UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period endedAugust 31, 2004
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to ________
Commission File No.000-29903
BIG BEAR GOLD CORPORATION | |
(Exact name of small business issuer as specified in its charter) | |
Delaware | 98-0220844 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| |
Suite 404, Ocean Pointe Building, 1688 - 152nd Street, South Surrey, British Columbia, Canada V4A 4N2 | |
(Address of principal executive offices) | |
604.538-2383 | |
(Issuer's telephone number, including area code) | |
N/A | |
(Former Name, Former Address if Changed Since last Report) | |
Check whether the issuer (1) filed all reports to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [ ] No [X]
[APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS]
Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after distribution of securities under a plan confirmed by a court. Yes [ ] No [ ].
[APPLICABLE ONLY TO CORPORATE ISSUERS]
State the number of shares outstanding of each of the issuer's classes of common equity as of the latest practicable date:As of October 31, 2004, there were 14,338,500 shares of common stock, par value $0.0001, outstanding.
Transitional Small Business Disclosure Format (Check One): Yes [ ] No [X]
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PART I - FINANCIAL INFORMATION
BIG BEAR GOLD CORPORATION
(A Pre-exploration Stage Company)
INTERIM FINANCIAL STATEMENTS
August 31, 2004
(Stated in US Dollars)
(Unaudited)
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BIG BEAR GOLD CORPORATION
(A Pre-exploration Stage Company)
INTERIM BALANCE SHEETS
August 31, 2004 and February 29, 2004
(Stated in US Dollars)
(Unaudited)
August 31, | February 29, | |
ASSETS | ||
Current |
|
|
Cash | $2,367 | $9,899 |
Capital assets | 755 | 466 |
| ________________ | ________________ |
| $3,122 | $10,365 |
| _______________ | _______________ |
LIABILITIES | ||
Current |
|
|
Accounts payable | $33,580 | $20,955 |
Due to related parties | 127,200 | 73,805 |
| ________________ | ________________ |
| 160,780 | 94,760 |
| ________________ | ________________ |
STOCKHOLDERS' DEFICIENCY | ||
Common stock, $0.0001 par value |
|
|
160,000,000 shares authorized |
|
|
14,338,500 (February 29, 2004: 9,023,958) shares outstanding | 1,434 | 902 |
Additional paid-in capital | 28,089 | 8,433 |
Deficit accumulated during the pre-exploration stage | (187,181) | (93,730) |
| ________________ | ________________ |
| (157,658) | (84,395) |
| ________________ | ________________ |
| $3,122 | $10,365 |
| _______________ | _______________ |
SEE ACCOMPANYING NOTES
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BIG BEAR GOLD CORPORATION
(A Pre-exploration Stage Company)
INTERIM STATEMENTS OF OPERATIONS
for the three and six months ended August 31, 2004 and 2003,
and for the period March 3, 2000 (Date of Incorporation) to August 31, 2004
(Stated in US Dollars)
(Unaudited)
Three Months ended | Six months ended | March 3, | |||
| 2004 | 2003 | 2004 | 2003 | 2004 |
Expenses |
|
|
|
|
|
General and administrative | $12,865 | $7,677 | $22,907 | $13,549 | $65,294 |
Mineral property costs | 70,544 | 26,829 | 70,544 | 30,284 | 121,887 |
| ________________ | ________________ | ________________ | ________________ | ________________ |
Net loss for the period | (83,409) | (34,506) | (93,451) | (43,833) | (187,181) |
| _______________ | _______________ | _______________ | _______________ | _______________ |
Loss per share | $(0.01) | $(0.00) | $(0.01) | $(0.01) |
|
| _______________ | _______________ | _______________ | _______________ |
|
Weighted average number of |
|
|
|
|
|
shares outstanding | 14,338,500 | 8,000,000 | 12,357,308 | 8,000,000 |
|
| _______________ | _______________ | _______________ | _______________ |
|
SEE ACCOMPANYING NOTES
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BIG BEAR GOLD CORPORATION
