UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED OCTOBER 31, 2005
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT FOR THE TRANSITION PERIOD FROM
_______________ to _______________
Commission File Number 0-20722
NEWGOLD, INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE 16-1400479
------------------------------- ---------------------------------------
(State of other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
400 Capitol Mall, Suite 900
Sacramento, California 95814
---------------------------------------- -----------------------------------
(Address of Principal Executive Offices) Zip Code
Issuer's telephone number: (916) 449-3913
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the issuer was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days:
YES X NO
------- -------
Indicate by checkmark whether the registrant is a shell company (as defined by
Rule 12b-2 of the Exchange Act)
YES NO X
------- -------
Common stock, $0.001 par value, 63,104,072 issued and outstanding as of December
9, 2005.
Transitional Small Business Disclosure Format: Yes No
---------- ----------
INDEX
Page
----
PART I - FINANCIAL INFORMATION................................................3
ITEM 1. FINANCIAL STATEMENTS........................................3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATIONS.................................................16
ITEM 3. CONTROLS AND PROCEDURES....................................24
PART II - OTHER INFORMATION..................................................25
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS...................................................25
ITEM 5. OTHER INFORMATION..........................................25
ITEM 6. EXHIBITS ..................................................25
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NEWGOLD, INC.
INDEX TO UNAUDITED FINANCIAL STATEMENTS
Page
----
Condensed Balance Sheet as of October 31, 2005 (Unaudited) 4
Condensed Statements of Operations for the three months and nine
months ended October 31, 2005 and 2004 (Unaudited) 5
Condensed Statements of Comprehensive Loss for the three months
and nine months ended October 31, 2005 and 2004 (Unaudited) 6
Condensed Statements of Cash Flows for the nine months
ended October 31, 2005 and 2004 (Unaudited) 7
Notes to Unaudited Financial Statements 8-15
3
NEWGOLD, INC.
CONDENSED BALANCE SHEET
OCTOBER 31, 2005
(UNAUDITED)
--------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash $ 764
Travel advance 2,657
----------------
Total current assets 3,421
OTHER ASSETS
Deferred reclamation costs 513,946
----------------
Total other assets 513,946
----------------
TOTAL ASSETS $ 517,367
================
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable $ 602,438
Accrued expenses 1,412,638
Accrued reclamation costs 513,946
Notes payable due to individuals and officers 457,634
----------------
Total current liabilities 2,986,656
----------------
DEFERRED REVENUE 800,000
----------------
Total liabilities 3,786,656
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' DEFICIT
Common stock, $0.001 par value
250,000,000 shares authorized
63,104,072 shares issued and outstanding 63,104
Additional paid in capital 14,647,544
Accumulated deficit (17,979,937)
----------------
Total shareholders' deficit (3,269,289)
----------------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT $ 517,367
================
The accompanying notes are an integral part of these financial statements
4
NEWGOLD, INC.
CONDENSED STATEMENTS OF OPERATIONS
FOR THE NINE AND THREE MONTHS ENDED OCTOBER 31,
(UNAUDITED)
--------------------------------------------------------------------------------
For the Nine Months Ended For the Three Months Ended
October 31, October 31,
------------------------------- --------------------------------
2005 2004 2005 2004
-------------- -------------- -------------- --------------
NET SALES $ - $ - $ - $ -
COST OF GOODS SOLD 159,521 15,000 19,821 5,000
-------------- -------------- -------------- --------------
GROSS LOSS (159,521) (15,000) (19,821) (5,000)
OPERATING EXPENSES (504,798) (231,343) (120,227) (78,561)
-------------- -------------- -------------- --------------
LOSS FROM OPERATIONS (664,319) (246,343) (140,048) (83,561)
-------------- -------------- -------------- --------------
OTHER (EXPENSE)
Interest expense (930,315) (256,417) (203,254) (157,011)
Loss on sale of
marketable securities - (281,063) - (281,063)
-------------- -------------- -------------- --------------
Total other (expense) (930,315) (537,480) (203,254) (438,074)
-------------- -------------- -------------- --------------
NET LOSS $ (1,594,634) $ (783,823) $ (343,302) $ (521,635)
============== ============== ============== ==============
BASIC AND DILUTED LOSS PER SHARE $ (0.03) $ (0.02) $ (0.01) $ (0.01)
============== ============== ============== ==============
BASIC AND DILUTED WEIGHTED-
AVERAGE SHARES
OUTSTANDING 54,542,821 47,606,174 63,104,072 47,606,174
============== ============== ============== ==============
The accompanying notes are an integral part of these financial statements
5
NEWGOLD, INC.
