
39 unpatented mining claims covering over 750 acres representing the Crescent
Valley mining property located in the Battle Mountain-Eureka mineral belt in
Nevada. See “Business-Crescent Valley and Red Caps Mine.”
Newgold
has entered into a Mineral Lease Agreement to explore and develop approximately
35,000 acres located in Elko County, Nevada.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
Caution
About Forward-Looking Statements
This
prospectus includes “forward-looking” statements about future financial results,
future business changes and other events that haven’t yet occurred. For example,
statements like we “expect,” “anticipate” or “believe” are forward-looking
statements. Investors should be aware that actual results may differ materially
from our expressed expectations because of risks and uncertainties about the
future. We do not undertake to update the information in this prospectus if
any
forward looking statement later turns out to be inaccurate. Details about risks
affecting various aspects of our business are discussed throughout this
prospectus and should be considered carefully.
Plan
of Operation for the Next Twelve Months
Certain
key factors that have affected our financial and operating results in the past
will affect our future financial and operating results. These include, but
are
not limited to the following:
·
|
Gold
prices, and to a lesser extent, silver prices;
|
·
|
Current
gold deposits under our control at the Relief Canyon Mine are estimated
by
us (based on past exploration by Newgold and work done by
others).
|
·
|
Our
proposed exploration of properties now include 146 millsite and unpatented
mining claims contained in about 1000 acres of the Relief Canyon
Property;
96 unpatented mining claims contained in about 1900 acres of the
Red Caps
Property; and 39 unpatented mining claims contained in about 750
acres of
the Crescent Valley Property.
|
·
|
Our
operating plan is to commence exploration work on all three mining
properties beginning with the Relief Canyon mining property by the
end of
2006. We expect this exploration program to continue through the
end of
2007. We expect to begin exploration work at the Red Caps and Crescent
Valley properties in 2007. During 2007, we plan to resume mining
operation
at the Relief Canyon mine and we anticipate realizing production
revenue
from the Relief Canyon mine thereafter. Through the sale of additional
securities and/or the use of joint ventures, royalty arrangements
and
partnerships, we intend to progressively enlarge the scope and scale
of
our exploration, mining and processing operations, thereby potentially
increasing our chances of locating
|
|
commercially viable ore deposits
which
could increase both our annual revenues and ultimately our net profits.
Our objective is to achieve annual growth rates in revenue and net
profits
for the foreseeable future.
|
·
|
We
expect to make capital expenditures in calendar years 2006, 2007
and 2008
of between $2.5 million and $4 million, including costs related to
the
exploration of the Relief Canyon mining property. We will have to
raise
additional outside capital to pay for these activities and the resumption
of mine operations and production at the Relief Canyon mine.
|
·
|
Additional
funding or the utilization of other venture partners will be required
to
fund mining operations, exploration, research, development and operating
expenses at the Red Caps, Crescent Valley and Antelope Peak properties.
In
the past we have been dependent on funding from the private placement
of
our securities as well as loans from related and third parties as
the sole
sources of capital to fund
operations.
|
Results
of Operation
Our
current business strategy is to invest in, explore and if warranted, conduct
mining operations of our current mining properties and other mineral producing
properties. Newgold is a public company that in the past has been engaged in
the
exploration, acquisition and development of gold-bearing properties in the
continental United States. Currently, our principal assets include various
mineral leases associated with the Relief Canyon Mine located near Lovelock,
Nevada along with various items of mining equipment and improvements located
at
that site. We have also entered into (i) a joint venture to explore additional
mining properties known as the Red Caps Project and Crescent Valley Project,
both of which are located in Lander County, Nevada and (ii) a mineral lease
to
explore approximately 35,000 acres of property located in Elko County,
Nevada.
Operating
Results for the Fiscal Years Ended January 31, 2006 and 2005
Although
we commenced efforts to re-establish our mining business early in fiscal year
2004, no mining operations have commenced and no revenues have been recognized
during the fiscal years 2004, 2005 and 2006, respectively. We hope to be able
to
commence generating revenues from mining operations during the 2007 calendar
year. We have granted a 4% net smelting return royalty to a third party related
to the Relief Canyon mining property which has been recorded as an $800,000
deferred option income.
During
the fiscal year ended January 31, 2006 we spent $132,166 on reclamation and
maintenance expenses related to the Relief Canyon mining property. Reclamation
and maintenance expenses expended during the year ended January 31, 2005 were
$28,433. These expenses relate primarily to maintenance and retention costs
required to maintain our mining claims. We incurred operating expenses of
$674,778 during the year ended January 31, 2006. Of this amount, $374,001
reflects officer compensation and related payroll taxes during the year and
$157,446 reflect fees for outside professional services. A large portion of
the
outside professional services reflects legal and accounting work pertaining
to
our annual and quarterly reporting on Form 10-KSB and preparation of an SB-2
registration statement occurring in fiscal
year
2006. During the year ended January 31, 2005 we incurred operating expenses
of
$353,972 of which $220,000 represents officer compensation and related payroll
taxes, $33,510 reflecting payroll tax penalties and $89,900 reflect fees for
outside professional services. It is anticipated that both mining costs and
operating expenses will increase significantly as we resume our exploration
program and mining operations.
We
incurred interest expense of $941,347 during the year ended January 31, 2006
which compares to interest expenses of $614,672 incurred during the year ended
January 31, 2005. The amount of loans outstanding during fiscal year 2006
decreased by $797,742 compared to fiscal year 2005, which was primarily the
result of the Chief Executive Officer’s conversion of a convertible note payable
of $1,402,742 into shares of common stock in July 2005 and the convertible
debenture of $600,000 funded in January 2006. The increase in additional
interest expense during fiscal year 2006 was primarily due to the increase
in
accretion of warrants issued in October 2004 as a debt discount.
In
conjunction with the Convertible Debenture issued January 27, 2006, we allocated
the proceeds received between convertible debt and the detachable warrants
based
upon the relative fair market values on the date the proceeds were received.
Subsequent to the initial recording, the change in the fair value of the
detachable warrants, determined under the Black-Scholes option pricing formula,
and the change in the fair value of the embedded derivative in the conversion
feature of the convertible debentures are recorded as adjustments to the
liabilities at January 31, 2006. This resulted in $37,418 of expense relating
to
the change in the fair value of the Company's stock reflected in the change
in
the fair value of the warrants and derivatives (noted above) and is included
as
other income (expense).
In
October 2004, we liquidated our investment in marketable securities through
open
market transactions. Net proceeds totaled approximately $34,100. This resulted
in a loss on sale of $281,063. There were no sales of marketable securities
for
the comparable period in fiscal year 2006.
Due
to
the fact that the joint venture with ASDi was a related party transaction with
no independent appraisal as to value, the joint venture was assigned a zero
value for accounting purposes and the $859,522 of securities paid by Newgold
was
recorded as a loss for accounting purposes.
Our
total
net loss for the year ended January 31, 2006 increased to $2,645,231 compared
to
a net loss of $ 1,278,140 incurred for the fiscal year ended January 31, 2005.
The larger net loss in fiscal year 2006 reflects the substantial increase in
operating expenses as we reactivate our mining activities, the increase in
interest expense, the loss recognized from the Crescent Red Caps JV and a
continued lack of revenues recognized during fiscal year 2006.
Operating
Results for the Fiscal Quarters Ended July 31, 2006 and 2005
Although
we commenced efforts to re-establish its mining business early in fiscal year
2004, no mining operations have commenced and no revenues have been recognized
during the quarters ended July 31, 2006 and 2005, respectively. Newgold hopes
to
be able to commence generating revenues from mining operations during the 2007
fiscal year. We have granted a 4% net
smelting
return royalty to a third party related to the Relief Canyon mining property
which has been recorded as an $800,000 deferred option income.
During
the quarter ended July 31, 2006 we spent $102,620 on reclamation and maintenance
expenses related to the Relief Canyon mining property. Reclamation and
maintenance expenses expended during the same quarter ended July 31, 2005 were
$110,700. These expenses relate primarily to maintenance and retention costs
required to maintain our mining claims. We incurred operating expenses of
$295,365 during the quarter ended July 31, 2006. Of this amount, $93,500
reflects officer compensation and related payroll taxes during the quarter,
$68,020 reflects outside directors compensation expense related to stock options
issued, and $63,997 reflect fees for outside professional services. A large
portion of the outside professional services reflects legal and accounting
work
pertaining to our annual and quarterly reporting on Form 10-KSB and Form 10-QSB
as well as our currently effective Form SB-2. During the quarter ended July
31,
2005 we incurred operating expenses of $181,692 of which $93,501 represented
officer compensation and related payroll taxes, $19,440 reflected web site
development expenses and $46,090 reflected fees for outside professional
services. It is anticipated that both mining costs and operating expenses will
increase significantly as we resume our exploration program and mining
operations.
We
incurred interest expense of $145,502 during the quarter ended July 31, 2006
which compares to interest expenses of $370,237 incurred during the same quarter
of 2005. The principal balance of loans outstanding during the second quarter
of
fiscal year 2007 increased by $380,154 compared to second quarter of fiscal
year
2006, which was primarily the result of the Convertible Debentures with a total
balance of $400,000 issued in January 2006, March 2006 and July 2006, net of
conversion of $600,000. The decrease in interest expense during the quarter
ended July 31, 2006 was primarily due to the decrease in accretion of warrants
issued in October 2004 as a debt discount.
In
conjunction with the Convertible Debenture issued in January 2006, March 2006
and July 2006, we allocated the proceeds received between convertible debt
and
the detachable warrants based upon the relative fair market values on the date
the proceeds were received. Subsequent to the initial recordings, the change
in
the fair value of the detachable warrants, determined under the Black-Scholes
option pricing formula, and the change in the fair value of the embedded
derivative in the conversion feature of the convertible debentures are recorded
as adjustments to the liabilities as initially recorded. This resulted in
$370,977 of expense relating to the change in the fair value of the Company's
stock reflected in the change in the fair value of the warrants and derivatives
(noted above) and is included as other income (expense).
Our
total
net loss for the quarter ended July 31, 2006 increased to $914,464 compared
to a
net loss of $662,629 incurred for the same quarter ended July 31, 2005. The
higher net loss in the second quarter of fiscal 2007 reflects the income effect
of the adjustment to fair value of derivatives and lower interest expense that
are partially offset by the increase in operating expenses as we reactivate
our
mining activities and a continued lack of revenues recognized during the
quarter.
Operating
Results for the Six Months Ended July 31, 2006 and 2005
During
the six months ended July 31, 2006 we spent $172,130 on reclamation and
maintenance expenses related to the Relief Canyon mining property. Reclamation
and maintenance expenses expended during the six months ended July 31, 2005
were
$139,700. These expenses relate primarily to maintenance and retention costs
required to maintain our mining claims. We incurred operating expenses of
$543,093 during the six months ended July 31, 2006. Of this amount, $187,000
reflects officer compensation and related payroll taxes during the six months
and $187,861 reflect fees for outside professional services. A large portion
of
the outside professional services reflects legal and accounting work pertaining
to our annual and quarterly reporting on Form 10-KSB and Form 10-QSB as well
as
our recently effective Form SB-2. During the six months ended July 31, 2005
we
incurred operating expenses of $384,571 of which $187,001 represented officer
compensation and related payroll taxes, $37,783 reflected promotional expenses
and $105,938 reflected fees for outside professional services. It is anticipated
that both mining costs and operating expenses will increase significantly as
we
resume our exploration program and mining operations.
We
incurred interest expense of $231,492 during the six months ended July 31,
2006
which compares to interest expenses of $727,061 incurred during the same six
months of 2005. The principal balance of loans outstanding during the first
six
months of fiscal year 2007 increased by $380,154 compared to the same six months
of fiscal year 2006, which was primarily the result of the Convertible
Debentures with a total balance of $400,000 issued in January 2006, March 2006
and July 2006, net of conversion of $600,000. The decrease in additional
interest expense during the six months ended July 31, 2006 was primarily due
to
the decrease in accretion of warrants issued in October 2004 as a debt
discount.
In
conjunction with the Convertible Debenture issued in January 2006, March 2006
and July 2006, we allocated the proceeds received between convertible debt
and
the detachable warrants based upon the relative fair market values on the date
the proceeds were received. Subsequent to the initial recordings, the change
in
the fair value of the detachable warrants, determined under the Black-Scholes
option pricing formula, and the change in the fair value of the embedded
derivative in the conversion feature of the convertible debentures are recorded
as adjustments to the liabilities as initially recorded. This resulted in
$661,824 of expense relating to the change in the fair value of the Company's
stock reflected in the change in the fair value of the warrants and derivatives
(noted above) and is included as other income (expense).
Our
total
net loss for the six months ended July 31, 2006 increased to $1,608,539 compared
to a net loss of $1,251,332 incurred for the same six months ended July 31,
2005. The higher net loss in the first six months of fiscal 2007 reflects the
income effect of the adjustment to fair value of derivatives and lower interest
expense that are partially offset by the increase in operating expenses as
we
reactivate our mining activities and a continued lack of revenues recognized
during the first six (6) months of fiscal 2007.
Liquidity
and Capital Resources
We
have
incurred significant operating losses since inception and during the six months
ended July 31, 2006 resulted in an accumulated deficit of $20,639,072 as of
July
31, 2006. At July 31, 2006, we had cash and other current assets of $187,450
compared to $701,546 at January 31, 2006 and a net working capital deficit
of
$2,385,885. Since the resumption of our business in
February
2003, we have been dependent on borrowed or invested funds in order to finance
our ongoing operations. As of July 31, 2006, we had outstanding debentures
and
notes payable in the gross principal amount of $832,788 (net balance of
$1,605,647 after $(422,697) of note payable discount and deferred financing
costs and $1,195,556 of derivative liabilities) which reflects an increase
of
$436,088 compared to notes payable in the gross principal amount of $452,634,
(net balance of $257,672 after $194,962 of note payable discount) as of July
31,
2005.
In
January 2006 we made a cash deposit of $243,204 in a blocked account to cover
future reclamation costs as required by the Nevada Department of Environmental
Protection for the Relief Canyon Mine.
As
of
July 31, 2006, we were in default on a promissory note due to an unrelated
party
in the principal amount $176,500.
On
January 25, 2006, Newgold entered into a joint venture with ASDi, LLC to develop
two Nevada mining properties known as the Red Caps Project (“Red Caps”) and
Crescent Valley Project (“Crescent Valley”). Pursuant to the joint venture,
Newgold will initially own a 22.22% interest in the LLC and ASDi will hold
a
77.78% interest. By expending up to $1,350,000 on each project over the next
three years, Newgold can increase its interest in the LLC to 66.66%. Thereafter,
Newgold has the right to purchase the remaining interest in the LLC held by
ASDi
at a price to be determined by the results of the exploration work conducted.
On
January 27, 2006, we entered into a Securities Purchase Agreement and
Convertible Debentures in the principal amount of $1,000,000 and bearing
interest at 8% per annum. The Debentures were funded $600,000 on January 27,
2006, $200,000 on March 2, 2006 upon the filing of a resale registration
statement with the SEC and a final $200,000 on July 18, 2006. On June 29, 2006
$500,000 of the Debenture dated January 27, 2006 was converted into 1,904,037
shares of Newgold restricted Common Stock and $100,000 of the Debenture dated
March 9, 2006 was converted into 495,050 shares of Newgold restricted Common
Stock. On September 15, 2006, the remaining $400,000 of principal Debentures
were converted into 1,523,229 shares of Newgold restricted Common Stock and
accrued interest of $30,948 was converted into 117,852 shares of Newgold
restricted Common Stock.
On
September 26, 2006, we entered into a Securities Purchase Agreement and
Convertible Debentures, as amended on November 1, 2006, in the aggregate
principal amount of $3,000,000 and bearing interest at 8% per annum. The
Debentures were issued $1,000,000 on September 26, 2006, $1,000,000 Debenture
upon the filing of this resale registration statement with the SEC and a final
$1,000,000 Debenture to be issued when the registration statement is declared
effective by the SEC.
By
attempting to resume mining operations, we will require approximately $10
million to $15 million in additional working capital above the amounts realized
from the convertible debentures to bring the Relief Canyon Mine into full
production. It is our intention to pursue several possible funding opportunities
including the sale of additional securities, entering into joint venture
arrangements, or incurring additional debt.
Due
to
our continuing losses from business operations, the independent auditor’s report
dated April 26, 2006, includes a “going concern” explanation relating to the
fact that Newgold’s continuation is dependent upon obtaining additional working
capital either through significantly increasing revenues or through outside
financing. As of September 30, 2006, Newgold’s principal commitments included
its obligation to pay ongoing maintenance fees on its 146 unpatented mining
claims, the funding arrangement pursuant to the joint venture with ASDi, LLC
and
the annual minimum rent due on the Winchell Ranch mineral lease.
Our
management believes that it will need to raise additional capital to continue
to
develop, promote and conduct our mining operations. Due to our limited cash
flow, operating losses and limited assets, it is unlikely that we could obtain
financing through commercial or banking sources. Consequently, we are dependent
on continuous cash infusions from our major stockholders or other outside
sources in order to fund our current operations. Prior to the transaction with
Cornell Capital Partners, Newgold’s president had paid a substantial portion of
Newgold’s expenses since restarting its business in February 2003. Although we
believe that our creditors and investors will continue to fund Newgold’s
expenses based upon their significant debt or equity interest in Newgold, there
is no assurance that such investors will continue to pay our expenses. If
adequate funds are not otherwise available, through public or private financing
as well as borrowing from other sources, Newgold would not be able to establish
or sustain its mining operations.
Recent
Financing Transaction
On
September 26, 2006, we entered into a Securities Purchase Agreement (the
“Purchase Agreement”) and other agreements, which were amended on November 1,
2006, in connection with the private placement of convertible debentures, in
the
principal amount of $3,000,000 and bearing interest at 8% per annum (the
“Debentures”). The Debentures were funded $1,000,000 on September 26, 2006,
$1,000,000 upon the filing of this resale registration statement with the SEC
and $1,000,000 upon this registration statement being declared effective by
the
SEC. Each Debenture will have a three (3) year term from the date of issue
unless they are converted into shares of Newgold Common Stock or are repaid
prior to the expiration dates. The conversion rate is adjustable and at any
conversion date, will be the lower of $0.4735 per share or 95% of the Market
Conversion Price. Consequently, the number of shares of Newgold Common Stock
into which the Debentures may be converted will never be less than 6,335,797
shares but could be substantially more if the average market price of Newgold’s
Common Stock falls below $0.4735.
In
conjunction with the Purchase Agreement, we entered into an Investor
Registration Rights Agreement (the “Registration Rights Agreement”). The
Registration Rights Agreement requires us to register at least 18,750,000 shares
of our Common Stock to cover the conversion of the Debentures (assuming
conversion prices substantially below $0.4735) and 3,500,000 shares of our
Common Stock issuable upon conversion of warrants (the “Warrants”) granted to
the Debenture holder. We are required to keep this Registration Statement
effective until the Debentures have been fully converted, repaid, or becomes
due
and the Warrants have been fully exercised or expire. Both the Debentures and
the Warrants are currently convertible or exercisable, respectively.
In
conjunction with the Purchase Agreement, we entered into a Security Agreement
(the “Security Agreement”). The Security Agreement creates a secured interest in
favor of the Debenture holder in our mining interest and assets in the Relief
Canyon Mine property. This security interest was created by recordation of
an
Amended Memorandum of Security Agreement filed in Pershing County, Nevada on
November 15, 2006. Consequently, should a default occur under the Debenture,
the
Debenture holder could take over or sell all of our interests, business and
assets associated with the Relief Canyon Mine.
In
conjunction with the Purchase Agreement, we granted 3,500,000 warrants to
purchase shares of Newgold Common Stock, 2,000,000 exercisable at $0.45 per
share and 1,500,000 exercisable at $0.60 per share. The Warrants have a term
of
four years. The exercise price may be reduced if shares of Newgold’s Common
Stock are sold at a price below the Warrant exercise price.
Lastly,
in conjunction with the Purchase Agreement, we entered into a Pledge and Escrow
Agreement whereby up to an additional 10,000,000 shares of Newgold Common Stock
could be issued to the Debenture holder in the event of a default relating
to
the Debenture. The precise amount of shares that would be required to be issued
to the Debenture holder would depend on the amount of principal and interest
outstanding under the Debentures at the time a default was
declared.
Pursuant
to the Purchase Agreement, for so long as at least $200,000 of principal remains
outstanding under the Debenture, the Debenture holder will have approval rights
over any major transaction (i.e., merger, stock splits, sale of assets) or
any
issuance of common or preferred stock by Newgold with certain exceptions. The
Debenture holder will also have a right for a period of 18 months to participate
in any additional capital sought to be raised by Newgold.
On
October 10, 2006 we received $650,000 upon the issuance of Convertible
Debentures with certain investors which bear interest at 8% per annum and are
convertible into shares of Newgold common stock at the Fixed Conversion Price
of
$0.4735 per share which would equal approximately 1,372,756 if the entire
principal were converted into Newgold common stock. In
conjunction with the Convertible Debentures, we granted 746,843 warrants to
purchase shares of Newgold Common Stock, 426,767 exercisable at $0.45 per share
and 320,076 exercisable at $0.60 per share. The Warrants have a term of four
years.
Off-Balance
Sheet Arrangements
During
the six month period ended July 31, 2006, Newgold did not engage in any
off-balance sheet arrangements as defined in Item 303(c) of the SEC’s Regulation
S-B.
Critical
Accounting Policies
Our
discussion and analysis of our financial condition and results of operation
are
based upon our financial statements, which have been prepared in accordance
with
generally accepted accounting principles in the United States. The preparation
of financial statements requires management to make estimates and disclosures
on
the date of the financial statements. On an on-going basis, we evaluate our
estimates, including, but not limited to, those related to revenue recognition.
We use authoritative pronouncements, historical experience and other assumptions
as the basis for making judgments. Actual results could differ from those
estimates. We believe that the following critical accounting policies affect
our
more significant judgments and estimates in the preparation of our financial
statements.
Exploration
Stage Company
Effective
January 1, 1995 (date of inception), Newgold is considered an exploration stage
company as defined in SFAS No. 7. Newgold’s exploration stage activities consist
of the development of several mining properties located in Nevada. Sources
of
financing for these exploration stage activities have been primarily debt and
equity financing. Newgold has, at the present time, not paid any dividends
and
any dividends that may be paid in the future will depend upon the financial
requirements of Newgold and other relevant factors.
Valuation
of long-lived assets
Long-lived
assets, consisting primarily of property and equipment, patents and trademarks,
and goodwill, comprise a significant portion of our total assets. Long-lived
assets are reviewed for impairment whenever events or changes in circumstances
indicate that their carrying values may not be recoverable. Recoverability
of
assets is measured by a comparison of the carrying value of an asset to the
future net cash flows expected to be generated by those assets. The cash flow
projections are based on historical experience, management’s view of growth
rates within the industry, and the anticipated future economic environment.
Factors
we consider important that could trigger a review for impairment include the
following:
|
(a) |
significant
underperformance relative to expected historical or projected future
operating results,
|
|
(b) |
significant
changes in the manner of our use of the acquired assets or the strategy
of
our overall business, and
|
|
(c) |
significant
negative industry or economic
trends.
|
When
we
determine that the carrying value of long-lived assets and related goodwill
and
enterprise-level goodwill may not be recoverable based upon the existence of
one
or more of the above indicators of impairment, we measure any impairment based
on a projected discounted cash flow method using a discount rate determined
by
our management to be commensurate with the risk inherent in our current business
model.
Deferred
Reclamation Costs
In
August
2001, the Financial Accounting Standards Board (“FASB”) issued Statement of
Financial Accounting Standards (“SFAS”) No. 143, “Accounting for Asset
Retirement Obligations,” which established a uniform methodology for accounting
for estimated reclamation and abandonment costs. The statement was adopted
February 1, 2003. The reclamation costs will be allocated to expense over the
life of the related assets and will be adjusted for changes resulting from
the
passage of time and revisions to either the timing or amount of the original
present value estimate.
Prior
to
adoption of SFAS No. 143, estimated future reclamation costs were based
principally on legal and regulatory requirements. Such costs related to active
mines were accrued and charged over the expected operating lives of the mines
using the units of production method based on
proven
and probable reserves. Future remediation costs for inactive mines were accrued
based on management’s best estimate at the end of each period of the
undiscounted costs expected to be incurred at a site. Such cost estimates
included, where applicable, ongoing care, maintenance and monitoring costs.
Changes in estimates at inactive mines were reflected in earnings in the period
an estimate was revised.
Exploration
Costs
Exploration
costs are expensed as incurred. All costs related to property acquisitions
are
capitalized.
Mine
Development Costs
Mine
development costs consist of all costs associated with bringing mines into
production, to develop new ore bodies and to develop mine areas substantially
in
advance of current production. The decision to develop a mine is based on
assessment of the commercial viability of the property and the availability
of
financing. Once the decision to proceed to development is made, development
and
other expenditures relating to the project will be deferred and carried at
cost
with the intention that these will be depleted by charges against earnings
from
future mining operations. No depreciation will be charged against the property
until commercial production commences. After a mine has been brought into
commercial production, any additional work on that property will be expensed
as
incurred, except for large development programs, which will be deferred and
depleted.
Reclamation
Costs
Reclamation
costs and related accrued liabilities, which are based on our interpretation
of
current environmental and regulatory requirements, are accrued and expensed,
upon determination.
Based
on
current environmental regulations and known reclamation requirements, management
has included its best estimates of these obligations in its reclamation
accruals. However, it is reasonably possible that our best estimates of our
ultimate reclamation liabilities could change as a result of changes in
regulations or cost estimates.
Valuation
of Derivative Instruments
FAS
No. 133 "Accounting for Derivative Instruments and Hedging
Activities"
requires
bifurcation of embedded derivative instruments and measurement of their fair
value for accounting purposes. In determining the appropriate fair value, the
Company uses the Black Scholes model as a valuation technique. Derivative
liabilities are adjusted to reflect fair value at each period end, with any
increase or decrease in the fair value being recorded in results of operations
as Adjustments to Fair Value of Derivatives. In addition, the fair values of
freestanding derivative instruments such as warrants are valued using Black
Scholes models.
Stock-Based
Compensation
We
currently account for the issuance of stock options to employees using the
fair
market value method according to SFAS No. 123R, Share-Based
Payment.
Recent
Accounting Pronouncements
In
February 2006, the FASB issued SFAS No. 155, “Accounting for Certain Hybrid
Financial Instruments”, which amends SFAS No. 133, “Accounting for Derivatives
Instruments and Hedging Activities” and SFAS No. 140, “Accounting for Transfers
and Servicing of Financial Assets and Extinguishment of Liabilities”. SFAS No.
155 amends SFAS No. 133 to narrow the scope exception for interest-only and
principal-only strips on debt instruments to include only such strips
representing rights to receive a specified portion of the contractual interest
or principle cash flows. SFAS No. 155 also amends SFAS No. 140 to allow
qualifying special-purpose entities to hold a passive derivative financial
instrument pertaining to beneficial interests that itself is a derivative
instrument. Newgold is currently evaluating the impact of this new Standard
but
believes that it will not have a material impact on Newgold’s financial
position, results of operations, or cash flows.