(A Pre-exploration Stage Company)
INTERIM STATEMENTS OF CASH FLOWS
for the six months ended August 31, 2004 and 2003
and for the period March 3, 2000 (Date of Incorporation) to August 31, 2004
(Stated in US Dollars)
(Unaudited)
Six months ended | March 3, | ||
| 2004 | 2003 | 2004 |
Operating Activities | |||
Net loss for the period | $(93,451) | $(43,833) | $(187,181) |
Add items not affecting cash: |
|
|
|
Incorporation costs | - | - | 210 |
Amortization | 161 | 117 | 394 |
Changes in non-cash working capital balances |
|
|
|
Accounts payable | 12,625 | 5 | 33,580 |
| ________________ | ________________ | ________________ |
Cash used in operating activities | (80,665) | (43,711) | (152,997) |
| ________________ | ________________ | ________________ |
Financing Activities |
|
|
|
Capital stock issued | 20,188 | - | 29,523 |
Due to related parties | 53,395 | 48,671 | 127,200 |
________________ | ________________ | ________________ | |
Cash provided by financing activities | 73,583 | 48,671 | 156,723 |
| ________________ | ________________ | ________________ |
Investing Activities |
|
|
|
Purchase of capital assets | (450) | (699) | (1,149) |
Incorporation costs | - | - | (210) |
| ________________ | ________________ | ________________ |
Cash used in investing activities | (450) | (699) | (1,359) |
________________ | ________________ | ________________ | |
Increase (decrease) in cash during the period | (7,532) | 4,261 | 2,367 |
|
|
|
|
Cash, beginning of the period | 9,899 | 1,289 | - |
| ________________ | ________________ | ________________ |
Cash, end of the period | $2,367 | $5,550 | $2,367 |
_______________ | _______________ | _______________ | |
Supplemental disclosure of cash flow |
|
|
|
Cash paid for: |
|
|
|
Interest | $- | $- | $- |
_______________ | _______________ | _______________ | |
Income taxes | $- | $- | $- |
_______________ | _______________ | _______________ | |
SEE ACCOMPANYING NOTES
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BIG BEAR GOLD CORPORATION
(A Pre-exploration Stage Company)
INTERIM STATEMENT OF STOCKHOLDERS' DEFICIENCY
for the period March 3, 2000 (Date of Incorporation) to August 31, 2004
(Stated in US Dollars)
(Unaudited)
| Common Shares | Additional | Deficit | Total | |
Number | Par Value | ||||
|
|
|
|
|
|
Capital stock issued for | 8,000,000 | $800 | $(590) | $- | $210 |
| ________________ | ________________ | ________________ | ________________ | ________________ |
Balance, as at February 28, 2001 | 8,000,000 | 800 | (590) | - | 210 |
Net loss for the year | - | - | - | (8,652) | (8,652) |
| ________________ | ________________ | ________________ | ________________ | ________________ |
Balance, as at February 28, 2003 | 8,000,000 | 800 | (590) | (8,652) | (8,442) |
Issue of shares for cash | |||||
- at $0.0031 | 999,958 | 100 | 3,025 | - | 3,125 |
- at $0.25 | 24,000 | 2 | 5,998 | - | 6,000 |
Net loss for the year | - | - | - | (85,078) | (85,078) |
| ________________ | ________________ | ________________ | ________________ | ________________ |
Balance, as at February 29, 2004 | 9,023,958 | 902 | 8,433 | (93,730) | (84,395) |
Issue of shares for cash | |||||
- at $0.0031 | 5,300,042 | 530 | 16,033 | - | 16,563 |
- at $0.25 | 14,500 | 2 | 3,623 | - | 3,625 |
Net loss for the period | - | - | - | (93,451) | (93,451) |
| ________________ | ________________ | ________________ | ________________ | ________________ |
Balance, as at August 31, 2004 | 14,338,500 | $1,434 | $28,089 | $(187,181) | $(157,658) |
| _______________ | _______________ | _______________ | _______________ | _______________ |
The number of shares issued and outstanding has been restated to give retroactive effect for a forward stock split on a 1.6 for one basis approved by the directors of the Company on July 22, 2003. The par value and additional paid-in capital were adjusted in conformity with the number of shares then issued.
