UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10QSB
[ x ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2003
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 or the transition period from to
COMMISSION FILE NUMBER 333-59872
Relay Mines Limited
(Exact name of registrant as specified in its charter)
NEVADA | 88-0488851 |
(State of incorporation) | (IRS Employer Identification |
1040 West Georgia-suite 1160
Vancouver, British Columbia
Canada V6E 4H1
(Address of principal executive offices)
(604) 605-0885
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (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 Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [ x ] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of March 31, 2003: 20,352,125
Contents
Balance Sheets
Statements of Operations
Statements of Cash Flows
Notes to the Financial Statements
Relay Mines Limited (An Exploration Stage Company)
Balance Sheets
(expressed in U.S. dollars)
March 31, 2003 $ (unaudited) | June 30, 2002 $ (audited) | ||
| ASSETS | |||
Current Assets | |||
Cash | 695 | 9,773 | |
Prepaid expenses | - | 3,620 | |
Total Assets | 695 | 13,393 | |
| LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | |||
Current Liabilities | |||
Accounts payable | 1,525 | 3,675 | |
Accrued liabilities | 1,200 | - | |
Advances from related party (Note 4(b)) | 7,852 | - | |
Total Liabilities | 10,577 | 3,675 | |
Contingency (Note 1) | |||
Stockholders' Equity (Deficit) | |||
| Common Stock, 100,000,000 shares authorized with a par value of $0.00001; 6,113,934 and 5,715,114 shares issued and outstanding, respectively | 61 | 58 | |
Additional Paid-in Capital | 386,332 | 345,617 | |
Stock Subscriptions Receivable | - | (552) | |
386,393 | 345,123 | ||
Deficit Accumulated During the Exploration Stage | (396,275) | (335,405) | |
Total Stockholders' Equity (Deficit) | (9,882) | 9,718 | |
Total Liabilities and Stockholders' Equity | 695 | 13,393 |
Relay Mines Limited
(An Exploration Stage Company)
Statements of Operations
(expressed in U.S. dollars)
(unaudited)
Accumulated from February 2, 2001 (Date of Inception) to March 31, | |||||||||
Three Months Ended March 31, | Nine Months Ended March 31, | ||||||||
2003 $ | 2003 $ | 2002 $ | 2003 $ | 2002 $ | |||||
Revenue | - | - | - | - | - | ||||
Expenses | |||||||||
Consulting | 282,946 | - | - | 10,000 | - | ||||
General and administration | 37,577 | 5,471 | 5,983 | 26,571 | 6,038 | ||||
Mining exploration | 10,438 | - | 5,000 | 3,484 | 5,000 | ||||
Professional fees | 49,987 | 625 | 21,350 | 8,660 | 26,157 | ||||
Rent (Note 4(a)) | 9,906 | 911 | - | 8,453 | - | ||||
Transfer agent and regulatory fees | 2,547 | - | - | 2,547 | - | ||||
Travel | 2,874 | - | - | 1,055 | - | ||||
396,275 | 7,007 | 32,333 | 60,870 | 37,195 | |||||
Net Loss for the Period | (396,275) | (7,007) | (32,333) | (60,870) | (37,195) | ||||
Net Loss Per Share - Basic | - | (0.01) | (0.01) | (0.01) | |||||
Weighted Average Shares Outstanding | 6,114,000 | 5,029,000 | 5,907,000 | 5,010,000 | |||||
(Diluted loss per share has not been presented as the result is anti-dilutive)
Relay Mines Limited
(An Exploration Stage Company)
Statements of Cash Flows
(expressed in U.S. dollars)
(unaudited)
Nine Months Ended March 31, | |||
2003 $ | 2002 $ | ||
Cash Flows To Operating Activities | |||
Net loss | (60,870) | (37,195) | |
Changes in non-cash working capital items | |||
| 3,620 | - | |
| (950) | 5,407 | |
Net Cash Used In Operating Activities | (58,200) | (31,788) | |
Cash Flows From Financing Activities | |||
Advances from related party | 7,852 | 21,730 | |
Sale of common stock | 41,270 | 11,000 | |
Net Cash Provided By Financing Activities | 49,122 | 32,730 | |
Cash Flows To Investing Activities | - | - | |
Net Decrease in Cash | (9,078) | 942 | |
Cash - Beginning of Period | 9,773 | 54 | |
Cash - End of Period | 695 | 996 | |
Non-Cash Financing Activities | - | - | |
Supplemental Disclosures | |||
Interest paid | - | - | |
Income taxes paid | - | - | |
1. Exploration Stage Company