In
March
2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial
Assets” which provides an approach to simplify efforts to obtain hedge-like
(offset) accounting. This Statement amends FASB Statement No. 140, “Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities”, with respect to the accounting for separately recognized servicing
assets and servicing liabilities. The Statement (1) requires an entity to
recognize a servicing asset or servicing liability each time it undertakes
an
obligation to service a financial asset by entering into a servicing contract
in
certain situations; (2) requires that a separately recognized servicing asset
or
servicing liability be initially measured at fair value, if practicable; (3)
permits an entity to choose either the amortization method or the fair value
method for subsequent measurement for each class of separately recognized
servicing assets or servicing liabilities; (4) permits at initial adoption
a
one-time reclassification of available-for-sale securities to trading securities
by an entity with recognized servicing rights, provided the securities
reclassified offset the entity’s exposure to changes in the fair value of the
servicing assets or liabilities; and (5) requires separate presentation of
servicing assets and servicing liabilities subsequently measured at fair value
in the balance sheet and additional disclosures for all separately recognized
servicing assets and servicing liabilities. SFAS No. 156 is effective for all
separately recognized servicing assets and liabilities as of the beginning
of an
entity’s fiscal year that begins after September 15, 2006, with earlier adoption
permitted in certain circumstances. The Statement also describes the manner
in
which it should be initially
applied.
Newgold does not believe that SFAS No. 156 will have a material impact on its
financial position, results of operations or cash flows.
In
July 2006, the FASB released FASB Interpretation No. 48, “Accounting
for Uncertainty in Income Taxes”, an interpretation of FASB Statement
No. 109 (FIN 48). FIN 48 clarifies the accounting and reporting for
uncertainties in income tax law. This interpretation prescribes a comprehensive
model for the financial statement recognition, measurement, presentation and
disclosure of uncertain tax positions taken or expected to be taken in income
tax returns. This statement is effective for fiscal years beginning after
December 15, 2006. The Company is currently in the process of evaluating
the expected effect of FIN 48 on its results of operations and financial
position.
In
September 2006, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Issues No. 157, “Fair Value Measurements” (“SFAS 157”),
which defines the
fair
value, establishes a framework for measuring fair value and expands disclosures
about fair value measurements. This statement is effective for financial
statements issued for fiscal years beginning after November 15, 2007, and
interim periods within those fiscal years. Early adoption is encouraged,
provided that the Company has not yet issued financial statements for that
fiscal year, including any financial statements for an interim period within
that fiscal year. The Company is currently evaluating the impact SFAS 157 may
have on its financial condition or results of operations.
In
September 2006, the FASB issued SFAS No. 158, “Employer’s
accounting for Defined Benefit Pension and Other Post Retirement
Plans”.
SFAS No. 158 requires employers to recognize in its statement of financial
position an asset or liability based on the retirement plan’s over or under
funded status. SFAS No. 158 is effective for fiscal years ending after
December 15, 2006. The Company is currently evaluating the effect that the
application of SFAS No. 158 will have on its results of operations and financial
condition.
In
September 2006, the United States Securities and Exchange Commission (SEC)
issued Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year Financial
Statements” (“SAB 108”). This SAB provides guidance on the consideration of the
effects of prior year misstatements in quantifying current year misstatements
for the purpose of a materiality assessment. SAB 108 establishes an approach
that requires quantification of financial statement errors based on the effects
on each of the company’s balance sheets, statements of operations and related
financial statement disclosures. The SAB permits existing public companies
to
record the cumulative effect of initially applying this approach in the first
year ending after November 15, 2006 by recording the necessary correcting
adjustments to the carrying values of assets and liabilities as of the beginning
of that year with the offsetting adjustment recorded to the opening balance
of
retained earnings. Additionally, the use of the cumulative effect transition
method requires detailed disclosure of the nature and amount of each individual
error being corrected through the cumulative adjustment and how and when it
arose. The Company is currently evaluating the impact SAB 108 may have on its
results of operations and financial condition.
In
October 2006, the Emerging Issues Task Force (“EITF”) issued EITF 06-3, “How
Taxes Collected from Customers and Remitted to Governmental Authorities Should
Be Presented in the Income Statement (That is, Gross versus Net Presentation)”
to clarify diversity in practice on the
presentation
of different types of taxes in the financial statements. The Task Force
concluded that, for taxes within the scope of the issue, a company may adopt
a
policy of presenting taxes either gross within revenue or net. That is, it
may
include charges to customers for taxes within revenues and the charge for the
taxes from the taxing authority within cost of sales, or, alternatively, it
may
net the charge to the customer and the charge from the taxing authority. If
taxes subject to EITF 06-3 are significant, a company is required to disclose
its accounting policy for presenting taxes and the amounts of such taxes that
are recognized on a gross basis. The guidance in this consensus is effective
for
the first interim reporting period beginning after December 15, 2006 (the first
quarter of our fiscal year 2007). We do not expect the adoption of EITF 06-3
will have a material impact on our results of operations, financial position
or
cash flow.
LEGAL
PROCEEDINGS
On
February 4, 2000, a complaint was filed against Newgold by Sun G. Wong in the
Superior Court of Sacramento County, California (Case No. 00AS00690). In the
complaint, Mr. Wong claims that he was held liable as a guarantor of
Newgold in a claim brought by Don Christianson in a breach of contract
action against Newgold. Despite the fact that Newgold settled the action with
Mr. Christianson through the issuance of 350,000 shares of Newgold Common Stock,
Mr. Wong, nevertheless, paid $60,000 to a third party claiming to hold
Mr. Christianson’s judgment pursuant to Mr. Wong’s guaranty agreement.
Similarly, Mr. Wong alleges that he was held liable as a guarantor for a debt
of
$200,000 owed by Newgold to Roger Primm with regard to money borrowed by
Newgold. Mr. Primm filed suit against Newgold which was settled through the
issuance of 300,000 shares of Newgold Common Stock. Nevertheless, Mr. Wong
alleges that he remains liable to a third party claiming to hold
Mr. Primm’s judgment for approximately $200,000 pursuant to his guaranty of
such debt of Mr. Primm. On December 29, 2000, the superior court entered a
default judgment against Newgold in the amount of $400,553 with regard to the
Christianson judgment and an additional $212,500 in regard to the Primm judgment
against Mr. Wong. Newgold believes that Mr. Wong was not obligated to pay any
sums pursuant to his guarantees with regard to the Christianson and Primm
judgments against Newgold. On September 26, 2006, the parties signed a
Settlement Agreement to resolve this lawsuit. Pursuant to the Settlement
Agreement, Newgold paid Mr. Wong $125,000 and issued him 100,000 shares of
restricted common stock on October 4, 2006. Newgold must pay a final payment
of
$50,000 to Mr. Wong on or before January 3, 2007. An Acknowledgment of
Satisfaction of Judgment will be filed by Mr. Wong immediately upon receipt
of
the final payment. Until the final payment is made, Mr. Wong has agreed to
refrain from taking any action to enforce his judgment against
Newgold.
On
May
18, 2004 Paul Ngoyi filed a petition for involuntary bankruptcy against Newgold
(Case No. BK-N-0451511). Mr. Ngoyi claimed to be the holder of both the
Christiansen and Primm judgments against Newgold and is claming that Newgold
cannot pay such judgments because it is insolvent. Newgold maintains that Mr.
Ngoyi’s claims are invalid as the two judgments were previously satisfied and
that Newgold is not insolvent. A pre-trial hearing was held on April 4, 2005
at
which time Newgold prevailed in having Mr. Ngoyi’s petition dismissed. An order
of dismissal was issued May 10, 2005.
MANAGEMENT
The
following table sets forth information about the directors and executive
officers of Newgold together with the principal positions and offices with
Newgold held by each:
Name
of Person
|
Age
|
Position
and Office Presently Held With Newgold
|
Director
Since
|
|
|
|
|
A.
Scott Dockter
|
50
|
Chairman,
CEO and President
|
1996
|
James
W. Kluber
|
55
|
Chief
Financial Officer and Director
|
2000
|
Terrence
Lynch
|
43
|
Director
|
2006
|
Stephen
Akerfeldt
|
62
|
Director
|
2006
|
Biographical
information for directors and executive officers:
A.
Scott Dockter
has been
the Chief Executive Officer and Chairman since December 2000, assuming such
positions upon the resignation of James Cutburth. Mr. Dockter had previously
served as Newgold’s CEO and President from November 1996 until February 2000 at
which time Mr. Cutburth assumed such positions. Mr. Dockter has been
self-employed in the business sector since 1978 and currently operates his
business through ASD CORP and ASDi LLC. He has held a Class A General
Engineering and Contracting License for more than 20 years, operating his
businesses in California, Nevada and Montana, specializing in earth moving,
mining, pipeline projects, structures, dams, industrial parks and sub divisions.
Mr. Dockter has directed his companies in large landfill operations, underground
concrete structures projects, large excavations, reclamation projects and
others, which include state and local municipal projects. Mr. Dockter has also
been a real estate developer, worked on oil & gas projects and has spent 15
years in the mining industry. He has personally owned mines, operated mines,
constructed mine infrastructures (physical, production and process) and produced
precious metals. In January 2002, Mr. Dockter pleaded guilty to one felony
charge of environmental pollution and was sentenced to 5 months in a Federal
detention camp and a $5,000 fine. The charge related to the release in the
summer 1997 of a hazardous material (asbestos) at a demolition project owned
by
Riverfront Development Corporation, a corporation founded by Mr. Dockter of
which he was then the CEO.
James
W. Kluber
has been
the Chief Financial Officer of Newgold since February 2000 and a director since
April 2000. Mr. Kluber has served as a senior financial consultant in a
variety of service and technology environments with special focus on high growth
companies and restructuring operations. He has successfully raised capital
for
companies in a variety of markets, utilizing public and private equity as well
as securitized and unsecured debt to accomplish funding requirements. From
December 2001 to September 2003, Mr. Kluber was the CFO and until October 2005
was the interim CFO of NutraCea a public company involved in the development
and
distribution of products based on the use of stabilized rice bran. Additionally,
he was the Senior Vice President and CFO from 1996 to 1999 for RealPage, Inc.
a
leading provider of software and services to the real estate industry. From
1993
to 1996 he served as Vice President of Financial Operations for two public
companies sponsored by Security Capital Group, ProLogis Trust and Archstone
Communities.
Terrence
Lynch was
appointed to the Board of Directors in July 2006. Mr. Lynch has been a
partner with Kingsmill Capital Partners, a financial advisory firm specializing
in advising both public and private early stage growth companies. Prior to
joining Kingsmill Capital he spent fifteen years operating start up companies
in
Industrial Products, Oil & Gas, and Media. Experienced in developing the
necessary financial structure to maximize a company’s ability to secure growth
capital, Mr. Lynch has raised corporate capital via debentures, limited
partnerships, and royalty financing in addition to conventional equity
placements. Mr. Lynch graduated in 1981 from St. Francis Xavier University
with
a joint honors degree in Economics and a BBA.
Stephen
Akerfeldt
was
appointed to the Board of Directors on September 12, 2006. Mr. Akerfeldt is
currently chairman of the board of Jura Energy Corporation which is an oil
and
gas exploration company based in Calgary, Canada. In 1998 he became part owner
and currently serves
as
president of Ritz Plastics Inc. which produces injection molded parts used
primarily in the automotive industry. In 2001, Mr. Akerfeldt and certain
partners acquired two major chains of dry cleaning operations in the Toronto,
Ontario marketplace which were then sold in 2003. Mr. Akerfeldt has worked
as a business consultant to various companies and entrepreneurs since the
mid-1990’s. From 1987 to 1990, Mr. Akerfeldt was Vice-Chairman and Chief
Financial Officer of Magna International Inc., a multi-billion dollar public
company auto parts manufacturer. Mr. Akerfeldt joined the accounting firm
of Coopers and Lybrand in 1965 and from 1974 through 1987 he was a partner
in
the firm’s Toronto office. His accounting practice included a broad range of
clients including investment dealers, public mining companies, insurance
companies, public oil and gas producers and manufacturing companies, both public
and private. Mr. Akerfeldt holds a Bachelor of Arts degree from the University
of Waterloo and became a chartered accountant with the Institute of Chartered
Accountants of Ontario in 1970.
The
current Directors will serve and hold office until the next annual stockholders'
meeting or until their respective successors have been duly elected and
qualified. Newgold’s executive officers are appointed by the Board of Directors
and serve at the discretion of the Board.
Family
Relationships
There
are
no family relationships between any director or executive officer.
Board
Meetings and Committees
Our
Board
of Directors held six meetings during the fiscal year ended January 31, 2006
and
acted by unanimous written consent on two occasions. The Board does not
currently have an Executive, Nominations or Compensation Committee. At the
current time, the entire Board of Directors acts to provide equivalent functions
that would be provided by these committees. On October 21, 2006, the Board
appointed Stephen Akerfeldt as our Audit Committee financial expert and to
be
chairman of the Audit Committee. The Board also appointed Terry Lynch to the
Audit Committee. We have only four directors, two of whom are also officers
of
Newgold. We plan to appoint additional directors to our Board who will be
independent directors during the current year.
Stockholder
Communication Policy
Stockholders
may send communications to the Board or individual members of the Board by
writing to them, care of Secretary, Newgold, 400 Capitol Mall, Suite 900,
California 95814, who will forward the communication to the intended director
or
directors. If the stockholder wishes the communication to be confidential,
then
the communication should be provided in a form that will maintain
confidentiality.
EXECUTIVE
COMPENSATION
The
following table sets forth the compensation of our chief executive officer
during the last three complete fiscal years and each officer who received annual
compensation in excess of $100,000 during the last completed fiscal
year.
SUMMARY
COMPENSATION TABLE
For
Years Ended January 31, 2006, 2005 and 2004
|
|
|
Annual
Compensation
|
|
Long
Term Compensation
|
|
|
|
|
|
Awards
|
|
Payout
|
|
|
Fiscal
Year
|
Salary
|
Bonus
($)
|
Other
Annual Compensation
($)
|
|
Restricted
Stock Award(s)
($)
|
Securities
Underlying
Options
(#)
|
|
LTIP
Payout ($)
|
All
Other
Compensation
($)
|
Scott
Dockter
(CEO)
|
2006
|
$180,000
|
-0-
|
-0-
|
|
-0-
|
-0-
|
|
-0-
|
-0-
|
|
2005
|
$
60,000
|
-0-
|
-0-
|
|
-0-
|
-0-
|
|
-0-
|
-0-
|
|
2004
|
$
60,000(1)
|
-0-
|
-0-
|
|
-0-
|
-0-
|
|
-0-
|
-0-
|
|
|
|
|
|
|
|
|
|
|
|
James
Kluber(2)
(CFO)
|
2006
|
$160,000
|
-0-
|
-0-
|
|
-0-
|
-0-
|
|
-0-
|
6,000(3)
|
|
2005
|
$140,000
|
-0-
|
-0-
|
|
-0-
|
-0-
|
|
-0-
|
6,000
(3)
|
|
2004
|
$140,000
|
-0-
|
-0-
|
|
-0-
|
-0-
|
|
-0-
|
6,000
(3)
|
(1)
|
Of
the amounts shown, the following amounts have been deferred: 2006
-
$75,000; 2004 - $24,000. The deferred amount for 2004 was converted
to a
convertible note payable on October 1,
2004.
|
(2)
|
Of
the amounts shown, the following amounts have been deferred: 2006
-
$11,057; 2005 - $93,500; 2004 - $89,000. The deferred amount for
2004 was
converted to a convertible note payable on October 1,
2004.
|
(3)
|
Amount
reflects a home office allowance
|
2006
Stock Option Plan
Our
Board
of Directors adopted the 2006 Stock Option Plan, or the 2006 Plan, on July
25,
2006. The 2006 Plan will be presented to stockholders for approval at the next
annual stockholders meeting. Under the terms of the 2006 Plan, we may grant
up
to 5,000,000 options which can include Incentive Stock Options issued to
employees and Nonstatutory Stock Options issuable to employees or consultants
providing services to Newgold on such terms as are determined by our board
of
directors. Our Board administers the 2006 Plan. Under the 2006 Plan, options
vest not less than 20% per year and have 10-year terms (except with respect
to
10% stockholders which have five-year terms). If an option holder terminates
his/her employment with us or becomes disabled or dies, the option holder or
his/her representative will have a certain number of months to exercise any
outstanding vested options. If we sell substantially all of our assets, are
a
party to a merger or consolidation in which we are not the surviving
corporation, then we have the right to accelerate unvested options and will
give
the option holder written notice of the exercisability and specify a time period
in which the options may be exercised. All options will terminate in
their
entirety to the extent not exercised on or prior to the date specified in the
written notice unless an agreement governing any change of control provides
otherwise.
Options/SAR
Grants in Last Fiscal Year
The
following table sets forth certain information with respect to options or SAR
grants of Common Stock during the fiscal year ended January 31, 2006 to the
Named Executive Officers.
Name
|
Number
of Securities Underlying Options Granted
|
Percent
of Total Options Granted to Employees at January 31, 2006
|
Exercise
or Base Price
($
Per Share)
|
Expiration
Date
|
None
|
|
|
|
|
Aggregated
Option/SAR Exercises Year-End Table.
During
the fiscal year ended January 31, 2006, none of the Named Executive Officers
had
exercised any options/SARs issued by Newgold. The following table sets forth
information regarding the stock options held as of January 31, 2006 by the
Named
Executive Officers.
Name
|
Number
of Securities Underlying Unexercised Options at
January
31, 2006
|
Value
of Unexercised
In-the-Money
Options at
January
31, 2006
|
Exercisable
|
Unexercisable
|
Exercisable
|
Unexercisable
|
None
|
|
|
|
|
Employment
Agreements
On
February 1, 2006, we entered into an employment agreement with A. Scott Dockter
to serve as our chief executive officer for Newgold, Inc. Pursuant to the
agreement, Mr. Dockter will receive an annual salary of $180,000 and an
automobile expense allowance of $1,000 per month. In addition, Mr. Dockter
will
be eligible to participate in any discretionary bonuses or employee stock option
plans which may be adopted in the future. The employment agreement has a term
of
three years.
On
February 1, 2006, we entered into an employment agreement with James W. Kluber
to serve as our chief financial officer of Newgold, Inc. Pursuant to the
agreement, Mr. Kluber will receive an annual salary of $160,000 and an office
expense allowance of $500 per month. In addition, Mr. Kluber will be
eligible to participate in any future discretionary bonuses or employee stock
option plans which may be adopted in the future. The employment agreement has
a
term of three years.
Employee
Pension, Profit Sharing or Other Retirement Plans
We
do not
have a defined benefit pension plan or profit sharing or other retirement plan.
Compensation
of Directors
Directors
are eligible to participate in Newgold’s 2006 Stock Option Plan. Subsequent to
the fiscal year end, upon adoption of the 2006 Stock Option Plan by the Board,
in July 2006, the Board made the following awards: A Scott Dockter received
options to purchase 500,000 shares of Newgold common stock, James Kluber
received options to purchase 400,000 shares of Newgold common stock, Terrence
Lynch received options to purchase 500,000 shares of Newgold common stock and
Stephen Akerfeldt received options to purchase 250,000 shares of Newgold common
stock. All of these options have an exercise price of $0.50 per share and a
term
of ten years (except for Mr. Dockter’s options which have a term of five years).
Additionally,
outside directors receive annual compensation of $10,000 per year and $1,500
for
each board and/or committee meeting attended.
Code
of Business Conduct and Ethics
The
Board
has adopted a Code of Business Conduct and Ethics that applies to all directors,
officers and employees of Newgold. Newgold will provide any person, without
charge, a copy of this Code. Requests for a copy of the Code may be made by
writing to Newgold at 400 Capitol Mall, Suite 900, Sacramento, California 95814.
Attention: Secretary.
Limitation
of Liability and Indemnification Matters
Newgold’s
bylaws provide that it will indemnify its officers and directors, employees
and
agents and former officers, directors, employees and agents unless their conduct
is finally adjudged as grossly negligent or to be willful misconduct. This
indemnification includes expenses (including attorneys’ fees), judgments, fines,
and amounts paid in settlement actually and reasonably incurred by these
individuals in connection with such action, suit, or proceeding, including
any
appeal thereof, subject to the qualifications contained in Delaware law as
it
now exists. Expenses (including attorneys’ fees) incurred in defending a civil
or criminal action, suit, or proceeding will be paid by Newgold in advance
of
the final disposition of such action, suit, or proceeding upon receipt of an
undertaking by or on behalf of the director, officer, employee or agent to
repay
such amount, unless it shall ultimately be determined that he or she is entitled
to be indemnified by Newgold as authorized in the bylaws. This indemnification
will continue as to a person who has ceased to be a director, officer, employee
or agent, and will benefit their heirs, executors, and administrators. These
indemnification rights are not deemed exclusive of any other rights to which
any
such person may otherwise be entitled apart from the bylaws. Delaware law
generally provides that a corporation shall have the power to indemnify persons
if they acted in good faith in a manner reasonably believed to be in, or not
opposed to, the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe the conduct
was unlawful. In the event any such person is judged liable for negligence
or
misconduct, this indemnification will apply only if approved by the court in
which the action was pending. Any other indemnification shall be made only
after
the determination by Newgold’s Board of Directors (excluding any directors who
were party to such action), by independent legal counsel in a written opinion,
or by a majority vote of stockholders (excluding any stockholders who were
parties to such action) to provide such indemnification.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933
(the
“1933Act”) may be permitted to directors, officers and controlling persons of
Newgold pursuant to the foregoing provisions, or otherwise, Newgold has been
advised that in the opinion of the
Securities
and Exchange Commission such indemnification is against public policy as
expressed in the 1933 Act and is, therefore, enforceable.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
The
following table sets forth the number of shares of Newgold’s Common Stock
beneficially owned as of October 31, 2006 by, (i) each executive officer and
director of Newgold; (ii) all executive officers and directors of Newgold as
a
group; and (iii) owners of more than 5% of Newgold’s Common Stock.
Name
and Address of Beneficial Owner
|
Position
|
Number
of Shares Beneficially Owned
|
Percent
|
Officers
and Directors
|
|
|
|
A.
Scott Dockter
400
Capitol Mall, Suite 900
Sacramento,
CA 95814
|
Chairman
and CEO
|
21,921,306(1)
|
25.7%
|
|
|
|
|
James
Kluber
327
Copperstone Trail
Coppell,
TX 75019
|
CFO,
Executive Vice President, and Secretary
|
1,795,007(2)
|
2.4%
|
|
|
|
|
Terrence
Lynch
1130
Morrison Heights
Oakville,
Ontario Canada L6J 4J1
|
Director
|
476,000(3)
|
*%
|
|
|
|
|
Stephen
Akerfeldt
93
Sheppard Avenue East
North
York, Ontario, Canada M2N3A3
|
Director
|
125,000(4)
|
*%
|
All
officers and directors as a group (4 individuals)
|
|
24,317,313
|
27.6%
|
|
|
|
|
Stockholders
owning 5% or more
|
|
|
|
City
Natural Resources
High
Yield Trust
Mansfield
House
1
Southhampton Street
London
, England WC2R OLR
|
|
5,000,000
(5)
|
6.7%
|
Cornell
Capital Partners, LP
101
Hudson Street Ste. 3700
Jersey
City, NJ 07303
|
|
10,040,168
(5)
|
12.7%
|
Bullworth
Capital
123
Queen Street West, Suite 199
Toronto,
ON Canada M5H 3M9
|
|
4,000,000
(7)
|
5.4%
|
*
Represents
less than 1%.
|
(1)
|
Amount
includes 12,657,909 shares issuable under stock warrants and options
exercisable within 60 days of October 31, 2006.
|
|
(2)
|
Amount
represents 1,795,007 shares issuable under stock warrants and options
exercisable within 60 days of October 31, 2006. Amount excludes shares
issuable pursuant to a convertible promissory note in the principal
amount
of $209,251.
|
|
(3)
|
Amount
includes 125,000 of shares issuable under options to purchase 250,000
shares granted to Mr. Lynch at the time he became a director of
Newgold
and 125,000 of shares issuable under options to purchase 250,000
shares
granted to Mr. Lynch since he became a director, exercisable within
60
days of October 31, 2006. 50% of the options are exercisable immediately
while the balance vests 50% on the first anniversary
date.
|
|
(4)
|
Amount
represents 125,000 shares issuable under options to purchase 250,000
shares granted at the time Mr. Akerfeldt became a director of Newgold.
50%
of the options are exercisable immediately while the balance vests
50% on
the first anniversary.
|
|
(5)
|
Amount
includes 2,500,000 shares issuable under stock warrants exercisable
within
60 days of October 31, 2006.
|
|
(6)
|
Amount
includes 6,000,000 shares issuable under stock warrants exercisable
within
60 days of October 31, 2006. Amount excludes shares issuable upon
conversion of convertible debentures.
|
|
(7)
|
Amount
includes 2,000,000 shares issuable under stock warrants exercisable
within
60 days of October 31, 2006.
|
Equity
Compensation Plan Information
Plan
Category
|
Number
of securities to be issued upon exercise of outstanding options,
warrants
and rights (a)
|
Weighted-average
exercise price of outstanding options, warrants and right (b)
|
Number
of securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column (a))
(c)
|
Equity
compensation plans to be approved by security holders
|
1,850,000
|
$
0.47
|
3,150,000
|
Equity
compensation plans not approved by security holders
|
N/A
|
|
|
TOTAL
|
1,850,000
|
$
0.47
|
3,150,000
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
During
the 2006 fiscal year, the president of Newgold, Scott Dockter, had loaned
Newgold an aggregate of $5,000. In July 2005 a convertible promissory note
with
a balance of $1,402,742 and additional accrued interest of $446,193 due to
Mr.
Dockter was converted into 12,326,231 shares of Newgold common stock. As of
January 31, 2005, Mr. Dockter had loaned Newgold a total of $24,845 and accrued
interest of $32,023. In addition to the outstanding note payable, Mr. Dockter
has been issued Warrants to purchase up to 12,157,909 shares of Newgold’s Common
Stock at exercise prices ranging from $0.15/share to $0.40/share.
On
January 25, 2006, Newgold entered into a joint venture with ASDi, LLC to develop
two Nevada mining properties known as the Red Caps Project and Crescent Valley
Project. The Red Caps consists of approximately 96 unpatented mining claims
covering 1900 acres and the
Crescent
Valley consists of approximately 39 unpatented mining claims covering 750 acres.
The Red Caps and Crescent Valley mining claims are currently owned by ASDi,
LLC,
which is owned and managed by A. Scott Dockter, Chairman and CEO of Newgold.
The
joint venture will be operated through a newly formed Nevada limited liability
company called Crescent Red Caps, LLC. The terms of the joint venture provide
for ASDi to contribute the Red Caps and Crescent Valley mining claims to the
LLC
in exchange for Newgold issuing 2.5 million shares of its Common Stock
and
warrants to purchase 2.5 million shares of Newgold Common Stock at an
exercise price of $0.40 per share for a term of three years to
ASDi.