SEE ACCOMPANYING NOTES
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BIG BEAR GOLD CORPORATION
(A Pre-exploration Stage Company)
NOTES TO THE INTERIM FINANCIAL STATEMENTS
August 31, 2004
(Stated in US Dollars)
(Unaudited)
Note 1Interim Reporting
The accompanying unaudited interim financial statements have been prepared by Big Bear Gold Corporation (the "Company") pursuant to the rules and regulations of the United States Securities and Exchange Commission. Certain information and disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustments and disclosures necessary for a fair presentation of these financial statements have been included. Such adjustments consist of normal recurring adjustments. These interim financial statements should be read in conjunction with the audited financial statements of the Company for the fiscal year ended February 29, 2004, as filed with the United States Securities and Exchange Commission.
The results of operations for the six months ended August 31, 2004 are not indicative of the results that may be expected for the full year.
Note 2Continuance of Operations
The financial statements have been prepared using generally accepted accounting principles in the United States of America applicable for a going concern which assumes that the Company will realize its assets and discharge its liabilities in the ordinary course of business. At August 31, 2004, the Company had a working capital deficiency of $158,413, which is not sufficient to meet its planned business objectives or to fund mineral property expenditures and ongoing operations for the next twelve months. The Company has accumulated losses of $187,181 since its commencement. Its ability to continue as a going concern is dependent upon the ability of the Company to obtain the necessary financing to meet its obligations and pay its liabilities arising from normal business operations when they come due.
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Note 3Mineral Properties
Pursuant to a lease agreement dated July 2003, the Company has the exclusive right to explore and develop 14 unpatented mining claims located in Nye County, Nevada and the exclusive option to purchase the property. The Company is required to make the following cash payments and incur the following work expenditures:
Year | Lease Payment | Exploration Costs |
1 | $15,000 (paid) | $25,000 (incurred) |
2 | 30,000 (paid) | 50,000 |
3 | 60,000 | 75,000 |
4 | 120,000 | 100,000 |
5 | 240,000 | 125,000 |
| ________________ | ________________ |
| $465,000 | $375,000 |
| _______________ | _______________ |
Upon the earlier of the expiration of the five years or the development of a fully operational mine, ownership will be transferred to the Company subject to a 3-4% Net Smelter Return based upon the existing price of gold. The Company has the option to purchase the Net Smelter Return at any time for $4,000,000.
During the six months ended August 31, 2004, the Company staked an additional 19 claim units in Nye County, Nevada. The Company paid staking costs of $2,565 and maintenance fees of $2,375 with respect to these claims.
During the year ended February 29, 2004, the Company staked 81 mineral claim units located in San Bernardino County, California. These units are known as the Santa Fe claims. The Company paid staking costs of $19,035.
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Item 2. Management's Discussion and Analysis or Plan of Operation.
FORWARD-LOOKING STATEMENTS
This quarterly report contains forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled "Risk Factors", that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
Our financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars. All references to "common shares" refer to the common shares in our capital stock.
As used in this quarterly report, the terms "we", "us", "our", and "Big Bear" mean Big Bear Gold Corporation, unless otherwise indicated.
General
We are a pre-exploration stage mining company incorporated on March 3, 2000 under the laws of the State of Delaware, under the name "Corsea Management Inc.". Effective March 19, 2003 we changed our name to Big Bear Gold Corporation. Effective July 29, 2003 we conducted a forward split of our shares of common stock or a 1:1.6 basis. The address of our principal executive office is Suite 404, Ocean Pointe Building, 1688 - 152nd Street, South Surrey, British Columbia, Canada V4A 4N2.