CONDENSED STATEMENTS OF COMPREHENSIVE LOSS
FOR THE NINE AND THREE MONTHS ENDED OCTOBER 31,
(UNAUDITED)
--------------------------------------------------------------------------------
For the Nine Months Ended For the Three Months Ended
October 31, October 31,
------------------------------- --------------------------------
2005 2004 2005 2004
-------------- -------------- -------------- --------------
NET LOSS $ (1,594,634) $ (783,823) $ (343,302) $ (521,635)
OTHER COMPREHENSIVE LOSS
Unrealized loss from
marketable securities - (49,843) - -
LESS: RECLASSIFICATION
Adjusted for losses
included in net loss - 254,663 - 254,663
-------------- -------------- -------------- --------------
COMPREHENSIVE LOSS $ (1,594,634) $ (579,003) $ (343,302) $ (266,972)
============== ============== ============== ==============
The accompanying notes are an integral part of these financial statements
6
NEWGOLD, INC.
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED OCTOBER 31,
(UNAUDITED)
--------------------------------------------------------------------------------
2005 2004
--------------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (1,594,634) $ (783,823)
Adjustments to reconcile net loss to net cash
used in operating activities
Accretion of warrants issued as a debt discount 777,643 158,249
Accretion of beneficial conversion of warrants 71,645 -
Fair value of warrants issued for services 15,690 -
(Increase) Decrease in
Deposits - 33,000
Travel advance (657) -
Increase (Decrease) in
Accounts payable 34,160 (1,917)
Accrued salaries and benefits 109,136 (94,334)
Accrued expenses (455,142) 142,613
--------------- ----------------
Net cash (used) by
operating activities (1,042,159) (546,212)
--------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Marketable securities - 315,187
--------------- ----------------
Net cash provided by investing activities - 315,187
--------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of common stock 2,423,935 -
Proceeds from note payable 5,000 230,832
Repayments of note payable (1,402,742) (350)
--------------- ----------------
Net cash provided by financing activities 1,026,193 230,482
--------------- ----------------
Net (decrease) in cash (15,966) (543)
CASH, BEGINNING OF PERIOD 16,730 5,967
--------------- ----------------
CASH, END OF PERIOD $ 764 $ 5,424
=============== ================
The accompanying notes are an integral part of these financial statements
7
NEWGOLD, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED OCTOBER 31, 2005
(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.
Newgold has embarked on a business strategy whereby it will invest in
and/or manage gold mining and other mineral producing properties.
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 located at that site. Newgold's
business will be to acquire, explore and, if warranted, develop various
mining properties located in the state of Nevada. Newgold plans to carryout
comprehensive exploration and development programs on its properties. While
Newgold may fund and conduct these activities itself, Newgold's current
plan is to outsource most 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 Newgold's mining properties. Consequently,
Newgold's current plan will not require the hiring of significant amounts
of mining employees but will require a smaller group of employees to
monitor and/or supervise the mining and exploration activities of other
entities in exchange for royalties or other revenue sharing arrangements.
NOTE 2 - GOING CONCERN
These financial statements have been prepared on a going concern basis.
However, during the year ended January 31, 2005, Newgold incurred a net
loss of $1,278,140 and had negative cash flows from operations of $353,201.