Newgold will initially own a 22.22%
interest in the LLC and ASDi will hold a 77.78% interest. By expending up to
$1,350,000 on each project over the next three years, Newgold can increase its
interest in the LLC to 66.66%. Thereafter, Newgold has the right to purchase
the
remaining interest in the LLC held by ASDi at a price to be determined by the
results of the exploration work conducted. Newgold will be the Manager of the
LLC.
Should
a
transaction, proposed transaction, or series of transactions involve one of
our
officers or directors or a related entity or an affiliate of a related entity,
or holders of stock representing 5% or more of the voting power (a “related
entity”) of our then outstanding voting stock, the transactions must be approved
by the unanimous consent of our board of directors. In the event a member of
the
board of directors is a related party, that member will abstain from the
vote.
DESCRIPTION
OF SECURITIES
We
are
authorized to issue 250,000,000 shares of Common Stock, $.001 par value per
share. We are not authorized to issue any preferred stock consisting. We had
74,644,240 shares of our Common Stock and no shares of preferred stock
outstanding as of October 31, 2006.
Common
Stock
The
holders of outstanding shares of Common Stock are entitled to receive dividends
out of assets or funds legally available for the payment of dividends at such
times and in such amounts as the board from time to time may determine.
The Common Stock is not entitled to pre-emptive rights and is not subject
to conversion or redemption. Upon liquidation, dissolution or winding up
of our business, the assets legally available for distribution to stockholders
are distributable ratably among the holders of the Common Stock after payment
of
liquidation preferences, if any, on any outstanding preferred or Common Stock
or
other claims of creditors. Each outstanding share of Common Stock is duly
and validly issued, fully paid and non-assessable.
The
holders of Newgold Common Stock are entitled to one vote for each share held
on
all matters submitted to a vote of Newgold stockholders. Under certain
circumstances, California law permits the holders of Newgold Common Stock to
assert their right to cumulate their votes for the election of directors, in
which case holders of less than a majority of the outstanding shares of Newgold
Common Stock could elect one or more of Newgold’s directors. Holders of Newgold
Common Stock have no preemptive, subscription, or redemption
rights.
Transfer
Agent
Transfer
Online, Inc., Portland Oregon, serves as a transfer agent for the shares of
Newgold Common Stock.
SELLING
SECURITY HOLDERS
The
table
below lists the selling stockholders and other information regarding the
beneficial ownership of the Common Stock by each of the selling stockholders.
The first column lists the name of each selling stockholder. The second column
lists the number of shares of Common Stock beneficially owned by each selling
stockholder as of October
31, 2006. The third column lists the number of shares of Common Stock
that may be resold under this prospectus.
The
fourth and fifth columns list the number of shares of Common Stock owned and
the
percentage of Common Stock owned after the resale of the Common Stock registered
under this prospectus. Beneficial ownership is determined in accordance with
the
rules of the Securities and Exchange Commission, and includes voting and
investment power with respect to such shares. Shares of Common Stock issuable
upon conversion of a convertible debenture and shares of Common Stock subject
to
options or warrants that are currently exercisable or exercisable within 60
days
after October 31, 2006 are deemed to be beneficially owned by the person holding
such options for the purpose of computing the percentage ownership of such
person but are not treated as outstanding for the purpose of computing the
percentage ownership of any other stockholder.
|
|
Common Shares
|
|
Common Shares
|
|
Common Shares
|
|
Beneficially Owned
|
Offered
by this
|
Beneficially
Owned
|
Name
of Selling Stockholder
|
Prior
to Offering
|
Prospectus
|
After
Offering
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
|
|
Percentage
|
|
|
|
Cornell
Capital Partners, LP
|
|
28,790,168
|
|
22,250,000(1)
|
|
6,540,168
|
|
8.6%
|
Maxim
Nudelmann
|
|
1,609,596
(2)
|
|
1,609,596
|
|
----
|
|
*
|
R.
Bruce McFarlane
|
|
201,199(3)
|
|
201,199
|
|
----
|
|
*
|
EFG
Bank
|
|
804,798(4)
|
|
804,798
|
|
----
|
|
*
|
|
|
31,405,761
|
|
24,865,593
|
|
6,540,168
|
|
8.6%
|
*
Represents holdings of less than one percent
(1)
|
Estimated
maximum number of shares of common stock issuable upon of Convertible
Debentures (18,750,000 shares) beneficially owned by Cornell Capital
Partners, and 3,500,000 shares of common stock underlying warrants
immediately exercisable. Yorkville Advisors, LLC, which is the investment
advisor and general partner of Cornell Capital Partners, has sole
dispositive, investment and voting power for all the shares. Pursuant
to
the Convertible Debenture, Cornell Capital Partners will not own
more than
4.99% of our then outstanding common stock at any time. The address
for
Cornell Capital Partners, is 101 Hudson Street, Suite 3700, Jersey
City,
New Jersey 07303.
|
(2)
|
Estimated
maximum number of shares of common stock issuable upon conversion
of a
Convertible Debentures(1,150,000 shares) beneficially owned by Mr.
Nudelmann, and 459,596 shares of common stock underlying warrants
which
are immediately exercisable. The address for Maxim Nudelmann is Keithstr.
31, 10787 Berlin, Germany.
|
(3)
|
Estimated
maximum number of shares of common stock issuable upon conversion
of a
Convertible Debenture (143,750 shares) beneficially owned by Mr.
McFarlane, and 57,449 shares of common stock underlying warrants
which are
immediately exercisable. The address for R. Bruce McFarlane is 2020
Pumphill Way, Calgary, Alberta
Canada.
|
(4)
|
Estimated
maximum number of shares of common stock issuable upon conversion
of a
Convertible Debenture (575,000 shares)beneficially owned by EFG Bank,
and
229,798 shares of common stock underlying warrants which are immediately
exercisable. The address for EFG Bank is Quar de Seujet 24, P.O.
Box 2391,
1211 Geneva 2 Switzerland.
|
PLAN
OF DISTRIBUTION
Each
of
the selling stockholders, and any of their donees, pledgees, transferees or
other successors-in-interest selling shares of Newgold Common Stock or interests
in shares of Newgold Common Stock received after the date of this prospectus
from a selling stockholder as a gift, pledge, partnership distribution or other
transfer, may, from time to time, sell, transfer or otherwise dispose of any
or
all of their shares of Common Stock or interests in shares of Common Stock
on
any stock exchange, market or trading facility on which the shares are traded
or
in private transactions. These dispositions may be at fixed prices, at
prevailing market prices at the time of sale, at prices related to the
prevailing market price, at varying prices determined at the time of sale,
or at
negotiated prices. A selling stockholder will act independently of Newgold
in
making decisions with respect to the timing, manner and size of each
sale.
Each
of
the selling stockholders may use any one or more of the following methods when
selling shares:
·
|
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
·
|
block
trades in which the broker-dealer will attempt to sell the shares
as agent
but may position and resell a portion of the block as principal to
facilitate the transaction;
|
·
|
purchases
by a broker-dealer as principal and resale by the broker-dealer for
its
account;
|
·
|
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
·
|
privately
negotiated transactions;
|
·
|
settlement
of short sales entered into after the date of this
prospectus;
|
·
|
broker-dealers
may agree with the selling stockholders to sell a specified number
of such
shares at a stipulated price per
share;
|
·
|
a
combination of any such methods of
sale;
|
·
|
through
the writing or settlement of options or other hedging transactions,
whether through an options exchange or otherwise;
or
|
·
|
any
other method permitted pursuant to applicable
law.
|
Broker-dealers
engaged by the selling stockholders may arrange for other brokers-dealers to
participate in sales. Broker-dealers may receive commissions or discounts from
the selling stockholders (or, if any broker-dealer acts as agent for the
purchaser of shares, from the purchaser) in amounts to be negotiated. Each
selling stockholder does not expect these commissions and discounts relating
to
its sales of shares to exceed what are customary in the types of transactions
involved.
In
connection with the sale of our Common Stock or interests therein, the selling
stockholders may enter into hedging transactions with broker-dealers or other
financial institutions, which may in turn engage in short sales of the Common
Stock in the course of hedging the positions they assume. The selling
stockholders may also sell shares of our Common Stock short and deliver these
securities to close out their short positions, or loan or pledge the Common
Stock to broker-dealers that in turn may sell these securities. The selling
stockholders may also enter into options or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such
transaction).
The
selling stockholders and any broker-dealers or agents that are involved in
selling the shares may be deemed to be “underwriters” within the meaning of the
Securities Act of 1933 (the “Securities Act”) in connection with such sales. In
such event, any commissions received by such broker-dealers or agents and any
profit on the resale of the shares purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act. Discounts,
concessions, commissions and similar selling expenses, if any, that can be
attributed to the sale of securities will be paid by the selling stockholders
and/or the purchasers. Each selling stockholder has informed Newgold that it
does not have any agreement or understanding, directly or indirectly, with
any
person to distribute the Common Stock.
Newgold
is required to pay certain fees and expenses incurred by it incident to the
registration of the shares. Newgold has agreed to indemnify the selling
stockholders against certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.
Because
selling stockholders may be deemed to be “underwriters” within the meaning of
the Securities Act, they will be subject to the prospectus delivery requirements
of the Securities Act. In addition, any securities covered by this prospectus
which qualify for sale pursuant to Rule 144 under the Securities Act may be
sold
under Rule 144 rather than under this prospectus. Each selling stockholder
has
advised us that they have not entered into any agreements, understandings or
arrangements with any underwriter or broker-dealer regarding the sale of the
shares. There is no underwriter or coordinating broker acting in connection
with
the proposed sale of the shares by the selling stockholders.
We
agreed
to keep this prospectus effective until the earlier of (i) _September 26, 2009
(ii) the date on which the shares may be resold by the selling stockholders
pursuant to Rule 144(k) under the Securities Act or any other rule of similar
effect or (iii) all of the shares have been sold pursuant to the prospectus
or
Rule 144 under the Securities Act or any other rule of similar effect. The
resale shares will be sold only through registered or licensed brokers or
dealers if
required
under applicable state securities laws. In addition, in certain states, the
resale shares may not be sold unless they have been registered or qualified
for
sale in the applicable state or an exemption from the registration or
qualification requirement is available and is complied with.
Under
applicable rules and regulations under the Securities Exchange Act of 1934,
as
amended (the “Exchange Act”), any person engaged in the distribution of the
shares may not simultaneously engage in market making activities with respect
to
our Common Stock for a period
of
two business days prior to the commencement of the distribution. In addition,
the selling stockholders will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, including Regulation
M,
which may limit the timing of purchases and sales of shares of our Common Stock
by the selling stockholders or any other person. We will make copies of this
prospectus available to the selling stockholders and have informed them of
the
need to deliver a copy of this prospectus to each purchaser at or prior to
the
time of the sale.
DISCLOSURE
OF COMMISSION POSITION OF INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
Our
Bylaws, subject to the provisions of Delaware Corporation Law, contain
provisions which allow the corporation to indemnify any person against
liabilities and other expenses incurred as the result of defending or
administering any pending or anticipated legal issue in connection with service
to us if it is determined that person acted in good faith and in a manner which
he reasonably believed was in the best interest of the corporation.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to our directors, officers and controlling persons,
we have been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.
LEGAL
MATTERS
The
validity of the shares offered under this registration statement is being passed
upon by Weintraub Genshlea Chediak Law Corporation, Sacramento,
California.
EXPERTS
Our
financial statements for the fiscal years ending January 31, 2005 and 2006
included in this prospectus have been so included in reliance on the report
of
Singer Lewak Greenbaum & Goldstein LLP independent registered public
accounting firm, given on that firm's authority as experts in auditing and
accounting.
WHERE
YOU CAN FIND MORE INFORMATION
We
have
filed with the SEC a registration statement on Form SB-2 (File Number
___________) under the Securities Act of 1933 regarding the shares of Common
Stock offered hereby. This prospectus does not contain all of the information
found in the registration statement, portions of which are omitted as permitted
under the rules and regulations of the SEC. For further information regarding
us
and the securities offered by this prospectus, please refer to the registration
statement, including its exhibits and schedules. Statements made in this
prospectus
concerning
the contents of any contract, agreement or other document filed as an exhibit
to
the registration statement are summaries of the terms of those documents. The
registration statement of which this prospectus forms a part, including its
exhibits and schedules, may be inspected and copied at the public reference
room
maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. You may
obtain information on the operation of the public reference room by calling
the
SEC at 1-800-SEC-0330.
The
SEC
maintains a web site on the Internet at www.sec.gov. Our registration statement
and other information that we file with the SEC are available at the SEC’s
website.
We
intend
to make available to our stockholders annual reports (on Form 10-KSB) containing
our audited consolidated financial statements and make available quarterly
reports (on Form 10-QSB) containing our unaudited interim consolidated financial
information for the first three fiscal quarters of each of our fiscal years.
If
you
are a stockholder, you may request a copy of these filings at no cost by
contacting us at:
Newgold,
Inc.
400
Capitol Mall, Suite 900
Sacramento,
CA 95814
(916)
449-3913 (o)
(916)
449-8259 (f)
FINANCIAL
STATEMENTS
NEWGOLD,
INC.
FINANCIAL
STATEMENTS
INDEX
TO FINANCIAL STATEMENTS
|
|
|
|
FOR
THE YEARS ENDED JANUARY 31, 2006 AND 2005
|
|
|
|
Report
of Independent Registered Public Accounting Firm
|
F-1
|
|
|
Balance
Sheet
|
F-2
|
|
|
Statements
of Operations
|
F-4
|
|
|
Statements
of Comprehensive Loss
|
F-5
|
|
|
Statements
of Shareholders’ Deficit
|
F-6
|
|
|
Statements
of Cash Flows
|
F-10
|
|
|
Notes
to Financial Statements
|
F-14
|
|
|
FOR
THE QUARTERS ENDED JULY 31, 2006 AND 2005
|
|
|
|
Condensed
Balance Sheet as of July 31, 2006 (Unaudited)
|
F-33
|
|
|
Condensed
Statements of Operations for
the three months ended
July
31, 2006 and 2005 (Unaudited)
|
F-35
|
|
|
Condensed
Statements of Cash Flows for the three months
ended
July 31, 2006 and 2005 (Unaudited)
|
F-36
|
|
|
Notes
to Unaudited Financial Statements
|
F-40
|
REPORT
OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board
of
Directors and Shareholders
Newgold,
Inc.
We
have
audited the balance sheet of Newgold, Inc. (a exploration stage company) (the
“Company”) as of January 31, 2006, and the related statements of operations,
comprehensive loss, shareholders' deficit, and cash flows for each of the two
years in the period ended January 31, 2006 and the period from January 1, 1995
to January 31, 2006. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provided a
reasonable basis for our opinion.
In
our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Newgold, Inc. as of January 31,
2006, and the results of its operations and its cash flows for each of the
two
years in the period ended January 31, 2006, and the period from January 1,
1995
to January 31, 2006 in conformity with accounting principles generally accepted
in the United States of America.
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 2 to the financial
statements, the Company has incurred a net loss of $2,645,231 and had negative
cash flow from operations of $899,807. In addition, the Company had an
accumulated deficit of $19,030,535 and a shareholders’ deficit of $2,960,365 at
January 31, 2006. These factors, among others, as discussed in Note 2 to the
financial statements, raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans in regard to these matters
are
also described in Note 2. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
SINGER
LEWAK GREENBAUM & GOLDSTEIN LLP
Los
Angeles, California
April
26,
2006
NEWGOLD,
INC.
(AN
EXPLORATION STAGE COMPANY)
BALANCE
SHEET
January
31, 2006
ASSETS
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
Cash
|
|
$
|
700,224
|
|
Travel
advance
|
|
|
1,322
|
|
|
|
|
|
|
Total
current assets
|
|
|
701,546
|
|
|
|
|
|
|
Property,
plant and equipment
|
|
|
19,199
|
|
|
|
|
|
|
Other
Assets
|
|
|
|
|
Restricted
cash
|
|
|
243,204
|
|
Deferred
reclamation costs
|
|
|
270,736
|
|
|
|
|
|
|
Total
other assets
|
|
|
513,940
|
|
|
|
|
|
|
Total
assets
|
|
$
|
1,234,685
|
|
LIABILITIES
AND SHAREHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
Accounts
payable
|
|
$
|
798,233
|
|
Accrued
expenses
|
|
|
1,305,790
|
|
Accrued
reclamation costs
|
|
|
270,736
|
|
Notes
payable due to individuals and officers
|
|
|
457,634
|
|
|
|
|
|
|
Total
current liabilities
|
|
|
2,832,393
|
|
|
|
|
|
|
Long-term
liabilities
|
|
|
|
|
Convertible
debenture and related derivative liabilities,
net
of unamortized discount of $597,260 and deferred
financing
costs of $77,500
|
|
|
562,657
|
|
Deferred
revenue
|
|
|
800,000
|
|
|
|
|
|
|
Total
long-term liabilities
|
|
|
1,362,657
|
|
|
|
|
|
|
Total
liabilities
|
|
|
4,195,050
|
|
The
accompanying notes are an integral part of these financial
statements
Commitments
and contingencies
|
|
|
|
|
|
|
|
|
|
Shareholders'
deficit
|
|
|
|
|
Common
stock, $0.001 par value
250,000,000
shares authorized
68,104,072
shares issued and outstanding
|
|
|
68,104
|
|
Additional
paid in capital
|
|
|
16,002,066
|
|
Deficit
accumulated during the exploration stage
|
|
|
(19,030,535
|
)
|
|
|
|
|
|
Total
shareholders' deficit
|
|
|
(2,960,365
|
)
|
|
|
|
|
|
Total
liabilities and shareholders' deficit
|
|
$
|
1,234,685
|
|
The
accompanying notes are an integral part of these financial
statements
NEWGOLD,
INC.
(AN
EXPLORATION STAGE COMPANY)
STATEMENTS
OF OPERATIONS
For
the Years Ended January 31, 2006 and 2005
and
for the Period from January 1, 1995 to January 31, 2006
|
|
For
the Years Ended January 31,
|
|
For
the Period
From
January 1,
1995
to January
|
|
|
|
2006
|
|
2005
|
|
31,
2006
|
|
Net
sales
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of goods sold
|
|
|
132,166
|
|
|
28,433
|
|
|
302,831
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
(loss)
|
|
|
(132,166
|
)
|
|
(28,433
|
)
|
|
(302,831
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
(674,778
|
)
|
|
(353,972
|
)
|
|
(13,912,008
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(806,944
|
)
|
|
(382,405
|
)
|
|
(14,214,839
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Other
income (expense)
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
|
|
|
|
|
|
72,687
|
|
Dividend
income
|
|
|
-
|
|
|
-
|
|
|
30,188
|
|
Other
income
|
|
|
-
|
|
|
-
|
|
|
6,565
|
|
Adjustments
to fair value of derivatives
|
|
|
(37,418
|
)
|
|
-
|
|
|
(37,418
|
)
|
Interest
expense
|
|
|
(941,347
|
)
|
|
(614,672
|
)
|
|
(2,409,037
|
)
|
Loss
from joint venture
|
|
|
(859,522
|
)
|
|
|
|
|
(859,522
|
)
|
Loss
on sale of marketable securities
|
|
|
-
|
|
|
(281,063
|
)
|
|
(281,063
|
)
|
Bad
debt expense
|
|
|
-
|
|
|
-
|
|
|
(40,374
|
)
|
Loss
on disposal of plant, property
|
|
|
|
|
|
|
|
|
|
|
and
equipment
|
|
|
-
|
|
|
-
|
|
|
(334,927
|
)
|
Loss
on disposal of bond
|
|
|
-
|
|
|
-
|
|
|
(21,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total
other expense
|
|
|
(1,838,287
|
)
|
|
(895,735
|
)
|
|
(3,873,901
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(2,645,231
|
)
|
$
|
(1,278,140
|
)
|
$
|
(18,088,740
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted loss per share
|
|
$
|
(0.05
|
)
|
$
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted weighted-average
|
|
|
|
|
|
|
|
|
|
|
shares
outstanding
|
|
|
56,755,520
|
|
|
47,644,745
|
|
|
|
|
The
accompanying notes are an integral part of these financial
statements
NEWGOLD,
INC.
(AN
EXPLORATION STAGE COMPANY)
STATEMENTS
OF COMPREHENSIVE LOSS
For
the Years Ended January 31, 2006 and 2005
and
for the Period from January 1, 1995 to January 31, 2006
|
|
For
the Years Ended January 31,
|
|
For
the Period
From
January 1,
1995
to January
31,
2006
|
|
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(2,645,231
|
)
|
$
|
(1,278,140
|
)
|
$
|
(18,088,740
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Other
comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
Unrealized
loss from
|
|
|
|
|
|
|
|
|
|
|
marketable
securities
|
|
|
-
|
|
|
-
|
|
|
(204,820
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Sale
of securities with previous unrealized
|
|
|
|
|
|
|
|
|
|
|
holding
loss
|
|
|
-
|
|
|
204,820
|
|
|
204,820
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
loss
|
|
$
|
(2,645,231
|
)
|
$
|
(1,073,320
|
)
|
$
|
(18,088,740
|
)
|
The
accompanying notes are an integral part of these financial
statements
NEWGOLD,
INC.
|
(AN
EXPLORATION STAGE COMPANY)
|
STATEMENTS
OF SHAREHOLDERS' DEFICIT
|
For
the Years Ended January 31, 2006 and 2005
|
and
for the Period from January 1, 1995 to January 31,
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
Other
Com-
|
|
|
|
|
|
|
|
Common
Stock
|
|
Paid
in
|
|
prehensive
|
|
|
|
Accumulated
|
|
|
|
Shares
|
|
Amount
|
|
Capital
|
|
(Loss)
|
|
Deficit
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
December 31, 1994
|
|
|
6,768,358
|
|
$
|
6,768
|
|
|
-
|
|
|
-
|
|
$
|
(636,084
|
)
|
$
|
(629,316
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(233,877
|
)
|
|
(233,877
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
December 31, 1995
|
|
|
6,768,358
|
|
|
6,768
|
|
|
-
|
|
|
-
|
|
|
(869,961
|
)
|
|
(863,193
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued to creditors and shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of
Warehouse Auto Centers, Inc.
|
|
|
305,709
|
|
|
306
|
|
|
305,403
|
|
|
-
|
|
|
(305,709
|
)
|
|
-
|
|
Shares
issued to investors and underwriters
|
|
|
5,135,130
|
|
|
5,135
|
|
|
4,701,835
|
|
|
|
|
|
|
|
|
4,706,970
|
|
Shares
issued to purchase Washington Gulch
|
|
|
3,800,000
|
|
|
3,800
|
|
|
177,200
|
|
|
|
|
|
|
|
|
181,000
|
|
Shares
issued in exchange for net profits interest
|
|
|
1,431,642
|
|
|
1,432
|
|
|
440,605
|
|
|
|
|
|
|
|
|
442,067
|
|
Shares
issued to others
|
|
|
21,000
|
|
|
221
|
|
|
220,779
|
|
|
|
|
|
|
|
|
221,000
|
|
Shares
issued to Repadre
|
|
|
100,000
|
|
|
100
|
|
|
99,900
|
|
|
|
|
|
|
|
|
100,000
|
|
Shares
issued to repurchase 50% interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
in Relief Canyon
|
|
|
1,000,000
|
|
|
1,000
|
|
|
999,000
|
|
|
|
|
|
|
|
|
1,000,000
|
|
Net
loss for the period January 1, 1996
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to January 31, 1997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,803,784
|
)
|
|
(1,803,784
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
January 31, 1997
|
|
|
18,761,839
|
|
|
18,762
|
|
|
6,944,722
|
|
|
-
|
|
|
(2,979,454
|
)
|
|
3,984,030
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued to Warehouse Auto Centers, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
shareholders subsequently cancelled
|
|
|
(25,242
|
)
|
|
(25
|
)
|
|
(25,217
|
)
|
|
|
|
|
|
|
|
(25,242
|
)
|
Shares
issued to others
|
|
|
12,500
|
|
|
13
|
|
|
4,987
|
|
|
|
|
|
|
|
|
5,000
|
|
Additional
shares issued to investors and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these financial
statements
NEWGOLD,
INC.
|
(AN
EXPLORATION STAGE COMPANY)
|
STATEMENTS
OF SHAREHOLDERS' DEFICIT
|
For
the Years Ended January 31, 2006 and 2005
|
and
for the Period from January 1, 1995 to January 31,
2006
|
underwriters for delay in share trading
|
|
|
513,514
|
|
|
513
|
|
|
204,487
|
|
|
|
|
|
|
|
|
205,000
|
|
Shares
issued to Repadre
|
|
|
200,000
|
|
|
200
|
|
|
199,800
|
|
|
|
|
|
|
|
|
200,000
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,883,309
|
)
|
|
(5,883,309
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
January 31, 1998
|
|
|
19,462,611
|
|
|
19,463
|
|
|
7,328,779
|
|
|
-
|
|
|
(8,862,763
|
)
|
|
(1,514,521
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued in exchange for rent
|
|
|
15,000
|
|
|
15
|
|
|
5,985
|
|
|
|
|
|
|
|
|
6,000
|
|
Shares
issued to IBK
|
|
|
5,616,977
|
|
|
5,617
|
|
|
542,383
|
|
|
|
|
|
|
|
|
548,000
|
|
Shares
issued in exchange for property
|
|
|
150,000
|
|
|
150
|
|
|
55,350
|
|
|
|
|
|
|
|
|
55,000
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(753,219
|
)
|
|
(753,219
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
January 31, 1999
|
|
|
25,244,588
|
|
|
25,245
|
|
|
7,932,497
|
|
|
-
|
|
|
(9,615,982
|
)
|
|
(1,658,240
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three-for-two
stock split
|
|
|
12,672,441
|
|
|
12,671
|
|
|
(12,671
|
)
|
|
|
|
|
|
|
|
-
|
|
Shares
issued in exchange for debt conversion
|
|
|
3,205,674
|
|
|
3,206
|
|
|
1,279,065
|
|
|
|
|
|
|
|
|
1,282,271
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(919,735
|
)
|
|
(919,735
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
January 31, 2000
|
|
|
41,122,703
|
|
|
41,122
|
|
|
9,198,891
|
|
|
-
|
|
|
(10,535,717
|
)
|
|
(1,295,704
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for cash
|
|
|
1,796,000
|
|
|
1,796
|
|
|
663,204
|
|
|
|
|
|
|
|
|
665,000
|
|
Additional
shares issued for delay in registration
|
|
|
239,200
|
|
|
239
|
|
|
(239
|
)
|
|
|
|
|
|
|
|
-
|
|
Shares
issued for offering costs
|
|
|
120,000
|
|
|
120
|
|
|
(60,120
|
)
|
|
|
|
|
|
|
|
(60,000
|
)
|
Shares
issued for legal settlement
|
|
|
1,000,000
|
|
|
1,000
|
|
|
649,000
|
|
|
|
|
|
|
|
|
650,000
|
|
Shares
issued for services
|
|
|
78,271
|
|
|
78
|
|
|
69,922
|
|
|
|
|
|
|
|
|
70,000
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,382,723
|
)
|
|
(2,382,723
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
January 31, 2001
|
|
|
44,356,174
|
|
|
44,356
|
|
|
10,520,657
|
|
|
-
|
|
|
(12,918,440
|
)
|
|
(2,353,427
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for cash
|
|
|
2,500,000
|
|
|
2,500
|
|
|
147,500
|
|
|
|
|
|
|
|
|
150,000
|
|
The
accompanying notes are an integral part of these financial
statements
NEWGOLD,
INC.