Our Current Business
In March 2003 we staked 81 mineral claims in San Bernardino County, California, for which we have incurred aggregate staking costs of $19,035. In addition, we entered into a lease agreement dated July, 2003 with William Berg, Kenny Berg and R.H. Guelich, whereby we were granted an option to purchase 14 unpatented mining claims known as the "Jumping Jack Property" located in Nye County, Nevada. In order to exercise the option we are required to make the following cash payments totalling $465,000 and incur the following exploration costs totalling $375,000:
Year | Lease Payment | Exploration Costs |
1 | $15,000 (paid) | $25,000 (incurred) |
2 | $30,000 (paid) | $50,000 |
3 | $60,000 | $75,000 |
4 | $120,000 | $100,000 |
5 | $240,000 | $125,000 |
Total | $465,000 | $375,000 |
The agreement is also subject to a 3-4% net smelter return commencing upon the earlier of five years or a fully operational mine. We may purchase the net smelter return royalty at any time for $4,000,000.
During the six months ended August 31, 2004, we staked an additional 19 claim units in Nye County, Nevada,
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which are contiguous to the Jumping Jack Property. We paid staking costs of $2,565 and maintenance fees of $2,375 with respect to these claims.
We are continuing our initiatives to secure sufficient financing to fund our existing mineral exploration and development initiatives, and to fund future opportunities as they arise. Our current mineral exploration initiatives including the following prospect opportunities:
San Bernardino County, California
In March, 2003 we staked 81 claims in San Bernardino County. The claims are more particularly described as follows:
Location Area | Claim Name | CAMC Number |
| ||
San Bernardino | Big Bear 1-56 | 280972-281027 |
San Bernardino | Kelsey 1-9 | 281028-281036 |
San Bernardino | Wade 1-5 | 281037-281041 |
San Bernardino | RM 1-2 | 281042-281043 |
San Bernardino | Sante Fe 1-9 | 281044-281052 |
All 81 claims are located in Township 4 North, Range 2 East, Sections 8,9 and 10 of the San Bernardino County and are duly registered in the County Office in and with the Bureau of Land Management Office in Sacramento, California.
A total of 70 placer claims were staked over lower portions of the SILVER REEF and BLACKHAWK landslides, which occurred over 17,000 years ago, and 11 lode claims were staked at higher elevations to the two landslides and over previous workings of the Sante Fe Mine and over artisanal workings and untested ground which may represent additional source locations for the gold bearing landslide material.
Jumping Jack Property, Nye County, Nevada
The Jumping Jack property consists of 14 claims, which total approximately 600 acres.
Location Area | Claim Name |
| |
Nye County | Jumping Jack 52 |
Nye County | Jumping Jack 53 |
Nye County | Jumping Jack 54 |
Nye County | Jumping Jack 66 |
Nye County | Jumping Jack 67 |
Nye County | Jumping Jack 68 |
Nye County | Jumping Jack 73 |
Nye County | Jumping Jack 74 |
Nye County | Jumping Jack 100 |
Nye County | Jumping Jack 101 |
Nye County | Jumping Jack 102 |
Nye County | Jumping Jack 103 |
Nye County | Jumping Jack 104 |
Nye County | Jumping Jack 105 |
During the six months ended August 31, 2004, we staked an additional 19 claim units in Nye County, Nevada, which are contiguous to the Jumping Jack Property. The claims are designated as Flash 1 to Flash 19.
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The above mineral claims are all located in the West 1/2 of Section 1, T.11N., R44E. Mount Diablo Meridian, Nye County, Nevada, U.S.A.
The area of interest is described as Sections 35 and 36, T.12N., R44E. and Sections 1, 2, 11 and 12, T.11N., R44E., Mount Diablo Meridian, Nye County, Nevada, U.S.A.
The Jumping Jack property is located in the Moores Creek Mining District and has high-grade gold mineralization occuring primarily in the north-northwest striking, low-sulfidation, epithermal quartz, adularia veins. The district is located on the edge of the Mount Jefferson caldera and mineralization is comparable to other similarly aged gold deposits along the west flank of the Toquima Range, including Round Mountain, Gold Hill, Manhattan and Midway. Previous drilling on this property was directed at Round Mountain-type, low-grade disseminated gold mineralization. The epithermal vein system remains essentially untested, and is a prime candidate for a diamond drilling program. The Main Vein is partially concealed by thin pediment gravel sheets, but has a potential strike length in excess of 3,000 feet and has yielded promising assays. Additional quartz veins are exposed west of the Main Vein, but have, so far, yielded lower grades. Geochemical vectors point to the area east of the Main Vein for additional exploration. This area is underlain by unwelded tuffs that do not propagate veins, but may conceal blind veins in underlying welded tuffs. We believe that Moores Creek represents an under explored mining district with a well defined drill target and additional higher risk exploration targets.