The Company was incorporated in the State of Nevada on February 2, 2001. In February 2001, the Company acquired six mineral claims: the Mugwump property, Relay Creek valley, in the Province of British Columbia, Canada. The Company's principal business plan is to acquire, explore and develop mineral properties and to ultimately seek earnings by exploiting the mineral claims. The Company has been in the exploration stage since its formation in February 2001 and has not yet realized any revenues from its planned operations. It is primarily engaged in the acquisition, exploration and development of mining properties. Upon location of a commercial mineable reserve, the Company will actively prepare the site for extraction and enter a development stage. At present, management devotes most of its activities to raise sufficient funds to further explore and develop mineral properties. Planned principal activities have not yet begun.
The ability of the Company to emerge from the exploration stage with respect to any planned principal business activity is dependent upon its successful efforts to raise additional equity financing and/or attain profitable mining operations. Management has plans to seek additional capital through a private placement and public offering of its common stock. There is no guarantee that the Company will be able to complete any of the above objectives. These factors raise substantial doubt regarding the Company's ability to continue as a going concern.
During the nine months ended March 31, 2003 the Company issued 407,300 shares for proceeds of $40,730. At March 31, 2003, the Company had a working capital deficit of $9,882. A minimum of $4,000 per quarter is needed to cover expenses. Thus in the next year the Company will require $25,882 to cover both new expenses and preserve working capital. This amount would operate the Company but leave little or nothing for exploration. The Company expects to fund itself in the next twelve months by sales of shares. The Company filed an SB-2 Registration Statement with the U.S. Securities Exchange Commission which has been declared effective.
2. Summary of Significant Accounting Principles
Year End
The Company's year end is June 30.
Basis of Accounting
These financial statements are prepared in conformity with accounting principles generally accepted in the United States and are presented in US dollars.
Cash and Cash Equivalents
The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents. Long-Lived Assets SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" establishes a single accounting model for long-lived assets to be disposed of by sale including discontinued operations. SFAS 144 requires that these long-lived assets be measured at the lower of the carrying amount or fair value less cost to sell, whether reported in continuing operations or discontinued operations.
Foreign Currency Transactions/Balances
The Company's functional currency is the United States dollar. Occasional transactions occur in Canadian currency, and management has adopted Financial Accounting Standard No. 52. Monetary assets and liabilities denominated in foreign currencies are translated into United States dollars at rates of exchange in effect at the balance sheet date. Gains or losses are included in income for the years, except gains or losses relating to long-term debt, which are deferred and amortized over the remaining term of the debt. Non-monetary assets, liabilities and items recorded in income arising from transactions denominated in foreign currencies are translated at rates of exchange in effect at the date of the transaction. Exploration Costs
The Company is in the exploration stage and all costs relating to mineral property grassroots exploration are charged to operations as incurred.
Basic and Diluted Net Income (Loss) per Share
Loss per share was computed by dividing the net loss by the weighted average number of shares outstanding during the period. The weighted average number of shares was calculated by taking the number of shares outstanding and weighting them by the amount of time that they were outstanding. Basic and diluted loss per share were the same, as there were no common stock equivalents outstanding.
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.