|
(AN
EXPLORATION STAGE COMPANY)
|
STATEMENTS
OF SHAREHOLDERS' DEFICIT
|
For
the Years Ended January 31, 2006 and 2005
|
and
for the Period from January 1, 1995 to January 31,
2006
|
Warrants
issued with debt
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
|
|
|
|
|
20,000
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,502,366
|
)
|
|
(1,502,366
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
January 31, 2002
|
|
|
46,856,174
|
|
|
46,856
|
|
|
10,688,157
|
|
|
-
|
|
|
(14,420,806
|
)
|
|
(3,685,793
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued upon exercise of warrants
|
|
|
550,000
|
|
|
550
|
|
|
54,450
|
|
|
|
|
|
|
|
|
55,000
|
|
Offering
costs
|
|
|
|
|
|
|
|
|
(1,467
|
)
|
|
|
|
|
|
|
|
(1,467
|
)
|
Warrants
issued with debt
|
|
|
|
|
|
|
|
|
13,574
|
|
|
|
|
|
|
|
|
13,574
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(215,533
|
)
|
|
(215,533
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
January 31, 2003
|
|
|
47,406,174
|
|
|
47,406
|
|
|
10,754,714
|
|
|
-
|
|
|
(14,636,339
|
)
|
|
(3,834,219
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued upon exercise of warrants
|
|
|
200,000
|
|
|
200
|
|
|
19,800
|
|
|
|
|
|
|
|
|
20,000
|
|
Warrants
issued with debt
|
|
|
|
|
|
|
|
|
63,918
|
|
|
|
|
|
|
|
|
63,918
|
|
Other
comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
(204,820
|
)
|
|
|
|
|
(204,820
|
)
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(470,823
|
)
|
|
(470,823
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
January 31, 2004
|
|
|
47,606,174
|
|
|
47,606
|
|
|
10,838,432
|
|
|
(204,820
|
)
|
|
(15,107,162
|
)
|
|
(4,425,944
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for cash
|
|
|
671,667
|
|
|
672
|
|
|
100,078
|
|
|
|
|
|
|
|
|
100,750
|
|
Offering
costs
|
|
|
|
|
|
|
|
|
(124,337
|
)
|
|
|
|
|
|
|
|
(124,337
|
)
|
Warrants
issued with common stock
|
|
|
|
|
|
|
|
|
124,337
|
|
|
|
|
|
|
|
|
124,337
|
|
Warrants
issued with debt
|
|
|
|
|
|
|
|
|
1,284,234
|
|
|
|
|
|
|
|
|
1,284,234
|
|
Sale
of marketable securities
|
|
|
|
|
|
|
|
|
|
|
|
204,820
|
|
|
|
|
|
204,820
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,278,140
|
)
|
|
(1,278,140
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
January 31, 2005
|
|
|
48,277,841
|
|
|
48,278
|
|
|
12,222,744
|
|
|
-
|
|
|
(16,385,302
|
)
|
|
(4,114,280
|
)
|
The
accompanying notes are an integral part of these financial
statements
NEWGOLD,
INC.
|
(AN
EXPLORATION STAGE COMPANY)
|
STATEMENTS
OF SHAREHOLDERS' DEFICIT
|
For
the Years Ended January 31, 2006 and 2005
|
and
for the Period from January 1, 1995 to January 31,
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for cash
|
|
|
5,000,000
|
|
|
5,000
|
|
|
1,070,000
|
|
|
|
|
|
|
|
|
1,075,000
|
|
Shares
issued in exchange for
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
debt conversion
|
|
|
12,326,231
|
|
|
12,326
|
|
|
1,836,609
|
|
|
|
|
|
|
|
|
1,848,935
|
|
Shares
issued to purchase 22%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
interest in Crescent Red Caps LLC
|
|
|
2,500,000
|
|
|
2,500
|
|
|
497,500
|
|
|
|
|
|
|
|
|
500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants
issued with investment in joint venture
|
|
|
|
|
|
|
|
|
359,523
|
|
|
|
|
|
|
|
|
359,523
|
|
Warrants
issued for services
|
|
|
|
|
|
|
|
|
15,690
|
|
|
|
|
|
|
|
|
15,690
|
|
Sale
of marketable securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the period February
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1, 2005 to January 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,645,231
|
)
|
|
(2,645,231
|
)
|
Balance,
January 31, 2006
|
|
|
68,104,072
|
|
$
|
68,104
|
|
$
|
16,002,066
|
|
|
-
|
|
$
|
(19,030,535
|
)
|
$
|
(2,960,365
|
)
|
The
accompanying notes are an integral part of these financial
statements
NEWGOLD,
INC.
|
(AN
EXPLORATION STAGE COMPANY)
|
STATEMENTS
OF CASH FLOWS
|
For
the Years Ended January 31, 2006 and 2005
|
and
for the Period from January 1, 1995 to January 31,
2006
|
|
|
|
|
|
|
|
For
the Period
|
|
|
|
|
|
|
|
From
January 1,
|
|
|
|
For
the Years Ended January 31,
|
|
1995
to January
|
|
|
|
2006
|
|
2005
|
|
31,
2006
|
|
Cash
flows from operating activities
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
($2,645,231
|
)
|
|
($1,278,140
|
)
|
|
($18,088,740
|
)
|
Adjustments
to
reconcile net loss to net cash
|
|
|
|
|
|
|
|
|
|
|
used
in
operating activities
|
|
|
|
|
|
|
|
|
|
|
Accretion
of
warrants issued as a debt discount
|
|
|
777,642
|
|
|
443,682
|
|
|
1,274,257
|
|
Accretion
of
beneficial conversion
|
|
|
71,645
|
|
|
35,823
|
|
|
107,468
|
|
Accretion
of
debt discount
|
|
|
2,740
|
|
|
-
|
|
|
2,740
|
|
Adjustments
to
fair value of derivatives
|
|
|
37,417
|
|
|
-
|
|
|
37,417
|
|
Loss
from joint venture
|
|
|
859,522
|
|
|
-
|
|
|
859,522
|
|
Loss
on
sale of marketable securities
|
|
|
-
|
|
|
281,063
|
|
|
281,063
|
|
Depreciation
and amortization
|
|
|
-
|
|
|
-
|
|
|
124,157
|
|
Loss
on
disposal of property, plant and equipment
|
|
|
-
|
|
|
-
|
|
|
334,927
|
|
Impairment
in
value of property, plant and equipment
|
|
|
-
|
|
|
-
|
|
|
807,266
|
|
Loss
on
disposal of bond
|
|
|
-
|
|
|
-
|
|
|
21,000
|
|
Impairment
in
value of Relief Canyon Mine
|
|
|
-
|
|
|
-
|
|
|
3,311,672
|
|
Impairment
in
value of joint investments
|
|
|
-
|
|
|
-
|
|
|
490,000
|
|
The
accompanying notes are an integral part of these financial
statements
NEWGOLD,
INC.
|
(AN
EXPLORATION STAGE COMPANY)
|
STATEMENTS
OF CASH FLOWS
|
For
the Years Ended January 31, 2006 and 2005
|
and
for the Period from January 1, 1995 to January 31,
2006
|
Bad
debt
|
|
|
-
|
|
|
-
|
|
|
40,374
|
|
Assigned
value
of stock and warrants exchanged for services
|
|
|
15,690
|
|
|
-
|
|
|
552,948
|
|
Gain
on
write off of note payable
|
|
|
|
|
|
-
|
|
|
(7,000
|
)
|
Judgment
loss
accrued
|
|
|
|
|
|
|
|
|
250,000
|
|
(Increase)
decrease in
|
|
|
|
|
|
|
|
|
|
|
Restricted
cash
|
|
|
(243,204
|
)
|
|
|
|
|
(243,204
|
)
|
Employee
receivable
|
|
|
678
|
|
|
2,000
|
|
|
2,678
|
|
Deposits
|
|
|
|
|
|
45,000
|
|
|
4,500
|
|
Deferred
reclamation costs
|
|
|
243,210
|
|
|
-
|
|
|
(194,742
|
)
|
Prepaid
expenses
|
|
|
-
|
|
|
-
|
|
|
(2,900
|
)
|
Reclamation
bonds
|
|
|
-
|
|
|
-
|
|
|
185,000
|
|
Other
assets
|
|
|
-
|
|
|
-
|
|
|
(1,600
|
)
|
Increase
(decrease) in
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
|
229,955
|
|
|
28,082
|
|
|
517,273
|
|
Accrued
expenses
|
|
|
(249,871
|
)
|
|
89,289
|
|
|
1,963,574
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash used by operating activities
|
|
|
(899,807
|
)
|
|
(353,201
|
)
|
|
(7,370,344
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from
sale of marketable securities
|
|
|
-
|
|
|
34,124
|
|
|
34,124
|
|
Investment
in
marketable securities
|
|
|
-
|
|
|
-
|
|
|
(315,188
|
)
|
Advances
from
shareholder
|
|
|
-
|
|
|
-
|
|
|
7,436
|
|
Contribution
from joint venture partner
|
|
|
-
|
|
|
-
|
|
|
775,000
|
|
Purchase
of
joint venture partner interest
|
|
|
-
|
|
|
-
|
|
|
(900,000
|
)
|
The
accompanying notes are an integral part of these financial
statements
NEWGOLD,
INC.
|
(AN
EXPLORATION STAGE COMPANY)
|
STATEMENTS
OF CASH FLOWS
|
For
the Years Ended January 31, 2006 and 2005
|
and
for the Period from January 1, 1995 to January 31,
2006
|
Capital
expenditures
|
|
|
(19,199
|
)
|
|
-
|
|
|
(2,970,706
|
)
|
Proceeds
from
disposal of property, plant and equipment
|
|
|
|
|
|
-
|
|
|
278,783
|
|
Investments
in
joint ventures
|
|
|
-
|
|
|
-
|
|
|
(490,000
|
)
|
Note
receivable
|
|
|
-
|
|
|
-
|
|
|
(268,333
|
)
|
Repayment
of
note receivable
|
|
|
-
|
|
|
-
|
|
|
268,333
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash used by investing activities
|
|
|
(19,199
|
)
|
|
(34,124
|
)
|
|
(3,580,551
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from
the issuance of common stock
|
|
|
1,075,000
|
|
|
100,750
|
|
|
7,559,253
|
|
Proceeds
from
notes payable
|
|
|
527,500
|
|
|
251,043
|
|
|
5,554,548
|
|
Principal
repayments of notes payable
|
|
|
-
|
|
|
(21,953
|
)
|
|
(2,037,706
|
)
|
Repayment
of
advances to affiliate
|
|
|
-
|
|
|
-
|
|
|
(231,663
|
)
|
Deferred
revenue
|
|
|
-
|
|
|
-
|
|
|
800,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by financing activities
|
|
|
1,602,500
|
|
|
329,840
|
|
|
11,644,432
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase in cash
|
|
|
683,494
|
|
|
10,763
|
|
|
693,537
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash,
beginning of year
|
|
|
16,730
|
|
|
5,967
|
|
|
6,687
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash,
end of year
|
|
$
|
700,224
|
|
$
|
16,730
|
|
$
|
700,224
|
|
The
accompanying notes are an integral part of these financial
statements
Supplemental
cash flow information for the years ended January 31, 2006 and 2005
and
January 1, 1995
|
|
through
January 31, 2006 as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
the Period
|
|
|
|
|
|
|
|
From
January 1,
|
|
|
|
For
the Years Ended January 31,
|
|
1995
to January
|
|
|
|
2006
|
|
2005
|
|
31,
2006
|
|
|
|
|
|
|
|
|
|
Cash
paid for interest
|
|
$
|
-
|
|
$
|
-
|
|
$
|
161,107
|
|
Cash
paid for income taxes
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Non
Cash Investing and Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
Conversion
of
related party note payable to common
stock,
including interest payable of $446,193
|
|
$
|
1,848,935
|
|
$
|
-
|
|
$
|
1,848,935
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these financial
statements
NOTE
1 - ORGANIZATION AND LINE OF BUSINESS
NEWGOLD,
Inc. (“the Company”) has been in the business of acquiring, exploring,
developing, and producing gold properties. The Company had rights to mine
properties in Nevada and Montana. Its primary focus was on the Relief Canyon
Mine located near Lovelock, Nevada, where it has performed development and
exploratory drilling and was in the process of obtaining permits to allow
operation of the Relief Canyon Mine. In December 1997, the Company placed the
Relief Canyon Mine on care and maintenance status. The Company also conducted
exploration at its Washington Gulch Mine property in Montana.
In
February 2000 the Company began to implement an entirely new business model
of
investing in Internet companies. Due to the deterioration of the investment
market for these types of companies later in 2000, the Company abandoned this
investment strategy. From mid-2001 until the beginning of 2003 Newgold was
essentially inactive, only continuing with some of the care and maintenance
at
Relief Canyon, as provided for by a non-affiliate company owned by the Chairman
and CEO of Newgold.
The
Company has embarked on a business strategy whereby it will invest in and/or
manage gold mining and other mineral producing properties. Currently, the
Company’s principal assets include various mineral leases associated with the
Relief Canyon mine located near Lovelock, Nevada along with various items of
mining equipment located at that site as well as a 22% interest in a joint
venture covering two separate leasehold interests covering over 2700 acres
in
Lander County, Nevada. The Company’s business will be to acquire, explore
and, if warranted, develop various mining properties located in the state of
Nevada. The Company plans to carryout comprehensive exploration and
development programs and when appropriate, begin mining activities on its
properties. The Company may fund and conduct these activities itself, or it
may
outsource some of these activities through the use of various joint venture,
royalty or partnership arrangements pursuant to which other companies would
agree to finance, carryout the exploration and development programs, or perform
mining operations on Newgold’s mining properties. The Company’s current
plan may not require the hiring of significant amounts of mining employees
depending upon the level, if any, of the mining and exploration activities
outsourced to other entities.
Merger
In
November 1996, Newgold, Inc. of Nevada (Old Newgold) was merged into Warehouse
Auto Centers, Inc. (WAC), a public company, which had previously filed an
involuntary petition under Chapter 11 of the United States Bankruptcy Code
in
the United States Bankruptcy Court for the Western District of New York.
Pursuant to the plan of reorganization and merger (the Plan), (i) WAC which
was
the surviving corporation for legal purposes, changed its name to Newgold Inc.
(the Company), (ii) the outstanding shares of Old Newgold were converted into
the right to receive an aggregate of 12,000,000 shares or approximately 69%
of
the post merger outstanding common stock of the Company, (iii) each outstanding
share of WAC was converted into the right to receive 1/65 share of the common
stock of the Company, for an aggregate of 51,034 shares or less than 1% of
the
post merger outstanding common stock, (iv) unsecured trade debts and other
unsecured pre-petition liabilities were paid in full via the issuance of one
share of the Company’s stock, for each $42 of debt, for an aggregate of 63,374
shares or less than 1% of the post merger outstanding common stock, and (v)
post
petition creditors received 1 share of stock for each $1 of debt, for an
aggregate of 191,301 shares or approximately 1% of the post merger outstanding
common stock. The Plan also required an amendment to the Company’s capital
structure to increase the number of shares authorized to 50,000,000 and to
reduce the corresponding par value to $.001.
In
connection with the Plan, the Company raised $4,707,000 of cash through the
issuance of convertible debtor certificates. Shortly after confirmation of
the
Plan, the debtor certificates were exchanged for 5,135,130 shares of common
stock (including 428,130 shares issued in lieu of paying cash for underwriter’s
fees) representing approximately 29% of the post merger outstanding common
stock. An additional bonus of 513,514 shares was issued to investors and
underwriters during the year ended January 31, 1998 for delay in the effective
date of the Company’s stock trading.
For
accounting purposes, Old Newgold has been treated as the acquirer (reverse
acquisition). Accordingly, the historical financial statements prior to November
21, 1996 are those of Old Newgold. There were no assets or liabilities acquired
in this transaction and there is no impact on the statement of
operations.
NOTE
2 - GOING CONCERN
These
financial statements have been prepared on a going concern basis. During the
years ended January 31, 2006 and 2005 and the period from January 1, 1995 to
January 31, 2006, Newgold incurred net losses of approximately $2,645,231,
$1,278,140 and $18,088,740, respectively. In addition, Newgold had a total
shareholders’ deficit of $2,960,365 and was in the exploration stage since
inception and through January 31, 2006. The Company's ability to continue as
a
going concern is dependent upon its ability to generate profitable operations
in
the future and/or to obtain the necessary financing to meet its obligations
and
repay its liabilities arising from normal business operations when they come
due. The outcome of these matters cannot be predicted with any certainty at
this
time. Since inception, the Company has satisfied its capital needs by issuing
equity securities.
Management
plans to continue to provide for its capital needs during the year ended January
31, 2006 by issuing equity securities or incurring additional debt financing,
with the proceeds to be used to re-establish mining operations at Relief Canyon
as well as improve its working capital position. These financial statements
do
not include any adjustments to the amounts and classification of assets and
liabilities that may be necessary should the Company be unable to continue
as a
going concern.
NOTE
3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Effective
January 1, 1995 (date of inception), the Company is considered an exploration
stage Company as defined in SFAS No. 7. The Company’s exploration stage
activities consist of the development of several mining properties located
in
Nevada. Sources of financing for these exploration stage activities have been
primarily debt and equity financing. The Company has, at the present time,
not
paid any dividends and any dividends that may be paid in the future will depend
upon the financial requirements of the Company and other relevant
factors.
Cash
and Cash Equivalents
For
the
purpose of the statements of cash flows, the Company considers all highly liquid
investments purchased with original maturities of three months or less to be
cash equivalents.
Restricted
Cash
Restricted
cash represents a certificate of deposit with Wells Fargo Bank to serve as
collateral for a reclamation bond with the Nevada Department of Environmental
Protection at the Relief Canyon Mine.
Marketable
Securities Available for Sale
Investments
in equity securities are classified as available-for-sale. Securities classified
as available for sale are marked to market at each period end. Changes in value
on such securities are recorded as a component of
Other comprehensive income (loss).
If
declines in value are deemed other than temporary, losses are reflected
in
Net
income (loss).
Property
and Equipment
Depreciation,
depletion and amortization of mining properties, mine development costs and
major plant facilities will be computed principally by the units-of-production
method based on estimated proven and probable ore reserves. Proven and probable
ore reserves reflect estimated quantities of ore which can be economically
recovered in the future from known mineral deposits. Such estimates are based
on
current and projected costs and prices. Other equipment is depreciated using
the
straight-line method principally over the estimated useful life of seven years.
Deferred
Reclamation Costs
In
August
2001, the Financial Accounting Standards Board (“FASB”) issued Statement of
Financial Accounting Standards (“SFAS”) No. 143, “Accounting for Asset
Retirement Obligations,” which established a uniform methodology for accounting
for estimated reclamation and abandonment costs. The statement was adopted
February 1, 2003. The reclamation costs will be allocated to expense over the
life of the related assets and will be adjusted for changes resulting from
the
passage of time and revisions to either the timing or amount of the original
present value estimate.
Prior
to
adoption of SFAS No. 143, estimated future reclamation costs were based
principally on legal and regulatory requirements. Such costs related to active
mines were accrued and charged over the expected operating lives of the mines
using the UOP method based on proven and probable reserves. Future remediation
costs for inactive mines were accrued based on management’s best estimate at the
end of each period of the undiscounted costs expected to be incurred at a site.
Such cost estimates included, where applicable, ongoing care, maintenance and
monitoring costs. Changes in estimates at inactive mines were reflected in
earnings in the period an estimate was revised.
Exploration
Costs
Exploration
costs are expensed as incurred. All costs related to property acquisitions
are
capitalized.
Mine
Development Costs
Mine
development costs consist of all costs associated with bringing mines into
production, to develop new ore bodies and to develop mine areas substantially
in
advance of current production. The decision to develop a mine is based on
assessment of the commercial viability of the property and the availability
of
financing. Once the decision to proceed to development is made, development
and
other expenditures relating to the project will be deferred and carried at
cost
with the intention that these will be depleted by charges against earnings
from
future mining operations. No depreciation will be charged against the property
until commercial production commences. After a mine has been brought into
commercial production, any additional work on that property will be expensed
as
incurred, except for large development programs, which will be deferred and
depleted.
Financing
Costs
Financing
costs, including interest, are capitalized when they arise from indebtedness
incurred to finance development and construction activities on properties that
are not yet subject to depreciation or depletion. Financing costs are charged
against earnings from the time that mining operations commence. Capitalization
is based upon the actual interest on debt specifically incurred or on the
average borrowing rate for all other debt except where shares are issued to
fund
the cost of the project.
Depreciation,
Depletion and Amortization
Assets
other than mining properties and mineral rights are depreciated using the
straight-line method over their estimated useful lives. Capitalized development
costs are amortized on the units of production method considering proven and
probable reserves. Depreciation and depletion rates are subject to periodic
review to ensure that asset costs are amortized over their useful
lives.
Impairment
Mining
projects and properties are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of these assets may not
be
recoverable. If estimated future cash flows expected to result from the use
of
the mining project or property and its eventual disposition are less than the
carrying amount, impairment is recognized based on the estimated fair market
value of the mining project or property. Fair value generally is based on the
present value of estimated future net cash flows for each mining project or
property, calculated using estimates of proven and probable minable reserves,
geological resources, future prices, operating costs, capital requirements
and
reclamation costs. A provision for impairment in valuation of development costs
and property, plant and equipment amounted to $800,000 for the year ended
January 31, 2002 and was charged to operating expense. After these adjustments
all development costs and property, plant and equipment have been fully written
off.
Management’s
estimates of future cash flows are subject to risks and uncertainties.
Therefore, it is reasonably possible that changes could occur which may affect
the recoverability of the Company’s investment in mineral
properties.
Risks
Associated with Gold Mining
The
business of gold mining is subject to certain types of risks, including
environmental hazards, industrial accidents, and theft. Prior to suspending
operations, the Company carried insurance against certain property damage loss
(including business interruption) and comprehensive general liability insurance.
While the Company maintained insurance consistent with industry practice, it
is
not possible to insure against all risks associated with the mining business,
or
prudent to assume that insurance will continue to be available at a reasonable
cost. The Company has not obtained environmental liability insurance because
such coverage is not considered by management to be cost effective. The Company
currently carries no insurance on any of its properties due to the current
status of the mine and the Company’s current financial condition.
Reclamation
Costs
Reclamation
costs and related accrued liabilities, which are based on the Company’s
interpretation of current environmental and regulatory requirements, are accrued
and expensed, upon determination.
Based
on
current environmental regulations and known reclamation requirements, management
has included its best estimates of these obligations in its reclamation
accruals. However, it is reasonably possible that the Company’s best estimates
of its ultimate reclamation liabilities could change as a result of changes
in
regulations or cost estimates.
Valuation
of Derivative Instruments
FAS
No. 133 "Accounting for Derivative Instruments and Hedging Activities
"
requires
bifurcation of embedded derivative instruments and measurement of their fair
value for accounting purposes. In determining the appropriate fair value, the
Company uses the Black Scholes model as a valuation technique. Derivative
liabilities are adjusted to reflect fair value at each period end, with any
increase or decrease in the fair value being recorded in results of operations
as Adjustments to Fair Value of Derivatives. In addition, the fair values of
freestanding derivative instruments such as warrants are valued using Black
Scholes models.
Revenue
Recognition
Revenues
will be recognized when deliveries of gold are made, title and risk of loss
passes to the buyer and collectibility is reasonably assured. Deferred revenue
represents non-refundable cash received in exchange for royalties on net smelter
returns on the Relief Canyon Mine. Deferred revenue will be amortized to
earnings based on estimated production in accordance with the royalty agreement.
Fair
Value of Financial Instruments
The
Company's financial instruments include cash and cash equivalents and accounts
payable - trade. The carrying amounts for these financial instruments
approximate fair value due to their short maturities.
Comprehensive
Income
The
Company utilizes SFAS No. 130, "Reporting Comprehensive Income." This statement
establishes standards for reporting comprehensive income and its components
in a
financial statement. Comprehensive income as defined includes all changes in
equity (net assets) during a period from non-owner sources. Examples of items
to
be included in comprehensive income, which are excluded from net income, include
foreign currency translation adjustments, minimum pension liability adjustments,
and unrealized gains and losses on available-for-sale marketable securities.
Comprehensive income is presented in the Company's financial statements since
the Company did have unrealized gain (loss) of from changes in equity from
available-for-sale marketable securities.
Income
Taxes
The
Company accounts for income taxes under the liability method, which requires
the
recognition of deferred tax assets and liabilities for the expected future
tax
consequences of events that have been included in the financial statements
or
tax returns. Under this method, deferred income taxes are recognized for the
tax
consequences in future years of differences between the tax bases of assets
and
liabilities and their financial reporting amounts at each period end based
on
enacted tax laws and statutory tax rates applicable to the periods in which
the
differences are expected to affect taxable income. Valuation allowances are
established, when necessary, to reduce deferred tax assets to the amount
expected to be realized.
As
of
January 31, 2005, the deferred tax assets related to the Company’s net operating
loss carry-forwards are fully reserved. Due to the provisions of Internal
Revenue Code Section 338, the Company may not have any net operating loss
carry-forwards available to offset financial statement or tax return taxable
income in future periods as a result of a change in control involving 50
percentage points or more of the issued and outstanding securities of the
Company.
Estimates
The
preparation of financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and
liabilities
at the date of the financial statements and the reported amounts of revenue
and
expenses during the reporting period. Actual results could differ from those
estimates.
Loss
Per Share
The
Company utilizes SFAS No. 128, "Earnings per Share." Basic loss per share is
computed by dividing loss available to common shareholders by the
weighted-average number of common shares outstanding. Diluted loss per share
is
computed similar to basic loss per share except that the denominator is
increased to include the number of additional common shares that would have
been
outstanding if the potential common shares had been issued and if the additional
common shares were dilutive. Common equivalent shares are excluded from the
computation if their effect is anti-dilutive.
The
following common stock equivalents were excluded from the calculation of diluted
loss per share since their effect would have been anti-dilutive:
|
|
2006
|
|
2005
|
|
Warrants
|
|
|
20,774,583
|
|
|
11,724,583
|
|
Concentrations
of Credit Risk
Financial
instruments which potentially subject the Company to concentrations of credit
risk consist of cash and cash equivalents. The Company places its cash and
cash
equivalents with high credit, quality financial institutions. At times, such
cash and cash equivalents may be in excess of the Federal Deposit Insurance
Corporation insurance limit of $100,000. The Company has not experienced any
losses in such accounts and believes it is not exposed to any significant credit
risk on cash and cash equivalents.