Review of Operations / Plan of Operation
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the Financial Statements and accompanying notes and the other financial information appearing elsewhere in this report. The statements contained in this section include projections of future results and "forward-looking statements" as that term is defined in Section 27A of the Act, and Section 21E of the Exchange Act. All statements that are included in this registration statement, other than statements of historical fact, are forward-looking statements. Although management believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from the expectations are disclosed in this report, including, without limitation, in conjunction with those forward-looking statements contained in the report.
Overview
As at August 31, 2004, we were a pre-exploration stage company whose plan of operation over the next twelve months is to develop our mining properties. We remain in the pre-exploration stage and, since inception, have experienced no significant change in liquidity or capital resources or shareholders' equity. Consequently, our balance sheet as of August 31, 2004, reflects total assets of $2,367 in cash and $755 in capital assets. We are a pre-exploration stage company as defined in Statement of Financial Accounting Standards No. 7, "Accounting and Reporting by Development Stage Enterprises." We have not been operational, other than occasionally searching for a business or venture to acquire, as described below, or had revenues other than interest income since our inception. All losses accumulated since inception have been considered as part of our pre-exploration stage activities.
Plan of Operation
We are in the business of acquiring and exploring resource properties and interests. We have not generated any revenues since our inception. We were incorporated on March 3, 2000. We have commenced pursuing resource sector opportunities, such as the Jumping Jack and San Bernardino Projects as previously discussed.
Plan of Operations - Next 12 Months
We intend to continue our exploration activities in California and Nevada. Our personnel are continuously evaluating new opportunities that become available via network contracts, on ground exploration, or via submittal from independent sources. We anticipate we will require $120,000 for the 12 months ending August 31, 2005 to fund our obligations in respect of our various properties and for our ongoing operational expenses.
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We intend to finance our activities via brokered or non-brokered private placements, bank financing, and/or advances from related parties or shareholders loans, during the year 2004. The amount and conditions precedent to such fund raising are presently under assembly.
We are also pursuing other potential projects within the mineral resource sector.
Financial Condition, Liquidity and Capital Resources
Our principal capital resources have been through issuance of common stock, shareholder loans and borrowing from related parties.
At August 31, 2004, there was a working capital deficit of $158,413 compared to working capital deficit of $55,385 at August 31, 2003.
At August 31, 2004, our total assets were $3,122, which mainly consisted of $2,367 cash on hand and capital assets of $755.
At August 31, 2004, our total current liabilities increased to $160,780 from $58,407 at August 31, 2003.
We posted losses of $93,451 for the six month period ended August 31, 2004, losses of $43,833 for the six months ended August 31, 2003, and losses of $187,181 since inception to August 31, 2004. The principal component of the losses for the period ended August 31, 2004 were administrative expenses and property investigation costs.
Operating expenses for the six month period ended August 31, 2004 were $93,451, compared to the six month period ended August 31, 2003, which were $43,833.
Product Research and Development
Our business plan is focused on the exploration and development of our mineral interests.
We do not anticipate that we will expend any significant funds on research and development over the next twelve months ending August 31, 2005.
Purchase of Significant Equipment
We do not intend to purchase any significant equipment over the next twelve months ending August 31, 2005.
Employees
Currently we have no full time or part-time employees. We utilize short term contractors as necessary. Our directors and officers provide services on a month to month basis pursuant to oral arrangements, but have not signed employment or consulting agreements with us. We do not expect any material changes in the number of employees over the next 12 month period. We may enter formal written service agreements with our directors and officers in the future. We expect to continue to outsource contract employment as needed. Depending on the level of success of our exploration and development initiatives, we may retain full or part-time employees in the future.