Financial Instruments
The carrying value of cash and equivalents, accounts payable and accrued liabilities, and advances from related party approximate fair value due to the relatively short maturity of these instruments.
Concentration of Risk
The Company maintains its cash accounts in primarily one commercial bank in Vancouver, British Columbia, Canada. The Company's cash account is a business checking account maintained in U.S. dollars, which totalled $695 on March 31, 2003. This account is not insured. Recent Accounting Pronouncements
On June 29, 2001, SFAS No. 141, "Business Combinations," was approved by the Financial Accounting Standards Board ("FASB"). SFAS No. 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. Goodwill and certain intangible assets will remain on the balance sheet and not be amortized. On an annual basis, and when there is reason to suspect that their values have been diminished or impaired, these assets must be tested for impairment, and write-downs may be necessary. The Company implemented SFAS No. 141 on July 1, 2001 and its impact is not expected to be material on its financial position or results of operations.
On June 29, 2001, SFAS No. 142, "Goodwill and Other Intangible Assets," was approved by FASB. SFAS No. 142 changes the accounting for goodwill from an amortization method to an impairment-only approach. SFAS No. 142 is effective for fiscal years beginning after December 15, 2001. Amortization of goodwill, including goodwill recorded in past business combinations, will cease upon adoption of this statement. The Company adopted SFAS No. 142 and its impact is not expected to have a material effect on its financial position or results of operations.
In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligation." SFAS No. 143 is effective for fiscal years beginning after June 15, 2002, and will require companies to record a liability for asset retirement obligations in the period in which they are incurred, which typically could be upon completion or shortly thereafter. The FASB decided to limit the scope to legal obligations and the liability will be recorded at fair value. The Company adopted SFAS No. 143 and its impact is not expected to have a material effect on its financial position or results of operations.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 is effective for fiscal years beginning after December 15, 2001. It provides a single accounting model for long-lived assets to be disposed of and replaces SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of." The Company adopted SFAS No. 144 and its impact is not expected to have a material effect on its financial position or results of operations.
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 December 31, 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 Company will adopt SFAS No. 146 on January 1, 2003. The effect of adoption of this standard on the Company's results of operations and financial position is being evaluated. FASB has also issued SFAS No. 145 and 147 but they will not have any relationship to the operations of the Company therefore a description of each and their respective impact on the Company's operations have not been disclosed.
Interim Financial Statements
These interim unaudited financial statements have been prepared on the same basis as the annual financial statements and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company's financial position, results of operations and cash flows for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period.
3. Mineral Properties
In February 2001, the Company, through an unrelated third party, acquired 100% of the rights, title and interest in six mineral claims: the Mugwump property, Relay Creek valley, in the Province of, British Columbia, Canada. Although the claims are recorded in a third party's name for tax purposes, title to the claims has been conveyed to the Company via an unrecorded deed. The Company has assigned no value to these claims, as there is no evidence showing proven and probable reserves.
4. Related Party Transactions/Balances
a) Rent of $8,453 was paid to Callinan Mines Ltd. ("Callinan") whose Vice President of Finance is the President of the Company.
b) The amount owing to Callinan is non-interest bearing, unsecured and due on demand.
In the next twelve months, the Company does not expect any significant changes in the number of employees and does not expect the purchase or sale of plant or significant equipment. We also have no plan for research and development for any property or product other than our mineral claims. See below for exploration information on the Mugwump claims.
The Company is completing its initial public pursuant to its SB2 registration and is adequately financed to survive the next twelve months and move its exploration program forward.
We must conduct exploration to determine what amount of minerals, if any, exist on our properties and if any minerals which are found can be economically extracted and profitably processed.
Our exploration program is designed to economically explore and evaluate our properties.
We do not claim to have any minerals or reserves whatsoever at this time on any of our properties.