Recent
Accounting Pronouncements
In
November 2004, the FASB issued SFAS No. 151,”Inventory Costs”. SFAS No. 151
amends the accounting for abnormal amounts of idle facility expense, freight,
handling costs, and wasted material (spoilage) under the guidance in ARB No.
43,
Chapter 4,"Inventory Pricing”. Paragraph 5 of ARB No. 43, Chapter 4, previously
stated that ". . . under some circumstances, items such as idle facility
expense, excessive spoilage, double freight, and rehandling costs may be so
abnormal as to require treatment as current period charges. . . ." This
Statement requires that those items be recognized as current-period charges
regardless of whether they meet the criterion of "so abnormal." In addition,
this Statement requires that allocation of fixed production overheads to the
costs of conversion be based on the normal capacity of the production
facilities. This statement is effective for inventory costs incurred during
fiscal years beginning after June 15, 2005. Management does not expect adoption
of SFAS No. 151 to have a material impact on the Company’s financial
statements.
In
December 2004, the FASB issued SFAS No. 152,”Accounting for Real Estate
Time-Sharing Transactions”. The FASB issued this Statement as a result of the
guidance provided in AICPA Statement of Position (SOP) 04-2,”Accounting for Real
Estate Time-Sharing Transactions”. SOP 04-2 applies to all real estate
time-sharing transactions. Among other items, the SOP provides guidance on
the
recording of credit losses and the treatment of selling costs, but does not
change the revenue recognition guidance in SFAS No. 66,”Accounting for Sales of
Real Estate”, for real estate time-sharing transactions. SFAS No. 152 amends
Statement No. 66 to reference the guidance provided in SOP 04-2. SFAS No. 152
also amends SFAS No. 67, “Accounting for Costs and Initial Rental Operations of
Real Estate Projects”, to state that SOP 04-2 provides the relevant guidance on
accounting for incidental operations and costs related to the sale of real
estate
time-sharing transactions. SFAS No. 152 is effective for years beginning after
June 15, 2005, with restatements of previously issued financial statements
prohibited. This statement is not applicable to the Company.
In
December 2004, the FASB issued SFAS No. 153,”Exchanges of Nonmonetary Assets,”
an amendment to Opinion No. 29,”Accounting for Nonmonetary Transactions”.
Statement No. 153 eliminates certain differences in the guidance in Opinion
No.
29 as compared to the guidance contained in standards issued by the
International Accounting Standards Board. The amendment to Opinion No. 29
eliminates the fair value exception for nonmonetary exchanges of similar
productive assets and replaces it with a general exception for exchanges of
nonmonetary assets that do not have commercial substance. Such an exchange
has
commercial substance if the future cash flows of the entity are expected to
change significantly as a result of the exchange. SFAS No. 153 is effective
for
nonmonetary asset exchanges occurring in periods beginning after June 15, 2005.
Earlier application is permitted for nonmonetary asset exchanges occurring
in
periods beginning after December 16, 2004. Management does not expect adoption
of SFAS No. 153 to have a material impact on the Company’s financial
statements.
In
March
2005, the FASB issued FASB Interpretation (“FIN”) No. 47, “Accounting for
Conditional Asset Retirement Obligations”. FIN No. 47
clarifies that the term conditional asset retirement obligation as
used in FASB Statement No. 143, “Accounting for Asset Retirement
Obligations,” refers to a legal obligation to perform an asset
retirement activity in which the timing and (or) method of settlement are
conditional on a future event that may or may not be within the control of
the
entity. The obligation to perform the asset retirement activity is
unconditional even though uncertainty exists about the timing and (or) method
of
settlement. Uncertainty about the timing and/or method of settlement of a
conditional asset retirement obligation should be factored into the measurement
of the liability when sufficient information exists. This
interpretation also clarifies when an entity would have sufficient
information to reasonably estimate the fair value of an asset retirement
obligation.
FIN
No.
47 is effective no later than the end of fiscal years ending after December
15, 2005 (December 31, 2005 for calendar-year companies). Retrospective
application of interim financial information is permitted but is not required.
Management does not expect adoption of FIN No. 47 to have a material impact
on
Newgold’s financial statements.
In
May
2005, the FASB issued Statement of Accounting Standards (SFAS) No. 154,
“Accounting Changes and Error Corrections” an amendment to Accounting Principles
Bulletin (APB) Opinion No. 20, “Accounting Changes”, and SFAS No. 3, “Reporting
Accounting Changes in Interim Financial Statements” though SFAS No. 154 carries
forward the guidance in APB No. 20 and SFAS No. 3 with respect to accounting
for
changes in estimates, changes in reporting entity, and the correction of errors.
SFAS No. 154 establishes new standards on accounting for changes in accounting
principles, whereby all such changes must be accounted for by retrospective
application to the financial statements of prior periods unless it is
impracticable to do so. SFAS No. 154 is effective for accounting changes
and error corrections made in fiscal years beginning after December 15, 2005,
with early adoption permitted for changes and corrections made in years
beginning after May 2005.
Effective
for reporting periods beginning after April 29, 2004, the Emerging Issues Task
Force (EITF) released Issue 04-2, "Whether Mineral Rights are Tangible or
Intangible Assets." The consensus was that mineral rights acquired on a business
combination are tangible assets and should be recorded as a separate component
of property, plant and equipment either on the face of the financial statements
or in the notes. The Company will comply with the Issue in the future as
required.
Effective
for reporting periods beginning after March 31, 2004, the EITF released Issue
No. 04-3, "Mining Assets: Impairment and Business Combinations." The EITF
reached consensus that an entity should include value beyond proven and probable
reserves in the value allocated to mining assets in a purchase price allocation
to the extent a market participant would include such value in determining
the
fair market value of the asset. The EITF also reached consensus that an entity
should include the effects of anticipated changes in market prices of minerals
when determining the fair market value of mining assets in a purchase price
equation in a manner consistent with expectations of the marketplace.
Effective
for reporting periods beginning after December 15, 2005, the EITF released
Issue
No. 04-6, “Accounting For Stripping Costs Incurred During Production In The
Mining Industry." The EITF reached a consensus of accounting for “stripping
cost”, the cost of removing overburden (material overlying a mineral deposit
that must be removed prior to mining) and waste materials, during the production
phase and determined that such costs are considered variable production costs
and thus should be included in the cost of inventory produced during the period
in which the stripping costs are incurred. The consensus applies to only
entities involved in finding and removing wasting natural resources. As such,
this statement is not applicable to the Company.
In
February 2006, the FASB issued SFAS No. 155, “Accounting for Certain Hybrid
Financial Instruments”, which amends SFAS No. 133, “Accounting for Derivatives
Instruments and Hedging Activities” and SFAS No. 140, “Accounting for Transfers
and Servicing of Financial Assets and Extinguishment of Liabilities”. SFAS No.
155 amends SFAS No. 133 to narrow the scope exception for interest-only and
principal-only strips on debt instruments to include only such strips
representing rights to receive a specified portion of the contractual interest
or principle cash flows. SFAS No. 155 also amends SFAS No. 140 to allow
qualifying special-purpose entities to hold a passive derivative financial
instrument pertaining to beneficial interests that itself is a derivative
instrument. The
Company is currently evaluating the impact this new Standard but believes that
it will not have a material impact on the Company’s financial position, results
of operations, or cash flows.
In
March
2006, the FASB issued SFAS No. 156, “Accounting
for Servicing of Financial Assets” (“SFAS NO. 156”), which provides an approach
to simplify efforts to obtain hedge-like (offset) accounting. This Statement
amends FASB Statement No. 140, “Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities”, with respect to the
accounting for separately recognized servicing assets and servicing liabilities.
The Statement (1) requires an entity to recognize a servicing asset or servicing
liability each time it undertakes an obligation to service a financial asset
by
entering into a servicing contract in certain situations; (2) requires that
a
separately recognized servicing asset or servicing liability be initially
measured at fair value, if practicable; (3) permits an entity to choose either
the amortization method or the fair value method for subsequent measurement
for
each class of separately recognized servicing assets or servicing liabilities;
(4) permits at initial adoption a one-time reclassification of
available-for-sale securities to trading securities by an entity with recognized
servicing rights, provided the securities reclassified offset the entity’s
exposure to changes in the fair value of the servicing assets or liabilities;
and (5) requires separate presentation of servicing assets and servicing
liabilities subsequently measured at fair value in the balance sheet and
additional disclosures for all separately recognized servicing assets and
servicing liabilities. SFAS No. 156 is effective for all separately recognized
servicing assets and liabilities as of the beginning of an entity’s fiscal year
that begins after September 15, 2006, with earlier adoption permitted in certain
circumstances. The Statement also describes the manner in which it should be
initially applied. The Company does not believe that SFAS No. 156 will have
a
material impact on its financial position, results of operations or cash
flows.
NOTE
4 -MARKETABLE SECURITIES AVAILABLE FOR SALE
At
January 31, 2006 and 2005 the Company held no marketable securities available
for sale. In October 2004 the Company sold all of its investment in marketable
securities. This resulted in net proceeds of $34,124 and a recognized loss
of
sale of $281,063.
NOTE
5 - PROPERTY AND EQUIPMENT
Property
and equipment at January 31, 2006 was recorded at $19,199 and consisted of
additional monitoring wells that were installed at the Relief Canyon Mine during
the year ended January 31, 2006. The Company had previously determined that
the
value of its fixed assets at the Relief Canyon Mine were permanently impaired
and wrote off assets with a basis of $800,000. If the Company can reestablish
mining operations at Relief Canyon it is possible that some of these assets
could be utilized in such operations.
A
summary
of property, plant and equipment previously written off was as
follows:
|
|
Buildings
|
|
Machinery
&
Equipment
|
|
Development
Costs
|
|
Capitalized
Interest
|
|
Total
|
|
Relief
Canyon Mine
|
|
$
|
215,510
|
|
$
|
277,307
|
|
$
|
261,742
|
|
$
|
45,441
|
|
$
|
800,000
|
|
All
office furniture and equipment has been fully depreciated as of January 31,
2006.
NOTE
6 - NOTES PAYABLE TO RELATED PARTIES AND INDIVIDUALS
Unsecured
notes payable to individuals and related parties consist of the following at
January 31, 2006:
Loans
from officers:
|
|
|
|
Convertible
notes payable
|
$
|
209,251
|
|
The
notes bear interest at 8% per year.
In
October 2004, the Company consolidated the amounts owed to the
Chief
Executive Officer and the Chief Financial Officer referred to in
Note 10
(excluding accrued interest payable) into new convertible notes
payable
due September 30, 2005. The notes and any interest accrued on the
new
notes are convertible into common shares of the Company at a conversion
price of $0.15 per share. On July 31, 2005 the Chief Executive
Officer
converted his note payable and accrued interest payable on all
of his
notes payable into 12,326,231 common shares of Newgold. In connection
with
the loans, warrants to purchase 5,798,140 and 1,395,007 shares
of common
stock have been issued to the Chief Executive Officer and the Chief
Financial Officer, respectively.
|
|
|
|
|
Term
notes payable
|
$
|
24,844
|
|
The
notes bear interest at 8% per year.
The
notes are due October 31, 2006 and January 31, 2007. Newgold is
not in
default with respect to these loans. In connection with the loans,
warrants to purchase 141,540 shares of common stock have been issued.
The
warrants have been valued using the Black-Scholes option pricing
model
(see Note 8). The warrants were issued at $0.15 per share and expire
in
five years from the date of issuance.
|
|
|
|
|
Loan
from individual.
|
$
|
176,500
|
|
The
note bears interest at 8% per year.
The
note is currently due. The Company is in default with respect to
this
loan.
|
|
|
|
|
Other
non-interest bearing advances
|
|
47,039
|
|
Total
notes payable to individuals and related parties
|
$
|
457,634
|
|
Interest
expense was $941,347, $614,672 and $2,409,037 for the years ended January 31,
2006 and 2005, and the period from January 1, 1995 to January 31, 2006,
respectively.
NOTE
7 - CONVERTIBLE DEBENTURE
On
January 27, 2006, Newgold entered into a Securities Purchase Agreement (the
“Purchase Agreement”) and other agreements in connection with the private
placement of a convertible debenture, in the principal amount of $1,000,000
and
bearing interest at 8% per annum (the “Debenture”). The Debenture was funded
$600,000 on January 27, 2006, with additional fundings due as follows: $200,000
upon the filing of a resale registration statement with the SEC and $200,000
upon the registration statement being declared effective by the SEC. Of the
$600,000 funded on January 27, 2006, $77,500 was paid for various loan fees
and
closing costs. The Debenture is due and payable on January 27, 2009 unless
it is
converted into shares of Newgold Common Stock or is repaid prior to its
expiration date. The conversion rate is adjustable and at any conversion date,
will be the lower of $0.2626 per share or 95% of the Market Conversion Price.
In
conjunction with the Purchase Agreement, Newgold entered into an Investor
Registration Rights Agreement (the “Registration Rights Agreement”). The
Registration Rights Agreement requires Newgold to register at least 24,050,025
shares of our Common Stock to cover the conversion of the Debenture (assuming
conversion prices substantially below $0.2626) and 2,500,000 shares of our
Common Stock issuable upon conversion of warrants (the “Warrants”) granted to
the Debenture holder. Newgold is required to keep this Registration Statement
effective until the Debenture has been fully converted, repaid, or becomes
due
and the Warrants have been fully exercised or expire. Both the Debenture and
the
Warrants are currently convertible or exercisable, respectively.
In
conjunction with the Purchase Agreement, Newgold entered into a Security
Agreement (the “Security Agreement”). The Security Agreement creates a secured
interest in favor of the Debenture holder in our mining interest and assets
in
the Relief Canyon Mine property. This security interest was created by
recordation of a Memorandum of Security Agreement filed in Pershing County,
Nevada on February 14, 2006. Consequently, should a default occur under the
Debenture, the Debenture holder could take over or sell all of our interests,
business and assets associated with the Relief Canyon Mine.
The
transaction, to the extent that it is to be satisfied with common stock of
the
Company, would normally be included as equity obligations. However, in the
instant case, due to the indeterminate number of shares which might be issued
under the embedded convertible note debt conversion feature, the Company is
required to record a liability for the fair value of the detachable warrants
and
the embedded convertible feature of the note payable (included in the
liabilities as a "derivative liability").
The
accompanying financial statements comply with current requirements relating
to
warrants and embedded conversion features as described in FAS 133, EITF 98-5,
00-19, and 00-27, and APB 14 as follows:
·
|
The
Company allocated the proceeds received between convertible debt
and the
detachable warrants based upon the relative fair market values on
the date
the proceeds were received.
|
·
|
Subsequent
to the initial recording, the change in the fair value of the detachable
warrants, determined under the Black-Scholes option pricing formula,
and
the change in the fair value of the embedded derivative in the conversion
feature of the convertible debentures are recorded as adjustments
to the
liabilities at January 31, 2006.
|
·
|
$37,418
of expense relating to the change in the fair value of the Company's
stock
reflected in the change in the fair value of the warrants and derivatives
(noted above) is included as other income (expense).
|
·
|
Accreted
interest of $2,740 as of January 31,
2006.
|
The
following table summarizes the various components of the convertible notes
as of
January 31, 2006:
Derivative
liabilities
|
|
$
|
637,417
|
|
Convertible
debenture
|
|
|
600,000
|
|
Unamortized
discount
|
|
|
(597,260
|
)
|
Deferred
financing costs
|
|
|
(77,500
|
)
|
Total
convertible debt
|
|
|
|
|
and
financing costs
|
|
$
|
562,657
|
|
NOTE
8 - COMMITMENTS AND CONTINGENCIES
Except
for the advance royalty and rent payments noted below, the Company is not
obligated under any capital leases or non-cancelable operating lease with
initial or remaining lease terms in excess of one year as of January 31, 2005.
However, minimum annual royalty payments are required to retain the lease rights
to the Company’s properties.
Relief
Canyon Mine
The
Company purchased the Relief Canyon Mine from J.D. Welsh Associates (Welsh)
in
January 1995. The mine consisted of 39 claims and a lease for access to an
additional 800 acres contiguous to the claims. During 1997, the Company staked
an additional 402 claims. Subsequent to January 31, 1998, the Company reduced
the total claims to 50 (approximately 1,000 acres). The annual payment to
maintain these claims is $5,000. As part of the original purchase of Relief
Canyon Mine, Welsh assigned the lease from Santa Fe Gold Corporation (Santa
Fe)
to the Company. The lease granted Santa Fe the sole right of approval of
transfer to any subsequent owner of the Relief Canyon Mine. Santa Fe had
accepted lease and minimum royalty payments from the Company, but has declined
to approve the transfer. Due to Welsh’s inability to transfer the Santa Fe
lease, the original purchase price of $500,000 for Relief Canyon Mine was
reduced by $50,000 in 1996 to $450,000.
Subsequent
to January 31, 1998, the lease was terminated by Santa Fe. Management believes
loss of the Santa Fe lease will have no material adverse affect on the remaining
operations of the mine operation or the financial position of the
Company.
During
1996, Repadre Capital Corporation (“Repadre”) purchased for $500,000 a net
smelter return royalty (Repadre Royalty). Repadre was to receive a 1.5% royalty
from production at each of the Relief Canyon Mine and Mission Mines. In July
1997, an additional $300,000 was paid by Repadre for an additional 1% royalty
from the Relief Canyon Mine. In October, 1997, when the Mission Mine lease
was
terminated, Repadre exercised its option to transfer the Repadre Royalty solely
to the Relief Canyon Mine resulting in a total 4% royalty. The total amount
received of $800,000 has been recorded as deferred revenue in the accompanying
financial statements.
Crescent
Red Caps Joint Venture
Newgold
is the owner of a 22.22% joint venture interest and is the operator of the
Crescent Red Caps Joint Venture (“Crescent Red Caps”). The remaining 77.78%
interest is held by ASDi LLC, a California limited liability company owned
by A.
Scott Dockter, Chairman and CEO of Newgold. Additionally, Newgold, by making
expenditures over the next three years aggregating $2,700,000, will end up
with
a 66.66% overall interest in the joint venture. Newgold will then have the
opportunity to purchase the remaining joint venture interest held by Mr. Dockter
based on the results of the exploration work contemplated by these additional
expenditures.
The
Company acquired its 22.22% in the joint venture by issuing to ASDi LLC
2,500,000 shares of its restricted common stock and a warrant to purchase
2,500,000 shares of its common stock at a price of $0.40. The warrant has a
term
of three years. The common stock was valued at $0.20 per share for a total
of
$500,000. The fair market value of the warrants was calculated to be $359,522
as
determined by the methodology described in Note 9. The Company recorded this
investment as a loss form the joint venture of $859,522 for the year ended
January 31, 2006.
The
properties are subject to two leases which include approximately 135 unpatented
mining claims and cover approximately 2700 acres. All gold, silver and other
mineral production by Crescent Red Caps is subject to a 3% net smelter return
(“NSR”) royalty payable to the lessors except for barite which is subject to a
10% royalty on ore produced from claims covered by the leases.
Litigation
On
February 4, 2000, a complaint was filed against the Company by Sun G. Wong
in
the Superior Court of Sacramento County, California (Case No. 00AS00690). In
the
complaint, Mr. Wong claims that he was held liable as a guarantor of
Newgold in a claim brought by Don Christianson in a breach of contract
action against Newgold. Despite the fact that Newgold settled the action with
Mr. Christianson through the issuance of 350,000 shares of Newgold common stock,
Mr. Wong, nevertheless, paid $60,000 to a third party claiming to hold
Mr. Christianson’s judgment pursuant to Mr. Wong’s guaranty agreement.
Similarly, Mr. Wong alleges that he was held liable as a guarantor for a debt
of
$200,000 owed by Newgold to Roger Primm with regard to money borrowed by
Newgold. Mr. Primm filed suit against the Company which was settled through
the
issuance of 300,000 shares of Newgold common stock. Nevertheless, Mr. Wong
alleges that he remains liable to a third party claiming to hold
Mr. Primm’s judgment for up to $200,000 pursuant to his guaranty of such
debt of Mr. Primm.
On
December 29, 2000, the superior court entered a default judgment against Newgold
in the amount of $400,553 with regard to the Christianson judgment and an
additional $212,500 in regard to the Primm judgment against Mr. Wong. The
Company believes that Mr. Wong was not obligated to pay any sums pursuant to
his
guarantees with regard to the Christianson and Primm judgments against Newgold
and, as a result, Mr. Wong should not have any recourse against the
Company
for reimbursement. Should
Mr. Wong seek to assert these judgments against the Company, the Company cannot
predict the outcome of any such action or the amount of expenses that would
be
ultimately incurred in defending any such claims. The Company is currently
negotiating a settlement with Mr. Wong; however there is no assurance that
an
acceptable settlement will be consummated.
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.
NOTE
9 - SHAREHOLDERS' DEFICIT
The
following common stock transactions occurred during the period from January
1,
1995 to January 31, 2006:
Common
Stock
In
January 1996 3,800,000 shares were issued for the purchase of rights to the
Washington Gulch property. The site was acquired from a former officer of the
Company. The property consists of a mill site located in Montana. The value
of
the common stock issued on the property was recorded at the cash value of the
net monetary assets received which amounted to $181,000.
In
June,
1996 the Company exchanged several “net profits interests” for shares of common
stock of the Company. A net profit interest is a royalty based on the profit
remaining after recapture of certain operating, capital and other costs as
defined by agreement. Net profits interests sold for $442,037 were repurchased
for 1,431,642 shares of common stock.
In
October 1996 the Company issued 1,000,000 shares, valued at $1 per share, to
Casmyn Corp. as partial consideration for the repurchase of their 50% interest
in the Relief Canyon Mine.
In
November 1996, the Company sold 100,000 shares in exchange for $100,000 in
cash
to Repadre Capital Corporation.
In
November 1996, Newgold, Inc. of Nevada (Old Newgold) was merged into Warehouse
Auto Centers, Inc. (WAC), a public company, which had previously filed an
involuntary petition under Chapter 11 of the United States Bankruptcy Code
in
the United States Bankruptcy Court for the Western District of New York.
Pursuant to the plan of reorganization and merger (the Plan), (i) WAC which
was
the surviving corporation for legal purposes, changed its name to Newgold,
Inc.
(the Company), (ii) the outstanding shares of Old Newgold were converted into
the right to receive an aggregate of 12,000,000 shares or approximately 69%
of
the post merger outstanding common stock of the Company, (iii) each outstanding
share of WAC was converted into the right to receive 1/65 share of the common
stock of the Company, for an aggregate of 51,034 shares or less than 1% of
the
post merger outstanding common stock, (iv) unsecured trade debts and other
unsecured pre-petition liabilities were paid in full via the issuance of one
share of the Company's stock for each $42 of debt, for an aggregate of 63,374
shares or less than 1% of the post merger outstanding common stock, and (v)
post
petition 1 share of stock for each $1 of debt, for an aggregate of 191,301
shares or approximately 1% of the post merger outstanding common stock. The
Plan
also required an amendment to the Company's capital structure to
increase
the number of shares authorized to 50,000,000 and to reduce the corresponding
par value to $.001.
In
connection with the Plan, the Company raised $4,707,000 of cash through the
issuance of convertible debtor certificates. Shortly after confirmation of
the
Plan, the debtor certificates were exchanged for 5,135,130 shares of common
stock (including 428,130 shares issued in lieu of paying cash for underwriter's
fees) of the Company representing approximately 29% of the post merger
outstanding common stock.
In
the
bankruptcy reorganization of WAC, all creditors were issued stock in settlement
of accounts payable. During fiscal 1998 post petition creditors had the option
of receiving cash in lieu of stock. Five creditors returned 25,242 shares to
the
Company, resulting in a charge to stockholders' deficit of $25,242.
In
May
1997, the Company issued 12,500 shares to a note holder in payment of a $5,000
note, which had originally been issued in exchange for an agreement to defer
filing a judgment for collection of the $200,000 note.
The
Company's stock was approved by NASD for trading on July 7, 1997. On May 27,
1997, the investors in the WAC bankruptcy reorganization, which had been
approved by the court on November 21, 1996, were issued a ten-percent bonus
of
470,700 shares for the delay in trading. An additional 42,814 shares issued
to
the investment bankers for a total of 513,514 shares. A total of $205,000 was
credited to stockholders' deficit for the transaction.
In
October 1997 Repadre Capital Corp. exercised warrants to purchase 200,000 shares
1997 at $1.00 per share.
The
employment contract for the corporate counsel stipulated the Company would
pay
the rent for a law office. In March 1998, the Company issued 15,000 shares
in
lieu of cash for six months rent. General and administrative expense was charged
$6,000 for the rent. The corporate counsel's office was subsequently relocated
to the Company's headquarters.
In
April
1998, the Company closed a Regulation S offering for 5,480,000 shares to raise
$548,000 at $.10 per share. In connection with this offering 136,977 shares
were
issued as commission to brokers.
As
an
alternative to gold mining, the Board of Directors approved an exploration
program for a calcium bentonite mine located in southern California. In payment
of a purchase option on the mine, the Company issued 150,000 shares of stock
to
the mine owner in May 1998. The Company charged $55,500 to exploration expense
for the option. After completing the due diligence on the mine property, the
Company abandoned development of the mine in August 1998.
On
June
8, 1999 the Board of Directors approved a three-for-two stock split, affected
in
the form of a 50% stock dividend, payable to stockholders of record on June
10,
1999.
In
January 2000 the Board of Directors, agreed that various creditors of the
Company would settle their debt through conversion of the debt into equity
by
issuing stock at a price of $0.40 per share. In total, $1,282,271 of debt was
converted into 3,205,674 shares of stock. $477,977 or 1,194,943 shares were
for
amounts owed to the Chairman of the Company; $328,733 or 821,833
shares
were for amounts owed to two directors and $475,561 or 1,188,898 shares were
for
amounts owed to other shareholders.
In
February 2000, the Company closed a private placement offering or 1,196,000
shares to raise $598,000 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 expired four years from the original date of closing. In connection
with this offering $60,000 were paid as commission to brokers in the form of
120,000 shares of common stock and were accounted for as offering costs. Due
to
the registration of the shares not being completed, as a penalty the Company
issued an additional 239,200 to the investors in August 2000.
In
April
2000, the Company issued 78,271 shares of common stock in exchange for services
related to an Internet interview and broadcast with the Chairman and Chief
Executive Officer of the Company..
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 1,000,000 shares
of stock as reimbursement for the payment of these amounts on behalf of the
Company.
In
October 2000 the Company issued 600,000 shares of common stock to an investor
for $67,000.
In
February 2001 the Company issued 2,500,000 shares of common stock to an investor
for $150,000.
In
January 2003 warrants to purchase 550,000 shares of common stock were exercised
at a price of $0.10 per share. The original exercise price was $1.00 however
the
investors and the Company renegotiated the exercise price to $0.10 per
share.