In addition, Newgold had an accumulated shareholders' deficit of $4,114,280
at January 31, 2005. Information for the nine months ended October 31, 2005
include a net loss of $1,594,634; negative cash flows from operations of
$1,042,159 and an accumulated shareholders' deficit of $3,269,289.
Newgold'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, Newgold 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
8
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 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, 2005.
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.
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).
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
9
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) during the nine month and three month period
ended October 31, 2004 from changes in equity from available-for-sale
marketable securities.
Stock-Based Compensation
------------------------
SFAS No. 123, "Accounting for Stock-Based Compensation," as amended by SFAS
No. 148, "Accounting for Stock-Based Compensation - Transition and
Disclosure," defines a fair value based method of accounting for
stock-based compensation. However, SFAS No. 123 allows an entity to
continue to measure compensation cost related to stock and stock options
issued to employees using the intrinsic method of accounting prescribed by
Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock
Issued to Employees." Entities electing to remain with the accounting
method of APB No. 25 must make pro forma disclosures of net income and
earnings per share as if the fair value method of accounting defined in
SFAS No. 123 had been applied. Newgold has elected to account for its
stock-based compensation to employees using the intrinsic value method
under APB No. 25. There were no stock options granted or outstanding for
the three months ended October 31, 2005 and 2004.
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:
2005 2004
---------- ----------
Warrants 13,374,583 11,052,916
10
Recent Accounting Pronouncements
--------------------------------
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.
NOTE 4 - MARKETABLE SECURITIES AVAILABLE FOR SALE
At October 31, 2005 and 2004 Newgold held no marketable securities
available for sale. In October 2004, the Company sold all of its investment
in marketable securities through open market transactions with net proceeds
aggregating approximately $34,100. The Company recorded a loss on sale of
securities on the Statements of Operations of $281,063 and $281,063 for the
three and nine months ended October 31, 2004, respectively.
NOTE 5 - PROPERTY AND EQUIPMENT
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.
11
A summary of property, equipment and capitalized costs was as follows:
Machinery
& Development Capitalized
Buildings Equipment Costs 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 October
31, 2005.
NOTE 6 - NOTES PAYABLE TO RELATED PARTIES AND INDIVIDUALS
Unsecured notes payable to individuals and related parties consist of the
following at October 31, 2005:
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.
Term notes payable $ 24,844
The notes bear interest at 8% per year.
The notes are due January 31 and October 31, 2006. 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. Newgold 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
=============
Newgold recorded interest expense of $203,254 and $930,315 for the three
months and nine months ended October 31, 2005 compared to interest expense
of $157,011 and $256,417 for the three months and nine months ended October
31, 2004.
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 October
31, 2005. However, minimum annual royalty payments are required to
12
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.
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.
13
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 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.
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 common stock (see this Note 8).
The fair market value of warrants issued during the nine months ended
October 31, 2005 in conjunction with the issuance of common stock was
determined to be $310,256 and was calculated under the Black-Scholes option
pricing model with the following assumptions used:
Expected life 3 years
Risk free interest rate 3.77% - 4.01%
Volatility 199.8% - 266.1%
Expected dividend yield None
The fair value of $294,566 warrants has been recorded as part of the
issuance of the common stock resulting in no impact on Newgold's results of
operations. The fair value of $15,690 warrants has been recorded as a debit
to operating expense for services rendered and a credit to additional paid
in capital.
The following table presents warrant activity from January 31, 2005 through
October 31, 2005:
14
Weighted-
Average
Number Exercise
of Shares Price
------------- -------------
Outstanding, January 31, 2005 11,724,583 $ 0.16
Granted 1,650,000 $ 0.43
------------- -------------
Outstanding, October 31, 2005 13,374,583 $ 0.19
============= =============
Exercisable, October 31, 2005 13,374,583 $ 0.19
============= =============
NOTE 9 - RELATED PARTY TRANSACTIONS
Loans from officers
-------------------
During the quarter ended October 31, 2005 the Chief Executive Officer and
Chairman of Newgold loaned the Company $5,000. As of October 31, 2005 the
net principal balance owing to him was $24,844 and accrued interest payable
was $32,413. See Note 6.