Going Concern
Due to our being a pre-exploration stage company and not having generated revenues, in their report on our financial statements for the period ended February 29, 2004, our independent auditors included an explanatory paragraph regarding concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure.
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We have historically incurred losses, and through August 31, 2004 have incurred losses of $187,181 from our inception. Because of these historical losses, we will require additional working capital to develop our business operations. We intend to raise additional working capital through private placements, public offerings, bank financing and/or advances from related parties or shareholder loans.
The continuation of our business is dependent upon obtaining further financing and achieving a profitable level of operations. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current or future stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.
There are no assurances that we will be able to either (1) achieve a level of revenues adequate to generate sufficient cash flow from operations; or (2) obtain additional financing through either private placements, public offerings and/or bank financing necessary to support our working capital requirements. To the extent that funds generated from operations and any private placements, public offerings and/or bank financing are insufficient, we will have to raise additional working capital. No assurance can be given that additional financing will be available, or if available, will be on terms acceptable to us. If adequate working capital is not available we may not increase our operations.
These conditions raise substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might be necessary should we be unable to continue as a going concern.
Recently Issued Accounting Standards
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity". SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). The requirements of SFAS No. 150 apply to issuers' classification and measurement of freestanding financial instruments, including those that comprise more than one option or forward contract. SFAS No. 150 does not apply to features that are embedded in a financial instrument that is not a derivative in its entirety. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003, except for mandatory redeemable financial instrumen ts of non-public entities. It is to be implemented by reporting the cumulative effect of a change in an accounting principle for financial instruments created before the issuance date of SFAS No. 150 and still existing at the beginning of the interim period of adoption. Restatement is not permitted. The adoption of this standard did not have a material effect on our results of operations or financial position.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure", which amends SFAS No. 123 to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, SFAS No. 148 expands the disclosure requirements of SFAS No. 123 to require more prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The transition provisions of SFAS No. 148 are effective for fiscal years ended after December 15, 2002. The disclosure provisions of SFAS No. 148 are effective for financial statements for interim periods beginning after December 15, 2002. The transition provisions do not currently have an impact on our financial position and results of operations as we currently have no stock-based employee compensation.
In June 2002, FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities". The provisions of this Statement are effective for exit or disposal activities that are initiated after February 28, 2002, with early application encouraged. This Statement addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)". This Statement requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. The adoption of this standard did not have a material effect on our results of operations or financial position.
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FASB has also issued SFAS No. 147 and 149 but they do not have any relationship to our operations therefore a description of each and their respective impact on our operations have not been disclosed.
APPLICATION OF CRITICAL ACCOUNTING POLICIES
Our financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles in the United States. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management's application of accounting policies. We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our financial statements is critical to an understanding of our financials.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles 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 revenues and expenses during the reporting period. Actual results could differ from those estimates.
Basic and Diluted Net Income (Loss) Per Share
We computed net income (loss) per share in accordance with Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share". SFAS No. 128 requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing Diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti dilutive.
Cash and Cash Equivalents
We consider all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents.
Financial Instruments
The fair values of accounts payable, accrued liabilities and amounts due to a related party were estimated to approximate their carrying values due to the immediate or short-term maturity of these financial instruments.
RISK FACTORS
Much of the information included in this quarterly report includes or is based upon estimates, projections or other "forward looking statements". Such forward looking statements include any projections or estimates made by us and our management in connection with our business operations. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein.
Such estimates, projections or other "forward looking statements" involve various risks and uncertainties as outline below. We caution the reader that important factors in some cases have affected and, in the future, could materially affect actual results and cause actual results to differ materially from the results expressed in any such estimates, projections or other "forward looking statements".
Our common shares are considered speculative during our pre-exploration stage. Prospective investors should
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consider carefully the risk factors set out below.
Risks Associated with our Business
We have limited operating history and losses that we expect to continue into the future.