In
February 2003 warrants to purchase 200,000 shares of common stock were exercised
at a price of $0.10 per share. The original exercise price was $1.00 however
the
investor and the Company renegotiated the exercise price to $0.10 per
share.
In
January 2005 the Company issued 671,667 shares of commons stock at a price
of
$0.15 per share to four investors for total proceeds of $100,750. Additionally,
671,667 warrants to purchase common stock at a price of $0.30 per share were
issued to the investors. The warrants expire three years from the date of
issuance.
In
March
2005 a Special Meeting of Shareholders of Newgold was held for the purpose
of
amending the Articles of Incorporation to affect an increase in the authorized
shares of common stock issuable to 250,000,000 shares. At the meeting the
proposal was approved by the shareholders, with a total of 31,392,611 shares
voting in favor of the amendment, 411,711 voting against the amendment and
10,207 shares abstained from voting.
In
February 2005 Newgold issued 500,000 shares of common stock at a price of $0.15
per share to an investor for total proceeds of $75,000. Additionally, 500,000
warrants to purchase common stock at a price of $0.30 per share were issued
to
the investor. The warrants expire three years from the date of
issuance.
In
April
2005 Newgold issued 2,000,000 shares of common stock at a price of $0.25 per
share to investors for total proceeds of $500,000. Additionally, 1,000,000
warrants to purchase common stock at a price of $0.50 per share were issued
to
the investors. The warrants expire three years from the date of
issuance.
In
July
2005 Newgold issued 12,326,231 shares of common stock at a price of $0.15 per
share to the Chief Executive Officer according to the terms of existing notes
payable to the officer. The issuance resulted in the repayment of principal
and
interest totaling $1,848,935.
In
January 2006 Newgold issued 2,500,000 shares of common stock at a price of
$0.20
per share to ASDi LLC, an entity controlled and managed by the Chief Executive
Officer in exchange for a 22.22% interest in a newly formed entity, Crescent
Red
Caps Joint Venture (see Note 8). Additionally, 2,500,000 warrants to purchase
common stock at a price of $0.40 per share were issued to ASDi LLC. The warrants
expire three years from the date of issuance.
In
January 2006 Newgold issued 2,500,000 shares of common stock at a price of
$0.20
per share to an investor for total proceeds of $500,000. Additionally, 2,500,000
warrants to purchase common stock at a price of $0.40 per share were issued
to
the investor. The warrants expire three years from the date of
issuance.
Warrants
Newgold
has issued common stock warrants to officers of Newgold as part of certain
financing transactions (see Note 6). Newgold has also issued warrants as part
of
the issuance of a convertible debt transaction (see Note 7). Newgold has also
issued warrants as part of the issuance of common stock (see this Note
9).
The
fair
market value of these warrants issued during the years ended January 31, 2006
and 2005 was determined to be $1,365,758 and $1,176,766, respectively, and
was
calculated under the Black-Scholes option pricing model with the following
assumptions used:
|
|
2006
|
|
2005
|
|
Expected
life
|
|
|
3
- 4 years
|
|
|
5
years
|
|
Risk
free interest rate
|
|
|
3.77%-4.49%
|
|
|
3.3%-3.71%
|
|
Volatility
|
|
|
134%
|
|
|
348%
|
|
Expected
dividend yield
|
|
|
None
|
|
|
None
|
|
The
fair
value of these warrants is being amortized to interest expense over one and
three years, the original life of the loans. Total amortization expense for
the
years ended January 31, 2006 and 2005 and the period from January 1, 1995 to
January 31, 2006 was approximately $777,642, $443,682 and $1,274,257,
respectively.
The
following table presents warrant activity through January 31, 2006:
|
|
Number
of Shares
|
|
Weighted
Average Exercise Price
|
|
Outstanding
at January 31, 2000
|
|
|
-
|
|
$
|
-
|
|
Granted
|
|
|
3,746,000
|
|
|
0.55
|
|
Exercised
|
|
|
-
|
|
|
-
|
|
Canceled
or expired
|
|
|
-
|
|
|
-
|
|
Outstanding
at January 31, 2001 and 2002
|
|
|
3,746,000
|
|
|
0.55
|
|
Granted
|
|
|
452,463
|
|
|
0.15
|
|
Exercised
|
|
|
(550,000
|
)
|
|
(0.10
|
)
|
Canceled
or expired
|
|
|
-
|
|
|
-
|
|
Outstanding
at January 31, 2003
|
|
|
3,648,463
|
|
|
0.43
|
|
Granted
|
|
|
1,265,766
|
|
|
0.15
|
|
Exercised
|
|
|
(200,000
|
)
|
|
(0.10
|
)
|
Canceled
or expired
|
|
|
(996,000
|
)
|
|
(1.00
|
)
|
Outstanding
at January 31, 2004
|
|
|
3,718,229
|
|
|
0.15
|
|
Granted
|
|
|
8,006,354
|
|
|
0.16
|
|
Exercised
|
|
|
-
|
|
|
-
|
|
Canceled
or expired
|
|
|
-
|
|
|
-
|
|
Outstanding
at January 31, 2005
|
|
|
11,724,583
|
|
|
0.16
|
|
Granted
|
|
|
9,050,000
|
|
|
0.37
|
|
Exercised
|
|
|
-
|
|
|
-
|
|
Canceled
or expired
|
|
|
-
|
|
|
-
|
|
Outstanding
at January 31, 2006
|
|
|
20,774,583
|
|
$
|
0.25
|
|
Exercisable
at January 31, 2006
|
|
|
20,774,583
|
|
$
|
0.25
|
|
Weighted
average remaining contractual term
|
|
36
months
|
NOTE
10 - INCOME TAXES
As
of
January 31, 2006, the Company had net operating loss carry-forwards of
approximately $11,145,241 available to reduce future Federal taxable income
which, if not used, will expire at various dates through January 31, 2026.
Due
to changes in the ownership of the Company, the utilization of these loss
carry-forwards may be subject to substantial annual limitations. Deferred tax
assets (liabilities) are comprised of the following at January 31,
2006:
Deferred
Tax
Assets
|
|
|
|
Net
Operating Loss Carry-forwards
|
|
$
|
4,774,409
|
|
Contribution
Carryover
|
|
|
16,029
|
|
Accrued
Interest Payable
|
|
|
58,498
|
|
Accrued
Payroll
|
|
|
237,651
|
|
Accrued
Payroll Tax
|
|
|
162,720
|
|
AmortizationDiffBook/Tax
|
|
|
552,469
|
|
AccruedAccountsPayable
|
|
|
88,250
|
|
Capital
Loss Difference
|
|
|
120,416
|
|
Stock
compensation
|
|
|
6,722
|
|
Other
|
|
|
272
|
|
Less
valuation allowance
|
|
|
(5,595,336
|
)
|
Total
Deferred Tax Assets
|
|
|
422,100
|
|
Deferred
Tax Liability
|
|
|
|
|
State
Taxes
|
|
|
(422,100
|
)
|
Total
Deferred Tax Liabilities
|
|
|
(422,100
|
)
|
|
|
|
|
|
Net
deferred tax assets
|
|
$
|
-
|
|
The
net
change in the total valuation allowance for the year ended January 31, 2006
was
$816,412. The valuation allowance is provided to reduce the deferred tax asset
to a level which, more likely than not, will be realized.
The
expected Federal income tax benefit, computed based on the Company’s pre-tax
losses at January 31, 2006 and the statutory Federal income tax rate, is
reconciled to the actual tax benefit reflected in the accompanying financial
statements as follows:
|
2006
|
|
2005
|
Statutory
regular federal income benefit rate
|
34.00%
|
|
34.00%
|
State
taxes
|
8.84%
|
|
8.84%
|
Change
in valuation allowance
|
(42.84)%
|
|
(42.84)%
|
Total
|
0.00%
|
|
0.00%
|
Previous
to June 21, 1996, the stockholder of the Company elected under Internal Revenue
Code Section 1362 to have the Company taxed as an S Corporation. As such, all
Federal and substantially all State income tax attributes passed through the
Company directly to the stockholder until that date. Additionally, the Company
has not filed any tax returns since 1996.
NOTE
11 - RELATED PARTY TRANSACTIONS
Loans
from officers
During
prior periods, the Chief Financial Officer and Secretary of Newgold loaned
Newgold an aggregate of $209,251. As of January 31, 2006 the net principal
balance owing to him was $209,251 and accrued interest payable was $22,692.
See
Note 6.
During
the 2006 fiscal year, the President of Newgold, Scott Dockter, had loaned
Newgold an aggregate of $5,000. As of January 31, 2006 the net principal balance
owing to him was $24,844 and accrued interest payable was $33,023. See Note
6.
In July 2005 a convertible promissory note with a balance of $1,402,742 and
additional accrued interest of $446,193 due to Mr. Dockter was converted
into 12,326,231 shares of Newgold common stock. As of January 31, 2005,
Mr. Dockter had loaned Newgold a total of $24,845 and accrued interest of
$32,023. In addition to the outstanding note payable, Mr. Dockter has been
issued Warrants to purchase up to 12,157,909 shares of Newgold’s Common Stock at
exercise prices ranging from $0.15/share to $0.40/share.
On
January 25, 2006, Newgold entered into a joint venture with ASDi, LLC to develop
two Nevada mining properties known as the Red Caps Project and Crescent Valley
Project. The Red Caps consists of approximately 96 unpatented mining claims
covering 1900 acres and the Crescent Valley consists of approximately 39
unpatented mining claims covering 750 acres. The Red Caps and Crescent Valley
mining claims are currently owned by ASDi, LLC, which is owned and managed
by A.
Scott Dockter, Chairman and CEO of Newgold. The joint venture will be operated
through a newly formed Nevada limited liability company called Crescent Red
Caps, LLC. The terms of the joint venture provide for ASDi to contribute the
Red
Caps and Crescent Valley mining claims to the LLC in exchange for Newgold
issuing 2.5 million shares of its Common Stock to ASDi. Additionally, 2,500,000
warrants to purchase common stock at a price of $0.40 per share were issued
to
ASDi LLC. The warrants expire three years from the date of issuance. Newgold
will initially own a 22.22% interest in the LLC and ASDi will hold a 77.78%
interest. By expending up to $1,350,000 on each project over the next three
years, Newgold can increase its interest in the LLC to 66.66%. Thereafter,
Newgold has the right to purchase the remaining interest in the LLC held by
ASDi
at a price to be determined by the results of the exploration work conducted.
Newgold will be the Manager of the LLC.
Accrued
Payroll and Expenses Owed to Officers
As
of
January 31, 2006 Newgold owed the Chief Executive Officer and Chairman of
Newgold $75,000 for back wages.
As
of
January 31, 2006 Newgold owed the Chief Financial Officer and Secretary of
Newgold $102,057 for back wages and $2,500 for accrued expenses.
NOTE
12 - SUBSEQUENT EVENTS
In
March
2006 Newgold issued 500,000 shares of common stock at a price of $0.20 per
share
to an investor for total proceeds of $100,000. Additionally, 500,000 warrants
to
purchase common stock at a price of $0.40 per share were issued to the investor.
The warrants expire three years from the date of issuance.
In
March
2006 $200,000 was funded per the terms of the Debenture referred to in Note
6.
Of the $200,000 funded $20,000 was paid for various loan fees and closing costs.
All of the original terms and conditions of the Debenture and related documents
remain unchanged.
UNAUDITED
FINANCIAL STATEMENTS FOR THE
QUARTER
ENDED JULY 31, 2006 AND 2005
NEWGOLD,
INC.
(AN
EXPLORATION STAGE COMPANY)
BALANCE
SHEET
July
31, 2006
ASSETS
|
|
Current
assets
|
|
|
|
Cash |
|
$
160,736
|
|
Deposit |
|
5,000
|
|
Prepaid
expense |
|
16,000
|
|
Travel
advance |
|
5,714
|
|
|
|
|
|
Total
current assets |
|
187,450
|
|
|
|
|
|
Property,
plant and equipment, net
of accumulated depreciation
|
|
|
|
of
$5,507 |
|
45,978
|
|
|
|
|
|
Other
Assets
|
|
|
|
Restricted
cash |
|
|
|
Deferred
reclamation costs |
|
243,204
|
|
|
|
270,736
|
|
Total
other assets |
|
|
|
|
|
|
513,940
|
|
Total
assets |
|
$
|
747,368
|
|
LIABILITIES
AND SHAREHOLDERS' DEFICIT
|
|
|
|
|
|
Current
liabilities
|
|
|
|
Accounts
payable
|
|
$
|
612,518
|
|
Accrued
expenses
|
|
|
1,257,293
|
|
Accrued
reclamation costs
|
|
|
270,736
|
|
Notes
payable due to individuals and officers
|
|
|
432,788
|
|
|
|
|
|
|
Total
current liabilities
|
|
|
2,573,335
|
|
|
|
|
|
|
Long-term
liabilities
|
|
|
|
|
Convertible
debenture and related derivative liabilities,
|
|
|
|
|
net
of unamortized discount of $323,114 and deferred
|
|
|
|
|
financing
costs of $99,583
|
|
|
1,172,859
|
|
Deferred
revenue
|
|
|
800,000
|
|
|
|
|
|
|
Total
long-term liabilities
|
|
|
1,972,859
|
|
|
|
|
|
|
Total
liabilities
|
|
|
4,546,194
|
|
The
accompanying notes are an integral part of these financial
statements
NEWGOLD,
INC.
(AN
EXPLORATION STAGE COMPANY)
BALANCE
SHEET
July
31, 2006
Commitments
and contingencies
|
|
|
|
|
|
|
|
Shareholders'
deficit
|
|
|
|
Common
stock, $0.001 par value |
|
|
|
250,000,000
shares authorized |
|
|
|
71,003,159
shares issued and outstanding |
|
71,003
|
|
Additional
paid in capital |
|
16,769,243
|
|
Deficit
accumulated during the exploration stage |
|
(20,639,072
|
) |
|
|
|
|
|
Total
shareholders' deficit |
|
|
(3,798,826
|
)
|
|
|
|
|
|
Total
liabilities and shareholders' deficit |
|
$
|
747,368
|
|
The
accompanying notes are an integral part of these financial
statements
NEWGOLD,
INC.
(AN
EXPLORATION STAGE COMPANY)
STATEMENTS
OF OPERATIONS
For
the Six and Three Months Ended July 31, 2006 and 2005
and
for the Period from January 1, 1995 to July 31, 2006
|
|
|
|
|
|
|
|
|
For
the Period
|
|
|
|
|
|
For
the Six Months Ended
|
For
the Three Months Ended
|
From
January 1,
|
|
|
|
|
|
July
31,
|
July
31,
|
1995
to July
|
|
|
|
|
|
2006
|
2005
|
2006
|
2005
|
31,
2006
|
Net
Sales
|
$ -
|
$ -
|
$ -
|
$ -
|
$ -
|
|
|
|
|
|
|
|
|
|
|
Exploration
and maintenance costs
|
172,130
|
139,700
|
102,620
|
110,700
|
474,961
|
|
|
|
|
|
|
|
|
|
|
Gross
loss
|
(172,130)
|
(139,700)
|
(102,620)
|
(110,700)
|
(474,961)
|
Operating
expenses
|
(543,093)
|
(384,571)
|
(295,365)
|
(181,692)
|
(14,455,102)
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
(715,223)
|
(524,271)
|
(397,985)
|
(292,392)
|
(14,930,062)
|
|
|
|
|
|
|
|
|
|
|
Other
(expense)
|
|
|
|
|
|
|
Interest
income
|
|
|
|
|
|
|
72,687
|
|
Dividend
income
|
|
|
|
|
|
|
30,188
|
|
Other
income
|
|
|
|
|
|
|
6,565
|
|
Adjustments
to fair value of derivatives
|
(661,824)
|
|
(
370,977)
|
|
(699,242)
|
|
Interest
expense
|
(231,492)
|
(727,061)
|
(145,502)
|
(370,237)
|
(2,640,529)
|
|
Loss
from joint venture
|
|
|
|
|
|
(859,522)
|
|
Loss
on sale of marketable securities
|
|
|
|
|
(281,063)
|
|
Bad
debt expense
|
|
|
|
|
|
|
(40,374)
|
|
Loss
on disposal of plant, property
|
|
|
|
|
|
|
|
and
equipment
|
|
|
|
|
|
|
(334,927)
|
|
Loss
on disposal of bond
|
|
|
|
|
|
(21,000)
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
other income (expense)
|
(893,316)
|
(727,061)
|
(516,479)
|
(370,237)
|
(4,767,217)
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
($1,608,539)
|
($1,251,332)
|
($914,464)
|
($662,629)
|
($19,697,279)
|
|
|
|
|
|
|
|
Basic
and diluted loss per share
|
($0.02)
|
($0.02)
|
($0.01)
|
($0.01)
|
|
|
|
|
|
|
|
|
Basic
and diluted weighted-
|
|
|
|
|
|
|
average
shares
|
|
|
|
|
|
|
outstanding
|
68,922,690
|
50,191,822
|
69,464,614
|
50,911,822
|
|
The
accompanying notes are an integral part of these financial
statements
|
|
|
|
|
NEWGOLD,
INC.
|
|
|
|
|
|
(AN
EXPLORATION STAGE COMPANY)
|
|
|
|
|
|
STATEMENTS
OF CASH FLOWS
|
|
|
|
For
the Six Months Ended July 31, 2006 and 2005
|
|
|
|
and
for the Period from January 1, 1995 to July 31,
2006
|
|
|
|
|
|
|
|
|
For
the Period
From
January 1,
1995
to July
31,
2006
|
|
|
|
|
|
|
|
|
|
For
the Six Months Ended July 31,
|
|
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
|
|
Cash
flows from operating activities
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
($1,608,539
|
)
|
|
($1,251,332
|
)
|
|
($19,697,279
|
)
|
Adjustments
to
reconcile net loss to net cash
|
|
|
|
|
|
|
|
|
|
|
used
in
operating activities
|
|
|
|
|
|
|
|
|
|
|
Accretion
of
warrants issued as a debt discount
|
|
|
-
|
|
|
585,006
|
|
|
1,274,263
|
|
Accretion
of
beneficial conversion
|
|
|
-
|
|
|
69,320
|
|
|
107,468
|
|
Accretion
of
debt discount
|
|
|
71,830
|
|
|
-
|
|
|
74,570
|
|
Adjustments
to
fair value of derivatives
|
|
|
661,824
|
|
|
-
|
|
|
699,241
|
|
Loss
from joint venture
|
|
|
-
|
|
|
-
|
|
|
859,522
|
|
Loss
on
sale of marketable securities
|
|
|
-
|
|
|
-
|
|
|
281,063
|
|
Depreciation
and amortization
|
|
|
23,424
|
|
|
-
|
|
|
147,581
|
|
Loss
on
disposal of property, plant and equipment
|
|
|
-
|
|
|
-
|
|
|
334,927
|
|
Impairment
in
value of property, plant and equipment
|
|
|
-
|
|
|
-
|
|
|
807,266
|
|
Loss
on
disposal of bond
|
|
|
-
|
|
|
-
|
|
|
21,000
|
|
Impairment
in
value of Relief Canyon Mine
|
|
|
-
|
|
|
-
|
|
|
3,311,672
|
|
Impairment
in
value of joint investments
|
|
|
-
|
|
|
-
|
|
|
490,000
|
|
Bad
debt
|
|
|
-
|
|
|
-
|
|
|
40,374
|
|
Assigned
value
of stock and warrants exchanged for services
|
|
|
68,020
|
|
|
15,690
|
|
|
620,968
|
|
The
accompanying notes are an integral part of these financial
statements
|
|
|
|
|
NEWGOLD,
INC.
|
|
|
|
|
|
(AN
EXPLORATION STAGE COMPANY)
|
|
|
|
|
|
STATEMENTS
OF CASH FLOWS
|
|
|
|
For
the Six Months Ended July 31, 2006 and 2005
|
|
|
|
and
for the Period from January 1, 1995 to July 31,
2006
|
|
|
|
|
|
|
Assigned
value
of stock options issued for compensation
|
2,057
|
|
-
|
|
2,057
|
Gain
on
write off of note payable
|
|
|
-
|
|
-
|
|
(7,000)
|
Judgment
loss
accrued
|
|
|
-
|
|
-
|
|
250,000
|
(Increase)
decrease in
|
|
|
|
|
|
|
|
Restricted
cash
|
|
|
-
|
|
-
|
|
(243,204)
|
Travel
advance
|
|
|
(4,392)
|
|
(657)
|
|
(1,714)
|
Deposits
|
|
|
(5,000)
|
|
-
|
|
(500)
|
Deferred
reclamation costs
|
|
|
-
|
|
-
|
|
(194,742)
|
Prepaid
expenses
|
|
|
(16,000)
|
|
-
|
|
(18,900)
|
Reclamation
bonds
|
|
|
-
|
|
-
|
|
185,000
|
Other
assets
|
|
|
-
|
|
-
|
|
(1,600)
|
Increase
(decrease) in
|
|
|
|
|
|
|
|
Accounts
payable
|
|
|
(185,715)
|
|
18,160
|
|
331,558
|
Accrued
expenses
|
|
|
50,135
|
|
(442,784)
|
|
2,013,709
|
|
|
|
|
|
|
|
|
Net
cash used by operating activities
|
|
|
(942,356)
|
|
(1,006,597)
|
|
(8,312,700)
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities
|
|
|
|
|
|
|
|
Proceeds
from
sale of marketable securities
|
|
|
-
|
|
-
|
|
34,124
|
Investment
in
marketable securities
|
|
|
-
|
|
-
|
|
(315,188)
|
Advances
from
shareholder
|
|
|
-
|
|
-
|
|
7,436
|
Contribution
from joint venture partner
|
|
|
-
|
|
-
|
|
775,000
|
Purchase
of
joint venture partner interest
|
|
|
-
|
|
-
|
|
(900,000)
|
The
accompanying notes are an integral part of these financial
statements
|
|
|
|
|
NEWGOLD,
INC.
|
|
|
|
|
|
(AN
EXPLORATION STAGE COMPANY)
|
|
|
|
|
|
STATEMENTS
OF CASH FLOWS
|
|
|
|
For
the Six Months Ended July 31, 2006 and 2005
|
|
|
|
and
for the Period from January 1, 1995 to July 31,
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
|
(32,287)
|
|
-
|
|
(3,002,993)
|
Proceeds
from
disposal of property, plant and equipment
|
|
|
-
|
|
278,783
|
Investments
in
joint ventures
|
-
|
|
-
|
|
(490,000)
|
Note
receivable
|
|
|
-
|
|
-
|
|
(268,333)
|
Repayment
of
note receivable
|
|
|
-
|
|
-
|
|
268,333
|
|
|
|
|
|
|
|
|
Net
cash used by investing activities
|
|
(32,287)
|
|
-
|
|
(3,612,838)
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities
|
|
|
|
|
|
|
|
Proceeds
from
the issuance of common stock
|
|
100,000
|
|
2,423,935
|
|
7,659,253
|
Proceeds
from
notes payable
|
|
|
360,000
|
|
-
|
|
5,914,548
|
Principal
repayments of notes payable
|
|
|
(24,845)
|
|
(1,402,742)
|
|
(2,062,551)
|
Repayment
of
advances to affiliate
|
|
|
-
|
|
-
|
|
(231,663)
|
Deferred
revenue
|
|
|
-
|
|
-
|
|
800,000
|
|
|
|
|
|
|
|
|
Net
cash provided by financing activities
|
|
435,155
|
|
1,021,193
|
|
12,079,587
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash
|
|
|
(539,488)
|
|
14,596
|
|
154,049
|
|
|
|
|
|
|
|
|
Cash,
beginning of year
|
|
|
700,224
|
|
16,730
|
|
6,687
|
|
|
|
|
|
|
|
|
Cash,
end of year
|
|
|
$
160,736
|
|
$
31,326
|
|
$
160,736
|
The
accompanying notes are an integral part of these financial
statements
NEWGOLD,
INC.
|
(AN
EXPLORATION STAGE COMPANY)
|
STATEMENTS
OF CASH FLOWS
|
For
the Six Months Ended July 31, 2006 and 2005
|
and
for the Period from January 1, 1995 to July 31,
2006
|
|
Supplemental
cash flow information for the six months ended July 31, 2006 and
2005 and
January 1, 1995
|
through
July 31, 2006 as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
the Period
|
|
|
|
|
|
|
|
From
January 1,
|
|
|
|
For
the Six Months Ended July 31,
|
|
1995
to July 31,
|
|
|
|
2006
|
|
2005
|
|
2006
|
|
|
|
|
|
|
|
|
Cash
paid for interest
|
|
|
$
-
|
|
$
-
|
|
$
161,107
|
Cash
paid for income taxes
|
|
|
$
-
|
|
$
-
|
|
$
-
|
|
|
|
|
|
|
|
|
Non
Cash Investing and Financing Activities:
|
|
|
|
|
|
|
|
Conversion
of related party note payable to common
stock,including
interest payable of $446,193
|
|
$
-
|
|
$
-
|
|
$
1,848,935
|
Conversion
of convertible debenture to common stock
|
|
$ 600,000
|
|
$
-
|
|
$
600,000
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these financial
statements
NEWGOLD,
INC.
(AN
EXPLORATION STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
For
the three Months Ended July 31, 2006
(Unaudited)
NOTE
1 - ORGANIZATION AND LINE OF BUSINESS
NEWGOLD,
Inc. has been in the business of acquiring, exploring, developing, and producing
gold properties. Newgold had rights to mine properties in Nevada and Montana.
Its primary focus was on the Relief Canyon mine located near Lovelock, Nevada,
where it has performed development and exploratory drilling and was in the
process of obtaining permits to allow operation of the Relief Canyon Mine.
In
December 1997, Newgold placed the Relief Canyon Mine on care and maintenance
status. From mid-2001 until the beginning of 2003 Newgold was essentially
inactive, only continuing with some of the care and maintenance at Relief
Canyon, as provided for by a non-affiliate company owned by the Chairman
and CEO
of Newgold.
The
Company has embarked on a business strategy whereby it will invest in and/or
manage gold mining and other mineral producing properties. Currently, the
Company’s principal assets include various mineral leases associated with the
Relief Canyon mine located near Lovelock, Nevada along with various items
of
mining equipment located at that site as well as a 22% interest in a joint
venture covering two separate leasehold interests covering over 2700 acres
in
Lander County, Nevada. The Company’s business will be to acquire, explore and,
if warranted, develop various mining properties located in the state of Nevada.
The Company plans to carryout comprehensive exploration and development programs
and when appropriate, begin mining activities on its properties. The Company
may
fund and conduct these activities itself, or it may outsource some of these
activities through the use of various joint venture, royalty or partnership
arrangements pursuant to which other companies would agree to finance, carryout
the exploration and development programs, or perform mining operations on
Newgold’s mining properties. The Company’s current plan may or may not require
the hiring of significant amounts of mining employees depending upon the
level,
if any, of the mining and exploration activities outsourced to other
entities.