During prior periods, the Chief Financial Officer and Secretary of Newgold
loaned Newgold an aggregate of $209,251. As of October 31, 2005 the net
principal balance owing to him was $209,251 and accrued interest payable
was $18,414. See Note 6.
Accrued Payroll and Expenses Owed to Officers
---------------------------------------------
As of October 31, 2005 Newgold owed the Chief Executive Officer and
Chairman of Newgold $30,000 for back wages.
As of October 31, 2005 Newgold owed the Chief Financial Officer and
Secretary of Newgold $120,167 for back wages and $7,000 for accrued
expenses.
15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
CAUTION ABOUT FORWARD-LOOKING STATEMENTS
This Form 10-QSB includes "forward-looking" statements about future financial
results, future business changes and other events that haven't yet occurred. For
example, statements like Newgold "expects," "anticipates" or "believes" are
forward-looking statements. Investors should be aware that actual results may
differ materially from Newgold's expressed expectations because of risks and
uncertainties about the future. Newgold does not undertake to update the
information in this Form 10-QSB if any forward-looking statement later turns out
to be inaccurate. Details about risks affecting various aspects of Newgold's
business are discussed throughout this Form 10-QSB 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:
o Gold prices, and to a lesser extent, silver prices;
o 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 properties now include 78 unpatented mining claims contained in
about 1000 acres.
Our operating plan is to place our mining claims into profitable
production during fiscal 2007, and use the net proceeds from these
operations to fund ongoing exploration and development of our property
holdings. Through the use of joint ventures, royalties, arrangements
and partnerships, we intend to progressively enlarge the scope and
scale of the mining and processing operations, thereby increasing 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;
o We expect to make capital expenditures in calendar years 2006 and 2007
of between $2.5 million and $4 million, including costs related to the
resumption of mine operations and production at the Relief Canyon mine.
o Due to the strengthening of the gold market, and consistent with our
exploration growth strategy, we expect exploration, research and
development expenditures in 2006 and 2007 will total between $500,000
and $1 million.
o Additional funding or the utilization of other venture partners will be
required for mining operations, exploration, research, development and
operating expenses. In the past we have been dependent on the funding
from the private placement of our securities as well as loans from
related parties as the sole sources of capital to fund operations.
16
RESULTS OF OPERATION
Newgold resumed business operations after having been inactive from July 2001
until February 2003. Consequently, because we are in the process of
reinstituting our business and mining operations, the results of operations for
the last two fiscal years will likely not be indicative of Newgold's current and
future operations. The current management discussion and analysis should be read
from the context of Newgold's recent resumption of its mining business.
Operating Results for the Fiscal Quarters Ended October 31, 2005 and 2004
-------------------------------------------------------------------------
Although Newgold 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 October 31, 2005 and 2004, respectively.
Newgold hopes to be able to commence generating revenues from mining operations
during the 2007 fiscal year. Newgold has 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 October 31, 2005 Newgold spent $19,821 on reclamation
and maintenance expenses related to the Relief Canyon mining property.
Reclamation and maintenance expenses expended during the same quarter ended
October 31, 2004 were $5,000. These expenses relate primarily to maintenance and
retention costs required to maintain Newgold's mining claims. Newgold incurred
operating expenses of $120,227 during the quarter ended October 31, 2005. Of
this amount, $93,500 reflects officer compensation and related payroll taxes
during the quarter and $15,000 reflect fees for outside professional services. A
large portion of the outside professional services reflects legal and accounting
work pertaining to Newgold's annual and quarterly reporting on Form 10-KSB and
Form 10-QSB occurring in fiscal year 2006. During the quarter ended October 31,
2004 Newgold incurred operating expenses of $78,561 of which $55,000 represents
officer compensation and related payroll taxes, $8,440 reflecting payroll tax
penalties and $13,500 reflect fees for outside professional services. It is
anticipated that both mining costs and operating expenses will increase
significantly as Newgold resumes its mining operations and exploration program.