We have not yet realized any revenues. We have limited operating history upon which an evaluation of our future success or failure can be made. Our net loss since inception to August 31, 2004 is $187,181. Our ability to achieve and maintain profitability and positive cash flow is dependent upon the following:
Based upon current plans, we expect to incur operating losses in future periods. This will happen because there are expenses associated with exploration of our mineral properties. We may not be successful in generating revenues in the future. Failure to generate revenues will cause us to go out of business.
Our properties are in the pre-exploration stage, are not commercially viable at this time and there is no assurance that commercially viable quantities of ore will be discovered.
Our mineral properties are in the early exploration stage and are not commercially viable at this time. Mineral exploration involves a high degree of risk. There is no assurance that commercially viable quantities of ore will be discovered. There is also no assurance that if found, commercially viable properties will be brought into commercial production. If we are not able to locate sufficient quantities of commercially viable ore and bring our properties into commercial production, we will not be able to continue operations and as a result our shareholders may lose any investment in our company.
There is substantial risk that no commercially exploitable minerals will be found and our business will fail.
The search for valuable minerals as a business is extremely risky. We can provide investors with no assurance that the minerals claims that we have an interest in contain commercially exploitable reserves. Exploration for minerals is a speculative venture necessarily involving substantial risk. The probability of an individual prospect having reserves and being commercially profitable is remote and in all probability, the Jumping Jack and San Bernardino properties do not contain any reserves and in such a case the funds we have spent or will spend on exploration of these properties will be lost.
If we do not raise enough money for exploration, we will have to delay exploration or go out of business.
We are in the very early exploration stage and we need additional financing before we are able to continue our exploration efforts. We have not made any arrangements for financing and we may be unable to raise financing. If we are not able to raise any financing we will have to delay our exploration or go out of business.
Because we are small and do not have much capital, we must limit our exploration and consequently may not find mineralized material. If we do not find mineralized material, we will cease operations.
Because we are small and do not have much capital, we must limit our exploration. Because we may have to limit our exploration, we may not find mineralized material, although our property may contain mineralized material. If we do not find mineralized material, we will cease operations. We require additional financing before we can undertake any explorations of our properties.
We may not have access to all of the supplies and materials we need to begin exploration that could cause us to delay or suspend operations.
Competition and unforeseen limited sources of supplies in the industry could result in occasional spot shortages of supplies, such as explosives, and certain equipment such as bulldozers and excavators that we might need to conduct exploration. We have not attempted to locate or negotiate with any suppliers of products, equipment or materials. We will attempt to locate products, equipment and materials after this offering is complete. If we cannot find the products and equipment we need, we will have to suspend our exploration plans until we do find the products and equipment we need.
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We do not have enough money to complete our exploration and consequently may have to cease or suspend our operations unless we are able to raise additional financing.
We have enough money to commence first stages of the exploration of our projects. We will require additional funding to complete subsequent phases of exploration. Because we are conducting exploration on undeveloped projects, we do not know how much we will have to spend to find out if there is mineralized material on our property. It could cost as little as $500,000 and as much as $10,000,000 to find out. If it turns out that we are not able to raise enough money to complete our exploration program, we will try to raise additional funds from a public offering, a private placement or loans. At the present time, we have not made any plans to raise additional money and there is no assurance that we would be able to raise additional money in the future. In we need additional money and cannot raise it, we will have to suspend or cease operations.
Indemnification of Directors, Officers and Others
Our By-laws contain provisions with respect to the indemnification of our officers and directors against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, actually and reasonably incurred by him, including an amount paid to settle an action or satisfy a judgment in a civil, criminal or administrative action or proceeding to which he is made a party by reason of his being or having been one of our directors or officers.
Anti-Takeover Provisions
We do not currently have a shareholder rights plan or any anti-takeover provisions in our By-laws. Without any anti-takeover provisions, there is no deterrent for a take-over of our company, which may result in a change in our management and directors.
Enforceability of Civil Liabilities Against Us
We do not currently maintain a permanent place of business within the United States. In addition, all of our directors and officers are nationals and/or residents of countries other than the United States, and all or a substantial portion of such persons' assets are located outside the United States. As a result, it may be difficult for investors to enforce within the United States any judgments obtained against our company or our officers or directors, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state thereof.