NOTE
2 - GOING CONCERN
These
financial statements have been prepared on a going concern basis. During
the
years ended January 31, 2006 and 2005 and the period from January 1, 1995
to
January 31, 2006, Newgold incurred net losses of approximately $2,645,231,
$1,278,140 and $18,088,740, respectively. In addition, Newgold had a total
shareholders’ deficit of $2,960,365 and was in the exploration stage since
inception and through January 31, 2006. Information for the six months
ended
July 31, 2006 include a net loss of $1,608,539; negative cash flows from
operations of $942,356 and an accumulated shareholders’ deficit of $3,798,826.
The Company's ability to continue as a going concern is dependent upon
its
ability to generate profitable operations in the future and/or to obtain
the
necessary financing to meet its obligations and repay its liabilities arising
from normal business operations when they come due. The outcome of these
matters
cannot be predicted with any certainty at this time. Since inception, the
Company has satisfied its capital needs by issuing equity securities,
convertible debentures and issuing debt.
Management
plans to continue to provide for its capital needs during the year ending
January 31, 2007 by issuing equity securities or incurring additional debt
financing, with the proceeds to be used to re-establish mining operations
at
Relief Canyon and commencing exploration activities at other mine sites as
well
as improve its working capital position. These financial statements do not
include any adjustments to the amounts and classification of assets and
liabilities that may be necessary should Newgold be unable to continue as
a
going concern.
NOTE
3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
These
financial statements have been prepared in accordance with the rules and
regulations of the Securities and Exchange Commission (“SEC”). Certain
information and footnotes normally included in financial statements prepared
in
accordance with generally accepted accounting principles in the United States
of
America have been condensed or omitted pursuant to these rules and regulations.
These consolidated financial statements should be read in conjunction with
the
consolidated financial statements and the notes thereto included in Newgold’s
Form 10-KSB, as filed with the SEC for the year ended January 31,
2006.
Effective
January 1, 1995 (date of inception), the Company is considered an exploration
stage Company as defined in SFAS No. 7. The Company’s exploration stage
activities consist of the development of several mining properties located
in
Nevada. Sources of financing for these exploration stage activities have
been
primarily debt and equity financing. The Company has, at the present time,
not
paid any dividends and any dividends that may be paid in the future will
depend
upon the financial requirements of the Company and other relevant
factors.
Cash
and Cash Equivalents
For
the
purpose of the statements of cash flows, Newgold considers all highly liquid
investments purchased with original maturities of three months or less to
be
cash equivalents.
Restricted
Cash
Restricted
cash represents a certificate of deposit with Wells Fargo Bank to serve as
collateral for a reclamation bond with the Nevada Department of Environmental
Protection at the Relief Canyon Mine.
Deferred
Reclamation Costs
In
August
2001, the Financial Accounting Standards Board (“FASB”) issued Statement of
Financial Accounting Standards (“SFAS”) No. 143, “Accounting for Asset
Retirement Obligations,” which established a uniform methodology for accounting
for estimated reclamation and abandonment costs. The statement was adopted
February 1, 2003. The reclamation costs will be allocated to expense over
the
life of the related assets and will be adjusted for changes resulting from
the
passage of time and revisions to either the timing or amount of the original
present value estimate.
Prior
to
adoption of SFAS No. 143, estimated future reclamation costs were based
principally on legal and regulatory requirements. Such costs related to active
mines were accrued and charged over the expected operating lives of the mines
using the UOP method based on proven and probable reserves. Future remediation
costs for inactive mines were accrued based on management’s best estimate at the
end of each period of the undiscounted costs expected to be incurred at a
site.
Such cost estimates included, where applicable, ongoing care, maintenance
and
monitoring
costs. Changes in estimates at inactive mines were reflected in earnings
in the
period an estimate was revised.
Risks
Associated with Gold Mining
The
business of gold mining is subject to certain types of risks, including
environmental hazards, industrial accidents, and theft. Prior to suspending
operations, Newgold carried insurance against certain property damage loss
(including business interruption) and comprehensive general liability insurance.
While Newgold maintained insurance consistent with industry practice, it
is not
possible to insure against all risks associated with the mining business,
or
prudent to assume that insurance will continue to be available at a reasonable
cost. Newgold has not obtained environmental liability insurance because
such
coverage is not considered by management to be cost effective. Newgold currently
carries no insurance on any of its properties due to the current status of
the
mine and Newgold’s current financial condition.
Comprehensive
Income
Newgold
utilizes SFAS No. 130, "Reporting Comprehensive Income." This statement
establishes standards for reporting comprehensive income and its components
in a
financial statement. Comprehensive income as defined includes all changes
in
equity (net assets) during a period from non-owner sources. Examples of items
to
be included in comprehensive income, which are excluded from net income,
include
foreign currency translation adjustments, minimum pension liability adjustments,
and unrealized gains and losses on available-for-sale marketable securities.
Comprehensive income is presented in Newgold's financial statements since
Newgold did have unrealized gain (loss) from changes in equity from
available-for-sale marketable securities.
Estimates
The
preparation of financial statements requires management to make estimates
and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
Loss
Per Share
Newgold
utilizes SFAS No. 128, "Earnings per Share." Basic loss per share is computed
by
dividing loss available to common shareholders by the weighted-average number
of
common shares outstanding. Diluted loss per share is computed similar to
basic
loss per share except that the denominator is increased to include the number
of
additional common shares that would have been outstanding if the potential
common shares had been issued and if the additional common shares were dilutive.
Common equivalent shares are excluded from the computation if their effect
is
anti-dilutive.
The
following common stock equivalents were excluded from the calculation of
diluted
loss per share since their effect would have been anti-dilutive:
|
2006
|
2005
|
Warrants
|
21,274,583
|
13,224,583
|
Options
|
1,350,000
|
-
|
Recent
Accounting Pronouncements
In
February 2006, the FASB issued SFAS No. 155, “Accounting for Certain Hybrid
Financial Instruments”, which amends SFAS No. 133, “Accounting for Derivatives
Instruments and Hedging Activities” and SFAS No. 140, “Accounting for Transfers
and Servicing of Financial
Assets
and Extinguishment of Liabilities”. SFAS No. 155 amends SFAS No. 133 to narrow
the scope exception for interest-only and principal-only strips on debt
instruments to include only such strips representing rights to receive a
specified portion of the contractual interest or principle cash flows. SFAS
No.
155 also amends SFAS No. 140 to allow qualifying special-purpose entities
to
hold a passive derivative financial instrument pertaining to beneficial
interests that itself is a derivative instrument. The
Company is currently evaluating the impact of this new Standard but believes
that it will not have a material impact on the Company’s financial position,
results of operations, or cash flows.
In
March
2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial
Assets” (“SFAS NO. 156”), which provides an approach to simplify efforts to
obtain hedge-like (offset) accounting. This Statement amends FASB Statement
No.
140, “Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities”, with respect to the accounting for separately
recognized servicing assets and servicing liabilities. The Statement (1)
requires an entity to recognize a servicing asset or servicing liability
each
time it undertakes an obligation to service a financial asset by entering
into a
servicing contract in certain situations; (2) requires that a separately
recognized servicing asset or servicing liability be initially measured at
fair
value, if practicable; (3) permits an entity to choose either the amortization
method or the fair value method for subsequent measurement for each class
of
separately recognized servicing assets or servicing liabilities; (4) permits
at
initial adoption a one-time reclassification of available-for-sale securities
to
trading securities by an entity with recognized servicing rights, provided
the
securities reclassified offset the entity’s exposure to changes in the fair
value of the servicing assets or liabilities; and (5) requires separate
presentation of servicing assets and servicing liabilities subsequently measured
at fair value in the balance sheet and additional disclosures for all separately
recognized servicing assets and servicing liabilities. SFAS No. 156 is effective
for all separately recognized servicing assets and liabilities as of the
beginning of an entity’s fiscal year that begins after September 15, 2006, with
earlier adoption permitted in certain circumstances. The Statement also
describes the manner in which it should be initially applied. The Company
does
not believe that SFAS No. 156 will have a material impact on its financial
position, results of operations or cash flows.
In
July 2006, the FASB released FASB Interpretation No. 48, “Accounting
for Uncertainty in Income Taxes”, an interpretation of FASB Statement
No. 109 (FIN 48). FIN 48 clarifies the accounting and reporting for
uncertainties in income tax law. This interpretation prescribes a comprehensive
model for the financial statement recognition, measurement, presentation
and
disclosure of uncertain tax positions taken or expected to be taken in income
tax returns. This statement is effective for fiscal years beginning after
December 15, 2006. The Company is currently in the process of evaluating
the expected effect of FIN 48 on its results of operations and financial
position.
NOTE
4 - PROPERTY AND EQUIPMENT
Property
and equipment at July 31, 2006 was recorded at $51,485 and consisted of $32,286
of computer equipment and related software purchased during the quarter ended
April 30, 2006 and $19,199 in additional monitoring wells that were installed
at
the Relief Canyon Mine during the year ended January 31, 2006.
Newgold
had previously determined that the value of its fixed assets at the Relief
Canyon Mine were permanently impaired and wrote off assets with a basis of
$800,000. If Newgold can reestablish mining operations at Relief Canyon
it is possible that some of these assets could be utilized in such
operations.
A
summary
of property and equipment was as follows:
|
Buildings
|
Machinery
&
Equipment
|
Development
Costs
|
Capitalized
Interest
|
Total
|
Relief
Canyon Mine
|
$215,510
|
$277,307
|
$261,742
|
$45,441
|
$800,000
|
NOTE
5 - NOTES PAYABLE TO RELATED PARTIES AND INDIVIDUALS
Unsecured
notes payable to individuals and related parties consist of the following
at
July 31, 2006:
Loans
from officers:
Convertible
note payable $
209,251
The
note
bears interest at 8% per year.
In
October 2004, Newgold consolidated the amounts owed to the Chief Executive
Officer and the Chief Financial Officer referred to in Note 9 (excluding
accrued
interest payable) into new convertible notes payable due September 30, 2005.
The
notes and any interest accrued on the new notes are convertible into common
shares of Newgold at a conversion price of $0.15 per share. On July 31, 2005
the
Chief Executive Officer converted his note payable and accrued interest payable
on all of his notes payable into 12,326,231 common shares of Newgold. In
connection with the loans, warrants to purchase 5,798,140 and 1,395,007 shares
of common stock have been issued to the Chief Executive Officer and the Chief
Financial Officer, respectively.
Loan
from
individual $
176,500
The
note
bears interest at 8% per year.
The
note
is currently due. Newgold is in default with respect to this loan.
Other
non-interest bearing advances
47,038
Total
notes payable to individuals and related parties $
432,789
Newgold
recorded interest expense of $145,502 and $231,492 for the three months
and six
months ended July 31, 2006 compared to interest expense of $370,237 and
$727,061
for the three months and six months ended July 31, 2005.
NOTE
6 - CONVERTIBLE DEBENTURE
On
January 27, 2006, Newgold entered into a Securities Purchase Agreement (the
“Purchase Agreement”) and other agreements in connection with the private
placement of a convertible debenture, in the principal amount of $1,000,000
and
bearing interest at 8% per annum (the “Debenture”). The Debenture was funded
$600,000 on January 27, 2006, $200,000 on March 2, 2006 and $200,000 on July
18,
2006. Of the $600,000 funded on January 27, 2006, $77,500 was paid for various
loan fees and closing costs. Of the $200,000 funded on March 9, 2006, $20,000
was paid for loan fees. Of the $200,000 funded on July 18, 2006, $20,000
was
paid for loan fees.
The
Debenture is due and payable on the third anniversary of each funding date
unless it is converted into shares of Newgold Common Stock or is repaid prior
to
its expiration date. The conversion rate is adjustable and at any conversion
date, will be the lower of $0.2626 per share or 95% of the Market Conversion
Price. On
June
29, 2006 $500,000 of the Debenture dated January 27, 2006 was converted into
1,904,037 shares of common stock and $100,000 of the Debenture dated March
9,
2006 was converted into 495,050 shares of common stock.
In
conjunction with the Purchase Agreement, Newgold entered into an Investor
Registration Rights Agreement (the “Registration Rights Agreement”). The
Registration Rights Agreement requires Newgold to register at least 24,050,025
shares of our Common Stock to cover the conversion of the Debenture (assuming
conversion prices substantially below $0.2626) and 2,500,000 shares of our
Common Stock issuable upon conversion of warrants (the “Warrants”) granted to
the Debenture holder. Newgold is required to keep this Registration Statement
effective until the Debenture has been fully converted, repaid, or becomes
due
and the Warrants have been fully exercised or expire. Both the Debenture
and the
Warrants are currently convertible or exercisable, respectively.
In
conjunction with the Purchase Agreement, Newgold entered into a Security
Agreement (the “Security Agreement”). The Security Agreement creates a secured
interest in favor of the Debenture holder in our mining interest and assets
in
the Relief Canyon Mine property. This security interest was created by
recordation of a Memorandum of Security Agreement filed in Pershing County,
Nevada on February 14, 2006. Consequently, if a default occurred under the
Debenture, the Debenture holder could take over or sell all of our interests,
business and assets associated with the Relief Canyon Mine.
The
transaction, to the extent that it is to be satisfied with common stock of
the
Company, would normally be included as equity obligations. However, in the
instant case, due to the indeterminate number of shares which might be issued
under the embedded convertible note debt conversion feature, the Company
is
required to record a liability for the fair value of the detachable warrants
and
the embedded convertible feature of the note payable (included in the
liabilities as a "derivative liability").
The
accompanying financial statements comply with current requirements relating
to
warrants and embedded conversion features as described in FAS 133, EITF 98-5,
00-19, and 00-27, and APB 14 as follows:
·
|
The
Company allocated the proceeds received between convertible debt
and the
detachable warrants based upon the relative fair market values
on the date
the proceeds were received.
|
·
|
Subsequent
to the initial recording, the change in the fair value of the detachable
warrants, determined under the Black-Scholes option pricing formula,
and
the change in the fair value of the embedded derivative in the
conversion
feature of the convertible debentures are recorded as adjustments
to the
liabilities at July 31, 2006.
|
·
|
$(661,824)
of expense relating to the change in the fair value of the Company's
stock
reflected in the change in the fair value of the warrants and derivatives
(noted above) is included as other income (expense).
|
·
|
Accreted
interest of $71,830 as of July 31,
2006.
|
The
following table summarizes the various components of the convertible notes
as of
July 31, 2006:
Derivative
liabilities
|
$
1,195,556
|
Convertible
debenture
|
400,000
|
Unamortized
discount
|
(323,114)
|
Deferred
financing costs, net
|
(99,583)
|
Total
convertible debt
|
|
and
financing costs
|
$ 1,172,859
|
NOTE
7 - COMMITMENTS AND CONTINGENCIES
Except
for the advance royalty and rent payments noted below, Newgold is not obligated
under any capital leases or non-cancelable operating lease with initial or
remaining lease terms in excess of one year as of July 31, 2006. However,
minimum annual royalty payments are required to retain the lease rights to
Newgold’s properties.
Relief
Canyon Mine
Newgold
purchased the Relief Canyon Mine from J.D. Welsh Associates (“Welsh”) in January
1995. The mine consisted of 39 claims and a lease for access to an additional
800 acres contiguous to the claims. During 1997, Newgold staked an additional
402 claims. Subsequent to January 31, 1998, Newgold reduced the total claims
to
50 (approximately 1,000 acres). The annual payment to maintain these claims
is
$5,000. As part of the original purchase of Relief Canyon Mine, Welsh assigned
the lease from Santa Fe Gold Corporation (Santa Fe) to Newgold. The lease
granted Santa Fe the sole right of approval of transfer to any subsequent
owner
of the Relief Canyon Mine. Santa Fe had accepted lease and minimum royalty
payments from Newgold, but has declined to approve the transfer. Due to Welsh’s
inability to transfer the Santa Fe lease, the original purchase price of
$500,000 for Relief Canyon Mine was reduced by $50,000 in 1996 to
$450,000.
Subsequent
to January 31, 1998, the lease was terminated by Santa Fe. Management believes
loss of the Santa Fe lease will have no material adverse affect on the remaining
operations of the mine operation or the financial position of
Newgold.
During
1996, Repadre Capital Corporation (“Repadre”) purchased for $500,000 a net
smelter return royalty (Repadre Royalty). Repadre was to receive a 1.5% royalty
from production at each of the Relief Canyon Mine and Mission Mines. In July
1997, an additional $300,000 was paid by Repadre for an additional 1% royalty
from the Relief Canyon Mine. In October, 1997, when the Mission Mine lease
was
terminated, Repadre exercised its option to transfer the Repadre Royalty
solely
to the Relief Canyon Mine resulting in a total 4% royalty. The total amount
received of $800,000 has been recorded as deferred revenue in the accompanying
financial statements.
Crescent
Red Caps Joint Venture
Newgold
is the owner of a 22.22% joint venture interest and is the operator of the
Crescent Red Caps Joint Venture (“Crescent Red Caps”). The remaining 77.78%
interest is held by ASDi LLC, a California limited liability company owned
by A.
Scott Dockter, Chairman and CEO of Newgold. Additionally, Newgold, by making
expenditures over the next three years aggregating $2,700,000, will end up
with
a 66.66% overall interest in the joint venture. Newgold will then have the
opportunity to purchase the remaining joint venture interest held by Mr.
Dockter
based on the results of the exploration work contemplated by these additional
expenditures.
The
Company acquired its 22.22% in the joint venture by issuing to ASDi LLC
2,500,000 shares of its restricted common stock and a warrant to purchase
2,500,000 shares of its common stock at a price of $0.40. The warrant has
a term
of three years. The common stock was valued at $0.20 per
share
for a total of $500,000. The fair market value of the warrants was calculated
to
be $359,522 as determined by the methodology described in Note 9. The Company
recorded this investment as a loss from the joint venture of $859,522 for
the
year ended January 31, 2006.
The
properties are subject to two leases which include approximately 135 unpatented
mining claims and cover approximately 2700 acres. All gold, silver and other
mineral production by Crescent Red Caps is subject to a 3% net smelter return
(“NSR”) royalty payable to the lessors except for barite which is subject to a
10% royalty on ore produced from claims covered by the leases.
Litigation
On
February 4, 2000, a complaint was filed against Newgold by Sun G. Wong in
the
Superior Court of Sacramento County, California (Case No. 00AS00690). In
the
complaint, Mr. Wong claims that he was held liable as a guarantor of
Newgold in a claim brought by Don Christianson in a breach of contract
action against Newgold. Despite the fact that Newgold settled the action
with
Mr. Christianson through the issuance of 350,000 shares of Newgold common
stock,
Mr. Wong, nevertheless, paid $60,000 to a third party claiming to hold
Mr. Christianson’s judgment pursuant to Mr. Wong’s guaranty agreement.
Similarly, Mr. Wong alleges that he was held liable as a guarantor for a
debt of
$200,000 owed by Newgold to Roger Primm with regard to money borrowed by
Newgold. Mr. Primm filed suit against Newgold which was settled through the
issuance of 300,000 shares of Newgold common stock. Nevertheless, Mr. Wong
alleges that he remains liable to a third party claiming to hold
Mr. Primm’s judgment for up to $200,000 pursuant to his guaranty of such
debt of Mr. Primm.
On
December 29, 2000, the superior court entered a default judgment against
Newgold
in the amount of $400,553 with regard to the Christianson judgment and an
additional $212,500 in regard to the Primm judgment against Mr. Wong. Newgold
believes that Mr. Wong was not obligated to pay any sums pursuant to his
guarantees with regard to the Christianson and Primm judgments against Newgold
and, as a result, Mr. Wong should not have any recourse against Newgold for
reimbursement. Should Mr. Wong seek to assert these judgments against Newgold,
Newgold cannot predict the outcome of any such action or the amount of expenses
that would be ultimately incurred in defending any such claims. Newgold is
currently negotiating a settlement with Mr. Wong; however there is no assurance
that an acceptable settlement will be consummated.
Newgold
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 Newgold’s financial
position, results of operations or liquidity.
NOTE
8 - SHAREHOLDERS' DEFICIT
Common
Stock
In
March
2006, Newgold issued 500,000 shares of common stock at a price of $0.20 per
share to an investor for total proceeds of $100,000. Additionally, 500,000
warrants to purchase common stock at a price of $0.40 per share were issued
to
the investor. The warrants expire three years from the date of
issuance.
Warrants
Newgold
has issued common stock warrants to officers of Newgold as part of certain
financing transactions (see Note 5). Newgold has also issued warrants as
part of
the issuance of a convertible
debt transaction (see Note 6). Newgold has also issued warrants as part of
the
issuance of common stock (see this Note 8).
The
fair
market value of warrants issued during the six months ended July 31, 2006
in
conjunction with the issuance of common stock was determined to be $56,724
and
was calculated under the Black-Scholes option pricing model with the following
assumptions used:
Expected
life 3
years
Risk
free
interest rate
4.78%
Volatility 160.4%
Expected
dividend yield
None
The
fair
value of these warrants has been recorded as both a debit and credit to
additional paid in capital.
The
following table presents warrant activity from January 31, 2006 through July
31,
2006:
|
Number
of
Share
|
Weighted-
Average
Exercise
Price
|
Outstanding,
January 31, 2006
|
20,774,583
|
$
0.25
|
Granted
|
500,000
|
$
0.40
|
Outstanding,
July 31, 2006
|
21,274,583
|
$
0.25
|
Exercisable,
July 31, 2006
|
21,274,583
|
$
0.25
|
Stock
options
The
2006
Plan provides for the issuance of non-qualified or incentive stock options
to
employees, non-employee members of the board and consultants. The exercise
price
per share is not to be less than the fair market value per share of the
Company’s common stock on the date of grant. The Board of Directors has the
discretion to determine the vesting schedule. Options may be either immediately
exercisable or in installments, but generally vest over a three-year period
from
the date of grant. In the event the holder ceases to be employed by the Company,
all unvested options terminate and all vested installment options may be
exercised within an installment period following termination. In general,
options expire ten years from the date of grant.
Effective
February 1, 2006, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 123(R), Share-Based
Payment (SFAS
123(R)), which requires the measurement and recognition of compensation expense
for all share-based payment awards made to employees and directors, including
stock options based on their fair values. Newgold had not previously issued
any
stock options prior to adoption of the 2006 Plan. In March 2005, the SEC
issued Staff Accounting Bulletin No. 107 (SAB
107)
to provide guidance on SFAS 123(R). The Company has applied SAB 107 in its
adoption of SFAS 123(R).
The
Company adopted SFAS 123(R) using the modified prospective transition method
as
of and for the three and six months ended July 31, 2006. In accordance with
the
modified prospective transition method, the Company’s financial statements for
prior periods have not been restated to reflect, and do not include, the
impact
of SFAS 123(R). Share-based compensation expense recognized is based on the
value of the portion of share-based payment awards that is ultimately
expected
to vest. Share-based compensation expense recognized in the Company’s Statement
of Operations during the three and six months ended July 31, 2006 includes
compensation expense for share-based payment awards granted during the current
fiscal year.
In
conjunction with the adoption of SFAS 123(R), the Company elected to attribute
the value of share-based compensation to expense using the straight-line
method.
Share-based compensation expense related to stock options and restricted
stock
grants was $70,007 for both the three and six months ended July 31,
2006, and was recorded in the financial statements as operating expense.
For
the
three months ended July 31, 2006 the Company’s calculations were made using
the Black-Scholes option pricing model with the following weighted average
assumptions: expected life, 36 months following the grant date; stock
volatility, 155.6%; risk-free interest rates of 4.97% to 5.00%; and no
dividends
during the expected term. As stock-based compensation expense recognized
in the
consolidated statement of operations pursuant to SFAS No. 123(R) is based
on awards ultimately expected to vest, expense for grants beginning upon
adoption of SFAS No. 123(R) on February 1, 2006 will be reduced for
estimated forfeitures. SFAS No. 123(R) requires forfeitures to be estimated
at the time of grant and revised, if necessary, in subsequent periods if
actual
forfeitures differ from those estimates. Forfeitures are estimated based
on
historical experience.
A
summary
of the Company’s stock option activity is as follows:
|
|
|
|
|
|
|
|
Weighted
Ave.
|
Aggregate
|
|
#
of Shares
|
Exercise
Price
|
Intrinsic
Value
|
|
|
|
|
Outstanding
as
of January 31, 2006
|
0
|
$ -
|
|
Granted
|
1,350,000
|
$ 0.35
|
16,000
|
Exercised
|
0
|
$
0
|
|
Cancelled
|
0
|
$
0
|
|
|
|
|
|
Outstanding
as
of July 31, 2006
|
1,350,000
|
$ 0.35
|
$
16,000
|
|
|
|
|
|
|
|
|
Exercisable
as
of July 31, 2006
|
337,500
|
$ 0.35
|
$
-0-
|
Additional
information regarding options outstanding as of July 31, 2006 is as follows
:
|
|
|
|
Options
outstanding
|
|
Options
exercisable
|
|
|
|
|
Weighted
average
|
|
Weighted
|
|
|
|
Weighted
|
Range
of
|
|
|
|
remaining
|
|
average
|
|
|
|
average
|
exercise
|
|
Number
|
|
contractual
|
|
exercise
|
|
Number
|
|
exercise
|
prices
|
|
outstanding
|
|
life
(years)
|
|
price
|
|
exercisable
|
|
price
|
|
|
|
|
|
|
|
|
|
|
|
$0.15
— $0.30
|
|
100,000
|
|
3.0
|
|
$0.16
|
|
25,000
|
|
$0.16
|
$0.31
— $0.45
|
|
1,000,000
|
|
3.0
|
|
$0.34
|
|
250,000
|
|
$0.34
|
$0.46
— $0.60
|
|
250,000
|
|
3.0
|
|
$0.50
|
|
62,500
|
|
$0.50
|
|
|
1,350,000
|
|
3.0
|
|
$0.35
|
|
337,500
|
|
$0.35
|
The
weighted-average grant-date fair value of options granted during the six
months
ended July 31, 2006 was $0.35. At July 31, 2006 there was $276,839 of
total unrecognized compensation costs related to non-vested stock options
granted under the Plan, which will be recognized over a period not to exceed
three years. At July 31, 2006, 3,650,000 shares were available for future
grants under the Stock Option Plan.
NOTE
9 - RELATED PARTY TRANSACTIONS
Loans
from officers
During
the quarter ended July 31, 2006 the Company repaid $19,845 previously borrowed
from the Chief Executive Officer.
During
prior periods, the Chief Financial Officer and Secretary of Newgold loaned
Newgold an aggregate of $209,251. As of July 31, 2006 the net principal balance
owing to him was $209,251 and accrued interest payable was $31,108. See Note
5.
Joint
venture with officer
On
January 25, 2006, Newgold entered into a joint venture with ASDi, LLC to
develop
two Nevada mining properties known as the Red Caps Project and Crescent Valley
Project. The Red Caps consists of approximately 96 unpatented mining claims
covering 1900 acres and the Crescent Valley consists of approximately 39
unpatented mining claims covering 750 acres. The Red Caps and Crescent Valley
mining claims are currently owned by ASDi, LLC, which is owned and managed
by A.