Newgold incurred interest expense of $203,254 during the quarter ended October
31, 2005 which compares to interest expenses of $157,011 incurred during the
same quarter ended October 31, 2004. The increase in additional interest expense
was primarily due to the increase in accretion of warrants issued in October
2004 as a debt discount.
In October 2004, Newgold liquidated its 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 2006.
Newgold's total net loss for the quarter ended October 31, 2005 decreased to
$343,302 compared
17
to a net loss of $521,635 incurred for the same quarter ended October 31, 2004.
The larger net loss in the third quarter of fiscal 2005 reflects the loss on
sale of marketable securities referred to above.
Operating Results for the Nine Months Ended October 31, 2005 and 2004
---------------------------------------------------------------------
During the nine months ended October 31, 2005 Newgold spent $159,521 on
reclamation and maintenance expenses related to the Relief Canyon mining
property. Reclamation and maintenance expenses expended during the nine months
ended October 31, 2004 were $15,000. These expenses relate primarily to
maintenance and retention costs required to maintain Newgold's mining claims.
Newgold incurred operating expenses of $504,798 during the nine months ended
October 31, 2005. Of this amount, $280,501 reflects officer compensation and
related payroll taxes during the period and $120,938 reflect fees for outside
professional services. A large portion of the outside professional services
reflects legal and accounting work pertaining to Newgold's annual and quarterly
reporting on Form 10-KSB and Form 10-QSB for fiscal years 2005 and 2006. During
the nine months ended October 31, 2004 Newgold incurred operating expenses of
$231,343 of which $165,000 represents officer compensation and $24,945 reflected
payroll tax penalties. It is anticipated that both mining costs and operating
expenses will increase significantly as Newgold resumes its mining operations
and exploration program.
Newgold incurred interest expense of $930,315 during the nine months ended
October 31, 2005 which compares to interest expenses of $256,417 incurred during
the nine months ended October 31, 2004. The increase in additional interest
expense was primarily due to $777,645 representing the increase in accretion of
warrants issued in October 2004 as a debt discount.
Newgold's total net loss for the nine months ended October 31, 2005 increased to
$1,594,634 compared to a net loss of $783,823 incurred for the nine months ended
October 31, 2004. The larger net loss in the current fiscal year reflects the
substantial increase in operating expenses ($504,798) and interest expense
($930,315) as well as the continuing lack of revenues recognized during the
first nine months of fiscal year 2006.
LIQUIDITY AND CAPITAL RESOURCES
Newgold has incurred significant operating losses during the last two fiscal
years and during the nine months ended October 31, 2005 which has resulted in an
accumulated deficit of $17,979,937 as of October 31, 2005. At October 31, 2005,
Newgold had cash and other current assets of $3,421 compared to $33,983 at
October 31, 2004 and a net working capital deficit of $2,983,235. During the
quarter ended October 31, 2005, Newgold's President loaned the Company $5,000 in
order to fund operating expenses. Since the resumption of its business in
February 2003, Newgold has been dependent on borrowed or invested funds in order
to finance its ongoing operations. As of October 31, 2005, Newgold had
outstanding notes payable in the gross principal amount of $457,634 which
reflects a decrease of $1,399,128 compared to notes payable in the gross
principal amount of $1,856,762, (net balance of $663,642 after $1,193,120 of
note payable discount) as of October 31, 2004.
As of October 31, 2005, we were in default on a promissory note due to an
unrelated party in the principal amount $176,500.
18
In the quarter ended April 30, 2005 Newgold raised a total of $575,000 through
the sale of 2,500,000 shares of its restricted stock.
In the quarter ended July 31, 2005 Newgold issued 12,326,231 shares of common
stock at a price of $0.15 per share to its Chief Executive Officer according to
the terms of existing notes payable to the officer. The issuance resulted in the
repayment of principal of $1,402,742 and interest of $446,193 totaling
$1,848,935.