Risks Associated with our Common Stock
There is no active trading market for our common stock and if a market for our common stock does not develop, our investors will be unable to sell their shares.
There is currently no active trading market for our common stock and such a market may not develop or be sustained. We currently plan to have our common stock quoted on the National Association of Securities Dealers Inc.'s OTC Bulletin Board. In order to do this, a market maker must file a Form 15c-211 to allow the market maker to make a market in our shares of common stock. However, we cannot provide our investors with any assurance that our common stock will be traded on the OTC Bulletin Board or, if traded, that a public market will materialize. Further, the OTC Bulletin Board is not a listing service or exchange, but is instead a dealer quotation service for subscribing members. If our common stock is not quoted on the OTC Bulletin Board or if a public market for our common stock does not develop, then investors may not be able to resell the shares of our common stock that they have purchased and may lose all of their investment. If we establish a trading market for our common stock, the market pr ice of our common stock may be significantly affected by factors such as actual or anticipated fluctuations in our operation results, general market conditions and other factors. In addition, the stock market has from time to time experienced significant price and volume fluctuations that have particularly affected the market prices for the shares of pre-exploration stage companies, which may materially adversely affect the market price of our common stock.
Our stock is a penny stock. Trading of our stock may be restricted by the SEC's penny stock regulations and the NASD's sales practice requirements, which may limit a stockholder's ability to buy and sell our stock.
Our stock is a penny stock. The Securities and Exchange Commission has adopted Rule 15g-9 which generally defines "penny stock" to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny
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stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and "accredited investors". The term "accredited investor" refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer's account. The bid and offer qu otations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer's confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common stock.
In addition to the "penny stock" rules promulgated by the Securities and Exchange Commission, the NASD has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information. Under interpretations of these rules, the NASD believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. The NASD requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.
Item 3. Controls and Procedures.
As required by Rule 13a-15 under the Exchange Act, as of the end of the period covered by this quarterly report, being August 31, 2004, we have carried out an evaluation of the effectiveness of the design and operation of our company's disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of our company's management, including our company's President along with our company's Secretary. Based upon that evaluation, our company's President along with our company's Secretary concluded that our company's disclosure controls and procedures are effective as of the end of the period covered by this report. There have been no significant changes in our company's internal controls or in other factors, which could significantly affect internal controls subsequent to the date we carried our evaluation.
Disclosure controls and procedures and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time period specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our President and Secretary as appropriate, to allow timely decisions regarding required disclosure.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits.
Exhibits required by Item 601 of Regulation S-B
(3) Articles of Incorporation and By-laws
3.1 Certificate of Incorporation (incorporated by reference from our Registration Statement on Form 10-SB, filed on March 3, 2000)
3.2 By-laws (incorporated by reference from our Registration Statement on Form 10-SB, filed on March 9, 2000)
3.3 Amendment to the Certificate of Incorporation (incorporated by reference from our Annual Report on Form 10-KSB, filed on June 25, 2004)
3.4 Amendment to the Certificate of Incorporation (incorporated by reference from our Annual Report on Form 10-KSB, filed on June 25, 2004)
(10) Material Contracts
10.1 Lease Agreement dated July, 2003 between Big Bear Gold Corporation and William Berg, Kenny Berg and R.H. Guelich. (incorporated by reference from our Annual Report on Form 10-KSB, filed on June 25, 2004)
10.2 Letter Agreement dated May 26, 2004 with Practical Geophysics. (incorporated by reference from our Annual Report on Form 10-KSB, filed on June 25, 2004)
(14) Code of Ethics
14.1 Code of Business Conduct and Ethics (incorporated by reference from our Annual Report on Form 10-KSB, filed on June 25, 2004)
(31) Section 302 Certification
31.1 Section 302 Certification
31.2 Section 302 Certification
(32) Section 906 Certification
32.1 Section 906 Certification
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
BIG BEAR GOLD CORPORATION | |
Date: November 9, 2004 | /s/ D. Gary Fife |
Date: November 9, 2004 | /s/ William Whittle |