Scott Dockter, Chairman and CEO of Newgold. The joint venture will be operated
through a newly formed Nevada limited liability company called Crescent Red
Caps, LLC. The terms of the joint venture provide for ASDi to contribute
the Red
Caps and Crescent Valley mining claims to the LLC in exchange for Newgold
issuing 2.5 million shares of its Common Stock to ASDi. Additionally, 2,500,000
warrants to purchase common stock at a price of $0.40 per share were issued
to
ASDi LLC. The warrants expire three years from the date of issuance. Newgold
will initially own a 22.22% interest in the LLC and ASDi will hold a 77.78%
interest. By expending up to $1,350,000 on each project over the next three
years, Newgold can increase its interest in the LLC to 66.66%. Thereafter,
Newgold has the right to purchase the remaining interest in the LLC held
by ASDi
at a price to be determined by the results of the exploration work conducted.
Newgold will be the Manager of the LLC.
NOTE
10 - SUBSEQUENT EVENTS
On
September 15, 2006 the $400,000 outstanding balance of the Convertible Debenture
referred to in Note 6 was converted into 1,523,229 shares of common stock.
Additionally, the outstanding interest payable under the debenture of $30,948
was converted into 117,852 shares of common stock.
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
Item
24. Indemnification
of Directors and Officers.
Our
Certificate of Incorporation provides that no director or officer of Newgold,
Inc. (the “Company”) shall be personally liable to the Company or its
stockholders for monetary damages for any breach of fiduciary duty by such
person as a director or officer, except for (i) breach of director’s duty of
loyalty to the Company or its stockholders; (ii) acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law;
(iii) unlawful payment of dividends or unlawful stock purchase or redemption;
or
(iv) any transaction from which the director derived an improper personal
benefit. Our Bylaws provide, in pertinent part, that the Company shall indemnify
any person made a party to or involved in any civil, criminal or administrative
action, suit or proceeding by reason of the fact that such person is or was
a
director or officer of the Company, or of any corporation which such person
served as such at the request of the Company, against expenses reasonably
incurred by, or imposed on, such person in connection with, or resulting from,
the exercise of such action, suit, proceeding or appeal thereon, except with
respect to matters as to which it is adjudged in such action, suit or proceeding
that such person was liable to the Company, or such other corporation, for
negligence or misconduct in the performance of such person’s duties as a
director or officer of the Company. The determination of the rights of
such indemnification and the amount thereof may be made, at the option of the
person to be indemnified, by (i) order of the Court or administrative body
or
agency having jurisdiction over the matter for which indemnification is being
sought; (ii) resolution adopted by a majority of a quorum of our disinterested
directors; (iii) if there is no such quorum, resolution adopted by a majority
of
the committee of stockholders and disinterested directors of the Company; (iv)
resolution adopted by a majority of the quorum of directors entitled to vote
at
any meeting; or (v) order of any Court having jurisdiction over the Company.
Such right of indemnification is not exclusive of any other right which
such director or officer may have, and without limiting the generality of such
statement, they are entitled to their respective rights of indemnification
under
any bylaws, agreement, vote of stockholders, provision of law, or otherwise
in
addition to their rights under the Company’s Bylaws.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933
(the
“Securities Act”) may be permitted to directors, officers and controlling
persons of Newgold pursuant to the foregoing provisions, or otherwise, Newgold
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
Item
25. Other
Expenses of Issuance and Distributions.
The
estimated expenses of this offering in connection with the issuance and
distribution of the securities being registered, are as follows:
Registration
Fee
|
|
$
|
905
|
|
Blue
Sky Fees
|
|
|
500
|
|
Printing
|
|
|
1,000
|
|
Legal
Fees and Expenses
|
|
|
30,000
|
|
Accounting
Fees and Expenses
|
|
|
25,000
|
|
Miscellaneous
|
|
|
1,552
|
|
Total
|
|
$
|
58,957
|
|
Item
26. Recent
Sales of Unregistered Securities.
On
October 10, 2006, Newgold issued convertible debentures in the aggregate
principal amount of $650,000 and bearing interest of 8% per annum. The
Debentures and accrued interest are convertible into shares of Newgold commons
stock at a conversion rate of $0.4735 per share. The Debentures are due and
payable three years from the date of issue unless they are converted into shares
of the Company’s common stock or are repaid prior to their expiration date.
Additionally, the investors were issued warrants to purchase an aggregate of
746,843 shares of Newgold common stock with 426,767 warrants exercisable at
$0.45 per share and 320,076 warrants exercisable at $0.60 per share. The
warrants expire four years from the date of issuance. The shares were offered
and sold exclusively to individuals residing or entities formed outside the
United States and are not deemed to be “U.S. persons” as that term is defined
under Regulation S. Each investor represented that it is purchasing such
shares for its own account. Both the offer and the sale of the Newgold
shares were made outside the United States and are deemed to be “offshore
transactions” as that term is defined under Regulation S. The share
certificates contain a legend indicating that such shares can only be
transferred in compliance with the provisions of Regulation S. In light of
the foregoing, such sales were deemed exempt from registration pursuant to
Regulation S of the 1933 Act. The shares are deemed to be “restricted
securities” as defined in Rule 144 under the 1933 Act. Pursuant
to EITF 00-19, "Accounting for Derivative Financial Instruments Indexed to,
and
Potentially Settled in, a Company's Own Stock",
we
have
performed an EITF 00-19 analysis of the warrants issued pursuant to the
agreement and determined that they will be treated as
equity.
The
following issuances of stock, warrants, and other equity securities were made
without any public solicitation to a limited number of investors or related
individuals or entities in separately negotiated transactions. Each investor
represented to us that the securities were being acquired for investment
purposes only and not with an intention to resell or distribute such securities.
Each of the individuals or entities had access to information about our business
and financial condition and was deemed capable of protecting their own
interests. The stock, warrants and other securities were issued pursuant to
the
private placement exemption provided by Section 4(2) or Section 4(6) of the
Securities Act. These are deemed to be “restricted securities” as defined in
Rule 144 under the Securities Act and the warrant certificates and the stock
certificates bear a legend limiting the resale thereof.
During
Newgold's current fiscal year ending January 31, 2007, it issued the following
securities pursuant to exemptions from registration under the Securities
Act:
(a) On
October 4, 2006 Newgold issued 100,000 shares of restricted common stock to
one
person in partial settlement of an existing litigation matter.
(b) On
September 26, 2006, Newgold entered into a Securities Purchase Agreement (the
“Purchase Agreement”) and a Registration Rights Agreement (the “Registration
Rights Agreement”), as amended on November 1, 2006, in connection with a private
placement of convertible debentures, in the aggregate principal amount of
$3,000,000 and bearing interest of 8% per annum (the “Debentures”). The
Debentures will be funded $1,000,000 on September 26, 2006, $1,000,000 upon
filing of this resale registration statement with the Securities and Exchange
Commission and $1,000,000 upon this registration statement being declared
effective. The Debentures are due and payable three years from the date of
issue
unless they are converted into shares of the Company’s common stock or are
repaid prior to their expiration date. Additionally, pursuant to the Purchase
Agreement, the investor was issued warrants (the “Warrants”) to purchase an
aggregate of 3,500,000 shares of Newgold common stock with 2,000,000 warrants
exercisable at $0.45 per share and 1,500,000 warrants exercisable at $0.60
per
share. The Warrants have a term of four years and are immediately exercisable.
We
have performed an EITF 00-19 analysis of the warrants issued pursuant to the
agreement and determined that they will be treated as a
liability due
to
the indeterminate number of shares which might be issued under the embedded
convertible note debt conversion feature. Accordingly, the Company is required
to record a liability for the fair value of the detachable warrants and the
embedded convertible feature of the note payable (included in liabilities as
a
"derivative liability").
(c) On
September 15, 2006, Newgold issued 1,523,229 shares of restricted common stock
in conversion of the remaining $400,000 in principal of outstanding Secured
Convertible Debentures held by Cornwell Capital Partners. An additional 117,852
shares of restricted common stock was issued in conversion of $30,948 of accrued
interest on the Secured Convertible Debentures.
(d) In
September 2006, we issued options to purchase an aggregate of 250,000 shares
of
our common stock to one directors from our newly adopted 2006 Stock Option Plan.
The options are exercisable at $0.50 per share. The options expire in ten
years.
(e) In
July
2006, we issued options to purchase an aggregate of 1,350,000 shares of our
common stock to three employees and one director from our newly adopted 2006
Stock Option Plan. The options are exercisable at between $0.32 and $0.50 per
share. 500,000 of these options expire in five years while the balance of
options expire in ten years.
(f) In
June
2006, Newgold issued 2,399,087 shares of restricted common stock in conversion
of $600,000 in principal of outstanding Secured Convertible Debentures held
by
Cornell Capital Partners.
(g) In
March
2006 Newgold issued 500,000 shares of restricted common stock at a price of
$0.20 per share to an investor for total proceeds of $100,000. Additionally,
500,000 warrants to purchase common stock at a price of $0.40 per share were
issued to the investor. The warrants expire three years from the date of
issuance.
(h) In
March
2006 $200,000 was funded per the terms of the Debenture referred to in paragraph
(i) below. Of the $200,000 funded $20,000 was paid for various loan fees and
closing costs. All of the original terms and conditions of the Debenture and
related documents remain unchanged.
During
Newgold’s fiscal year ended January 31, 2006, it issued the following securities
pursuant to exemptions from registration under the Securities Act:
(i) On
January 27, 2006, Newgold entered into a Securities Purchase Agreement (the
“Purchase Agreement”) and a Registration Rights Agreement (the “Registration
Rights Agreement”) in connection with a private placement of a convertible
debenture, in the principal amount of $1,000,000 and bearing interest of 8%
per
annum (the “Debenture”). The Debenture will be funded $600,000 at the closing,
$200,000 upon the filing of a resale registration statement with the Securities
and Exchange Commission and $200,000 upon the registration statement being
declared effective. The Debenture is due and payable on January 27, 2009 unless
it is converted into shares of the Company’s common stock or is repaid prior to
its expiration date. Additionally, pursuant to the Purchase Agreement, the
investor was issued warrants (the “Warrants”) to purchase an aggregate of
2,500,000 shares of Newgold common stock with 1,250,000 warrants exercisable
at
$0.20 per share and 1,250,000 warrants exercisable at $0.30 per share. The
Warrants have a term of four years and are immediately exercisable.
(j) On
January 27, 2006 Newgold issued 2,500,000 shares of commons stock at a price
of
$0.20 per share to an investor for total proceeds of $500,000. Additionally,
2,500,000 warrants to purchase common stock at a price of $0.40 per share were
issued to the investor. The warrants expire three years from the date of
issuance. The shares were offered and sold exclusively to individuals residing
or entities formed outside the United States and are not deemed to be “U.S.
persons” as that term is defined under Regulation S. Each investor
represented that it is purchasing such shares for its own account. Both
the offer and the sale of the Newgold shares were made outside the United States
and are deemed to be “offshore transactions” as that term is defined under
Regulation S. The share certificate contains a legend indicating that such
shares can only be transferred in compliance with the provisions of Regulation
S. In light of the foregoing, such sales were deemed exempt from
registration pursuant to Regulation S of the 1933 Act. The shares are
deemed to be “restricted securities” as defined in Rule 144 under the 1933
Act.
(k) On
January 25, 2006, Newgold entered into a joint venture with ASDi, LLC to develop
two Nevada mining properties known as the Red Caps Project (“Red Caps”) and
Crescent Valley Project (“Crescent Valley”). The Red Caps and Crescent Valley
mining claims are currently owned by ASDi, LLC which is owned and managed by
A. Scott Dockter, Chairman and CEO of Newgold. The joint venture will
be operated through a newly formed Nevada limited liability company called
Crescent Red Caps, LLC. The terms of the joint venture provide for ASDi to
contribute the Red Caps and Crescent Valley mining claims to the LLC in exchange
for Newgold issuing 2.5 million shares of its common stock and warrants to
purchase 2.5 million shares of Newgold common stock at an exercise price of
$0.40 per share for a term of three years to ASDi. Newgold will initially
own a 22.22% interest in the LLC and ASDi will hold a 77.78% interest. By
expending up to $1,350,000 on each project over the next three years, Newgold
can increase its interest in the LLC to 66.66%. Thereafter, Newgold has the
right to purchase the remaining interest in the LLC held by ASDi at a price
to
be determined by the results of the exploration work conducted. Newgold will
be
the Manager of the LLC.
During
Newgold’s fiscal year ended January 31, 2005, it issued the following equity
securities pursuant to exemptions from registration under the Securities
Act:
(l) In
April
2004, Newgold borrowed $9,650 from its President, Scott Dockter. The promissory
note is not convertible into stock, is due on April 30,2005, and bears interest
at 8% per year. In connection with the loans, warrants to purchase 64,333 shares
of Newgold common stock have been issued. The warrants have been valued using
the Black-Scholes option pricing model. The warrants were issued at $0.15 per
share and expire in five years from the date of issuance.
(m) In
July
2004, Newgold borrowed $8,500 from its President, Scott Dockter. The promissory
note is not convertible into stock, is due on July 31, 2005, and bears interest
at 8% per year. In connection with the loans, warrants to purchase 56,667 shares
of Newgold common stock have been issued. The warrants have been valued using
the Black-Scholes option pricing model. The warrants were issued at $0.15 per
share and expire in five years from the date of issuance.
(n) In
October 2004, Newgold borrowed $3,081 from its President, Scott Dockter. The
promissory note is not convertible into stock, is due on in one year and bears
interest at 8% per year. In conjunction with this loan, the President was issued
warrants to purchase 20,540 shares of Newgold’s common stock of $0.15 per share.
In addition, new convertible promissory notes were issued to Scott Dockter,
Newgold’s CEO and James Kluber, Newgold’s CFO in the principal amounts of
$1,402,742 and $209,251, respectively. The notes bear interest at 8% per annum
and are due September 30, 2005. In connection with the issuance of these notes,
Newgold issued warrants to purchase 5,798,140 and 1,395,007 shares of common
stock to its Chief Executive Officer and Chief Financial Officer, respectively.
During
Newgold’s fiscal year ended January 31, 2004, it issued the following equity
securities pursuant to exemptions from registration under the Securities
Act:
(o) In
February 2003, one person exercised a warrant to purchase 200,000 shares of
Newgold’s common stock. The exercise price was $0.10/share.
Item
27. Exhibits
|
Exhibit
No. |
Description
of Exhibit
|
|
2.1(4) |
Plan
of Reorganization and Merger Agreement, dated as of July 23, 1999,
between
the Registrant and Business Web, Inc.
|
|
2.2(6) |
First
Amendment to Plan of Reorganization and Merger Agreement, dated as
of
October 31, 1999, between the Registrant and Business Web,
Inc.
|
|
2.3(7) |
Termination
Agreement, dated as of December 27, 1999, between the Registrant
and
Business Web, Inc.
|
|
3.1(2) |
Certificate
of Incorporation of the Registrant.
|
|
3.2(1) |
Certificate
of Amendment to Certificate of Incorporation of the
Registrant.
|
|
3.3(2) |
Bylaws
of the Registrant
|
|
4.1(9) |
Convertible
Debenture
|
|
4.1.1(13) |
Form
of Convertible Debenture dated September 26,
2006
|
|
4.2.1(9) |
Form
of Warrant - $0.20 exercise price
|
|
4.2.2(9) |
Form
of Warrant - $0.30 exercise price
|
|
4.2.3(13) |
Form
of Warrant dated September 26, 2006
|
|
10.1(3) |
Promissory
Note between Newgold and A. Scott Dockter, dated April 2,
1997, for the principal amount of
$100,000.
|
|
10.2(3) |
Promissory
Note between Newgold and A. Scott Dockter, dated April 17,
1997, for the principal amount of
$50,000.
|
|
10.3(3) |
Promissory
Note between Newgold and A. Scott Dockter, dated April 30,
1997, for the principal amount of
$20,000.
|
|
10.4(3)
|
Promissory
Note between Newgold and A. Scott Dockter, dated May 30, 1997, for
the
principal amount of $35,000
|
|
10.5(5) |
Promissory
Note between Newgold and A. Scott Dockter, dated December
24, 1998, for the principal amount of
$24,000.
|
|
10.6(7) |
Warrant
to Purchase shares of Common Stock of Business Web,
Inc.
|
|
10.7(9) |
Securities
Purchase Agreement dated January 27, 2006 by and among Newgold
and the investor named therein.
|
|
10.8(9) |
Registration
Rights Agreement dated January 27, 2006 by and among Newgold and
the
investor named therein.
|
|
10.9(10) |
Joint
Venture Agreement dated January 25, 2006 between Newgold, Inc. and
ASDi,
LLC
|
|
10.10(10) |
Crescent
Red Caps LLC - Operating Agreement
|
|
10.11(11) |
Employment
Agreement for A. Scott Dockter dated February 1,
2006
|
|
10.12(11) |
Employment
Agreement for James W. Kluber dated February 1,
2006
|
|
10.13(12) |
Pledge
and Escrow Agreement dated January 27, 2006 by and among Newgold
and the
investor named therein.
|
|
10.14* |
Newgold,
Inc. 2006 Stock Option Plan
|
|
10.15(13) |
Securities
Purchase Agreement dated September 26, 2006 by and among Newgold
and the investor named therein.
|
|
10.15.1(14) |
Amendment
Number 1 to Securities Purchase Agreement dated November 1,
2006.
|
|
10.16(13) |
Registration
Rights Agreement dated September 26, 2006 by and among Newgold and
the
investor named therein.
|
|
14(8) |
Code
of Business Conduct and Ethics.
|
|
23.1* |
Consent
of Counsel (incorporated by reference to Exhibit 5.1 of this
filing)
|
|
23.2* |
Consent
of Independent Registered Public Accounting
Firm
|
____________________
|
(1) |
Incorporated
by reference to the Registrant’s Annual Report on Form 10-KSB for the
fiscal year ended January
31, 1996 filed with the omission on January 22,
1997.
|
|
(2) |
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.
|
|
(3) |
Incorporated
by reference to Registrant’s Annual Report on Form 10-KSB for the fiscal
year ended January 31, 1997
filed with the Commission on June 30,
1997.
|
|
(4) |
Incorporated
by reference to Registrant’s Annual Report on Form 10-KSB for the fiscal
year ended January 31, 1999
filed with the Commission on October 1,
1999.
|
|
(5) |
Incorporated
by reference to Registrant’s First Amendment to Annual Report on Form
10-KSB for the fiscal year ended
January 31, 1999, filed with the Commission on October 20,
1999.
|
|
(6) |
Incorporated
by reference to Registrant’s Form 8-K filed with the Commission on
November 2, 1999.
|
|
(7) |
Incorporated
by reference to Registrant’s Annual Report on Form 10-KSB for the fiscal
year ended January 31, 2000
filed with the Commission on May 17,
2000.
|
|
(8) |
Incorporated
by reference to Registrant’s Annual Report on Form 10-KSB for the fiscal
year ended January 31, 2005
filed with the Commission on May 2,
2005
|
|
(9) |
Incorporated
by reference to Registrant’s Form 8-K filed with the Commission on
February 2, 2006
|
|
(10) |
Incorporated
by reference to Registrant’s Form 8-K/A filed with Commission on February
27, 2006.
|
|
(11) |
Incorporated
by reference to Registrant’s Registration Statement on Form SB-2 (File No.
333-132218) filed with
the Commission on March 6, 2006.
|
|
(12) |
Incorporated
by reference to Registrant’s Amended Registration Statement in Form SB-2
(File No. 333-132218)
filed with the Commission on June 12,
2006.
|
|
(13) |
Incorporated
by reference to Registrant’s Form 8-K filed with the Commission on
September 29, 2006.
|
|
(14) |
Incorporated
by reference to Registrant’s Form 8-K/A filed with the Commission on
November 24, 2006.
|
Item
28. Undertakings.
The
undersigned registrant hereby undertakes:
(1) To
file,
during any period in which it offers or sells securities, a post-effective
amendment to this registration statement to:
(i) Include
any prospectus required by Sections 10(a)(3) of the Securities Act of 1933
(the
“1933 Act”);
(ii) Reflect
in the prospectus any facts or events arising after the effective date of the
Registration Statement (or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a fundamental change in
the
information set forth in the Registration Statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes
in volume and price represent no more than 20 percent change in the maximum
aggregate offering price set forth in the “Calculation of Registration Fee”
table in the effective Registration Statement;
(iii) Include
any additional or changed material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That,
for
the purpose of determining any liability under the 1933 Act, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the bona fide offering thereof.
(3) To
remove
from registration by means of a post-effective amendment any of the securities
that remain unsold at the end of the offering.
(4) For
determining liability of the undersigned small business issuer under the
Securities Act to any purchaser in the initial distribution of the securities,
the undersigned small business issuer undertakes that in a primary offering
of
securities of the undersigned small business issuer
pursuant
to this registration statement, regardless of the underwriting method used
to
sell the securities to the purchaser, if the securities are offered or sold
to
such purchaser by means of any of the following communications, the undersigned
small business issuer will be a seller to the purchaser and will be considered
to offer or sell such securities to such purchaser:
(i) Any
preliminary prospectus or prospectus of the undersigned small business issuer
relating to the offering required to be filed pursuant to Rule 424;
(ii) Any
free
writing prospectus relating to the offering prepared by or on behalf of the
undersigned small business issuer or used or referred to by the undersigned
small business issuer;
(iii) The
portion of any other free writing prospectus relating to the offering containing
material information about the undersigned small business issuer or its
securities provided by or on behalf of the undersigned small business issuer;
and
(iv) Any
other
communication that is an offer in the offering made by the undersigned small
business issuer to the purchaser.
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the small business
issuer pursuant to the foregoing provisions, or otherwise, the small business
issuer has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.
Each
prospectus filed pursuant to Rule 424(b) as part of a registration statement
relating to an offering, other than registration statements relying on Rule
430(B) or other than prospectuses filed in reliance on Rule 430A, shall be
deemed to be part of and included in the registration statement as of the date
it is first used after effectiveness. Provided;
however,
that no
statement made in a registration statement or prospectus that is part of the
registration statement or made in a document incorporated or deemed incorporated
by referenced into the registration statement or prospectus that is part of
the
registration statement will, as to a purchaser with a time of contract of sale
prior to such first use, supersede or modify any statement that was made in
the
registration statement or prospectus that was part of the registration statement
or made in any such document immediately prior to such date of first
use.
SIGNATURES
In
accordance with the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements of filing on Form SB-2 and authorized this registration statement
to be signed on our behalf by the undersigned, in the City of Sacramento, State
of California on November 29, 2006.
NEWGOLD,
INC.
By:
/s/ A. SCOTT DOCKTER
Name:
A.
Scott Dockter
Title:
Chief Executive Officer
In
accordance with the requirements of the Securities Act of 1933, this amended
registration statement was signed by the following persons in the capacities
and
on the dates stated:
Signatures
|
Title
|
Date
|
|
|
|
/s/
A. SCOTT DOCKTER
A.
Scott Dockter
|
Chief
Executive Officer and
Director
|
November
29, 2006
|
/s/
JAMES KLUBER
James
Kluber
|
Principal
Accounting Officer, Principal Financial Officer,
Secretary
and Director
|
November
29, 2006
|
/s/
TERRENCE LYNCH
Terrence
Lynch
|
Director
|
November
27, 2006
|
/s/
STEPHEN AKERFELDT
Stephen
Akerfeldt
|
Director
|
November
29, 2006
|
EXHIBIT
INDEX
|
Exhibit
No. |
Description
of Exhibit
|
|
2.1(4) |
Plan
of Reorganization and Merger Agreement, dated as of July 23, 1999,
between
the Registrant and Business Web, Inc.
|
|
2.2(6) |
First
Amendment to Plan of Reorganization and Merger Agreement, dated as
of
October 31, 1999, between the Registrant and Business Web,
Inc.
|
|
2.3(7) |
Termination
Agreement, dated as of December 27, 1999, between the Registrant
and
Business Web, Inc.
|
|
3.1(2) |
Certificate
of Incorporation of the Registrant.
|
|
3.2(1) |
Certificate
of Amendment to Certificate of Incorporation of the
Registrant.
|
|
3.3(2) |
Bylaws
of the Registrant
|
|
4.1(9) |
Convertible
Debenture
|
|
4.1.1(13) |
Form
of Convertible Debenture dated September 26,
2006
|
|
4.2.1(9) |
Form
of Warrant - $0.20 exercise price
|
|
4.2.2(9) |
Form
of Warrant - $0.30 exercise price
|
|
4.2.3(13) |
Form
of Warrant dated September 26, 2006
|
|
5.1(12) |
Opinion
of Counsel
|
|
10.1(3) |
Promissory
Note between Newgold and A. Scott Dockter, dated April 2,
1997, for the principal amount of
$100,000.
|
|
10.2(3) |
Promissory
Note between Newgold and A. Scott Dockter, dated April 17,
1997, for the principal amount of
$50,000.
|
|
10.3(3) |
Promissory
Note between Newgold and A. Scott Dockter, dated April 30,
1997, for the principal amount of
$20,000.
|
|
10.4(3)
|
Promissory
Note between Newgold and A. Scott Dockter, dated May 30, 1997, for
the
principal amount of $35,000
|
|
10.5(5) |
Promissory
Note between Newgold and A. Scott Dockter, dated December
24, 1998, for the principal amount of
$24,000.
|
|
10.6(7) |
Warrant
to Purchase shares of Common Stock of Business Web,
Inc.
|
|
10.7(9) |
Securities
Purchase Agreement dated January 27, 2006 by and among Newgold
and the investor named therein.
|
|
10.8(9) |
Registration
Rights Agreement dated January 27, 2006 by and among Newgold and
the
investor named therein.
|
|
10.9(10) |
Joint
Venture Agreement dated January 25, 2006 between Newgold, Inc. and
ASDi,
LLC
|
|
10.10(10) |
Crescent
Red Caps LLC - Operating Agreement
|
|
10.11(11) |
Employment
Agreement for A. Scott Dockter dated February 1,
2006
|
|
10.12(11) |
Employment
Agreement for James W. Kluber dated February 1,
2006
|
|
10.13(12) |
Pledge
and Escrow Agreement dated January 27, 2006 by and among Newgold
and the
investor named therein.
|
|
10.14* |
Newgold,
Inc. 2006 Stock Option Plan
|
|
10.15(13) |
Securities
Purchase Agreement dated September 26, 2006 by and among Newgold
and the investor named therein.
|
|
10.15.1(14) |
Amendment
Number 1 to Securities Purchase Agreement dated November 1,
2006.
|
|
10.16(13) |
Registration
Rights Agreement dated September 26, 2006 by and among Newgold and
the
investor named therein.
|
|
14(8) |
Code
of Business Conduct and Ethics.
|
|
23.1(12) |
Consent
of Counsel (incorporated by reference to Exhibit 5.1 of this
filing)
|
|
23.2* |
Consent
of Independent Registered Public Accounting
Firm
|
________________________________________
*Exhibits
included in this SB-2 Registration Statement