By attempting to resume mining operations, Newgold will require approximately
$2.5 million to $4 million in additional working capital above the current
working capital deficiency to bring the mine into full production. It is
Newgold's intention to pursue several possible funding opportunities including
the sale of additional securities, entering into joint venture arrangements, or
the incurring of additional debt.
Due to Newgold's continuing losses from its business operations, the independent
auditor's report dated April 15, 2005, 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 October 31, 2005, Newgold's principal
commitments included its obligation to pay ongoing maintenance fees on its 78
unpatented mining claims.
Management of Newgold believes that it will need to raise additional capital to
continue to develop, promote and conduct its mining operations. Due to Newgold's
limited cash flow, operating losses and limited assets, it is unlikely that
Newgold could obtain financing through commercial or banking sources.
Consequently, Newgold is dependent on continuous cash infusions from its major
stockholders or other outside sources in order to fund its current operations.
To date, Newgold's President has paid a substantial portion of Newgold's
expenses since restarting its business in February 2003. Although Newgold
believes that these 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 Newgold's 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.
Off-Balance Sheet Arrangements
------------------------------
During the fiscal quarter ended October 31, 2005, Newgold did not engage in any
off-balance sheet arrangements as defined in Item 303(c) of the SEC's Regulation
S-B.
FACTORS AFFECTING FUTURE OPERATING RESULTS
Newgold had been relatively inactive until February 2003. Consequently, it is
only recently reactivating its business operations and has generated no
revenues, other than dividend income, since its inception. As a result, Newgold
has only a limited operating history upon which to evaluate its future potential
performance. Newgold's prospects must be considered in light of
19
the risks and difficulties encountered by new companies which have not yet
established their business operations.
Newgold will need additional funds to finance its mining and exploration
activities as well as fund its current operations. It currently has limited cash
reserves and a working capital deficit and is unable to fund its operations from
revenues. Consequently, its ability to meet its obligations in the ordinary
course of business is dependent upon its ability to raise additional financing
through public or private equity financings, establish increasing cash flow from
operations, enter into joint ventures or other arrangements with corporate
sources, or secure other sources of financing to fund operations.
The audit report of Newgold's independent auditors includes a "going concern"
qualification. In the auditor's opinion, Newgold's limited operating history and
the accumulated shareholders' deficit as of January 31, 2005, raise substantial
doubt about its ability to continue as a going concern. See Note 2 of the Notes
to Financial Statements for the nine months ended October 31, 2005.
The price of gold has experienced an increase in value over the past three
years, generally reflecting among other things declining interest rates in the
United States; worldwide instability due to terrorism; and a global economic
slump. Any significant drop in the price of gold may have a materially adverse
affect on the results of Newgold's operations unless it is able to offset such a
price drop by substantially increased production.
Newgold's disclosures of its mineral resources are only estimates. Newgold has
no proven or probable reserves and has no ability to currently measure or prove
its reserves other then estimating such reserves relying on information produced
in the 1990's and thus may be unable to actually recover the quantity of gold
anticipated. Newgold can only estimate a potential mineral resource which is a
subjective process which depends in part on the quality of available data and
the assumptions used and judgments made in interpreting such data. There is
significant uncertainty in any resource estimate such that the actual deposits
encountered or reserves validated and the economic viability of mining the
deposits may differ materially from Newgold's estimates.
Gold exploration is highly speculative in nature. 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 Newgold's exploration programs will result in the discovery of new mineral
reserves or resources.
Newgold's mining property rights consist of 78 mill site and unpatented mining
claims. 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, Newgold may not be able to retain its royalty interests
on
20
that property, which could reduce its future revenues.
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. Newgold believes that, it is
currently operating in compliance with all known safety and environmental
standards and regulations applicable to its Nevada property. Currently, Newgold
is only permitted to carry on designated mining activities until it posts a
reclamation bond and the mining property is brought into compliance with the
requirements of the Nevada Department of Environmental Protection ("NDEP").
While current negotiations with the NDEP are ongoing, permitting Newgold's
mining property for full exploration and mining activities is expected to take 4
to 12 months. However, there can be no assurance that permits will be granted or
that future changes in federal or Nevada laws, regulations or interpretations
thereof will not have a material adverse affect on Newgold's ability to resume
and sustain mining operations.
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.
Since resuming operations in February 2003, Newgold has not carried insurance on
any of its properties due to the current status of the mine and Newgold's
current financial condition. Even if Newgold eventually obtains 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 is substantially dependent upon the continued services of A. Scott
Dockter, its President. Newgold has no employment agreement with Mr. Dockter,
nor is there either key person life insurance or disability insurance on Mr.
Dockter. While Mr. Dockter expects to spend the majority of his time assisting
Newgold, 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, Mr. Dockter has been
a significant shareholder of Newgold since its inception and considers his
investment of time and money in Newgold of significant personal value.
CRITICAL ACCOUNTING POLICIES
Newgold's discussion and analysis of its financial conditions and results of
operations are based upon its 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
21
on-going basis, Newgold evaluates its estimates, including, but not limited to,
those related to revenue recognition. Newgold uses authoritative pronouncements,
historical experience and other assumptions as the basis for making judgments.
Actual results could differ from those estimates. Newgold believes that the
following critical accounting policies affect its more significant judgments and
estimates in the preparation of its financial statements.
Valuation of long-lived assets
------------------------------
Long-lived assets, consisting primarily of property and equipment, patents and
trademarks, and goodwill, comprise a significant portion of Newgold's 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 Newgold considers 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 its use of the acquired
assets or the strategy of its overall business, and
(c) significant negative industry or economic trends.
When Newgold determines 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, it measures any
impairment based on a projected discounted cash flow method using a discount
rate determined by its management to be commensurate with the risk inherent in
its 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
22
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.
Reclamation Costs
-----------------
Reclamation costs and related accrued liabilities, which are based on Newgold'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 Newgold's best
estimates of its ultimate reclamation liabilities could change as a result of
changes in regulations or cost estimates.
Recent Accounting Pronouncements
--------------------------------
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
23
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.
ITEM 3. CONTROLS AND PROCEDURES
Newgold carried out an evaluation, under the supervision and with the
participation of Newgold's management, including Newgold's President and Chief
Executive Officer along with Newgold's Chief Financial Officer, of the
effectiveness of the design and operation of Newgold's disclosure controls and
procedures pursuant to Exchange Act Rule 13a-14 as of the end of the period
covered by this report. Based upon that evaluation, Newgold's President and
Chief Executive Officer along with Newgold's Chief Financial Officer concluded
that Newgold's disclosure controls and procedures are effective to ensure the
information required to be disclosed by Newgold in reports filed or submitted
under the Exchange Act were timely recorded, processed and reported within the
time periods specified in the Securities and Exchange Commission rules and
forms.
There have been no significant changes in Newgold's internal controls over
financial reporting or in other factors which occurred during the last quarter
covered by this report, which could materially affect or are reasonably likely
to materially affect Newgold's internal controls over financial reporting.
24
PART II - OTHER INFORMATION
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
SALES OF UNREGISTERED SECURITIES DURING THE QUARTER
During the quarter ended October 31, 2005, Newgold did not issue any securities
without registration under the Securities Act of 1933 ("1933 Act").
Prior issuances of Newgold's common stock during fiscal years 2006, 2005 and
2004 have been reported in Newgold's prior filings with the Securities and
Exchange Commission.
ITEM 6. EXHIBITS
31.1 Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
31.2 Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
32. Certification by CEO and CFO pursuant to Section 906 of the
Sarbanes- Oxley Act of 2002
25
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Dated: January 3, 2006 NEWGOLD, INC.
/s/ SCOTT DOCKTER
--------------------------------------------
Scott Dockter, President and Chief Executive
Officer
/s/ JAMES KLUBER
--------------------------------------------
James Kluber, Principal Accounting Officer
and Chief Financial Officer
26