We intend to implement an exploration program and intend to proceed in the following three phases all of which will be performed by independent contractors hired by us. We will not hire anyone to start exploration until we receive funds from this offering to start exploring for precious minerals. We believe that the only equipment we will need to start exploration on the property will be a backhoe. We will lease the backhoe from and equipment rental or hire an independent contractor who owns a backhoe to the dig the trenches we refer to in this prospectus. We expect to have to pay $30,000 for a backhoe or $25.00 an hour for an independent contractor who owns his own backhoe.
The only equipment we will need is a backhoe to dig trenches. It is not possible to allocate specific dollar amounts to specific acts because we do not know what we will encounter during our trenching. As trenches are dug and we evaluate the results, we will determine if mineralized material exists. Mineralized material is a mineralized body that has been delineated by appropriately spaced drilling and/or underground sampling to support a sufficient tonnage and average grade of metals. If mineralized material is found, we will then determined if it is profitable to extract the precious minerals.
Phase 1 will begin with research of the available geologic literature, personal interviews with geologists, mining engineers and others familiar with the prospect sites. We have not begun exploration on our property.
When the research is completed, our initial work will be augmented with geologic mapping, geophysical testing and geochemical testing of our claims. When available, existing workings, like trenches, prospect pits, shafts or tunnels will be examined. If an apparent mineralized zone is identified and narrowed down to a specific area by the studies, we will to begin trenching the area. Trenches are generally approximately 150 ft. in length and 10-20 ft. wide. These dimensions allow for a thorough examination of the surface of the vein structure types generally encountered in the area. They also allow easier restoration of the land to its pre-exploration condition when we conclude our operations. Once excavation of a trench is completed, samples are taken and then analyzed for economically potential minerals that are known to have occurred in the area. Careful interpretation of this available data collected from the various tests aid in determining whether or not the prospect has current economic potential and whether further exploration is warranted.
Phase 1 will take about 3 months and cost up to $20,000.
Phase 2 involves an initial examination of the underground characteristics of the vein structure that was identified by Phase 1 of exploration. Phase 2 is aimed at identifying any mineral deposits of potential economic importance. The methods employed are
| * | more extensive trenching |
| * | more advanced geophysical work |
| * | drift driving |
Drift driving is the process of constructing a tunnel to take samples of minerals for testing. Later, the tunnel can be used for mining minerals. The geophysical work gives a general understanding of the location and extent of mineralization at depths that are unreachable by surface excavations and provides a target for more extensive trenching and core drilling. Trenching identifies the continuity and extent of mineralization, if any, below the surface. After a thorough analysis of the data collected in Phase 2, we will decide if the property warrants a Phase 3 study.
Phase 2 will take about 3 months and cost up to $20,000.
Phase 3 is aimed at precisely defining the depth, the width, the length, the tonnage and the value per ton of any mineral body. This is accomplished through extensive drift driving. Phase 3 will take about 6 months and cost up to $90,000.
We do not intend to interest other companies in the property if we find mineralized materials. We intend to try to develop the reserves ourselves.
We are currently in Phase 1 of our proposed exploration program.
The program, consisting of soil and rock sampling as well as geological mapping, was completed between July 3 and July 7, 2002. The program was designed to follow-up previous explorers' results that discovered mineralization (mercury, antimony and gold) that is indicative of a gold bearing shallow (epithermal) hydrothermal style system.
Geological mapping at a scale of 1:2,500 was completed over the entire property. A total of 57 soil samples, taken at either 25m (82 ft) or 50m (160 ft) intervals along portions of the 8,500m (5.3 miles) of flagged control grid. 21 rock samples were also collected. All soil and rock samples were analyzed using gold analysis and 30-element ICP at Assayers Canada (Min-En) Laboratory in Vancouver.
Geological mapping confirmed that the property is underlain by three geological units. The Bridge River Complex, a sequence of rocks consisting of dark gray/brown basalt +/- limestone-chert, argillite, chert, tuffaceous sediments (medium grained white/beige quartz porphyry and quartz rose sandstones) occurs on the western edge of the property. An ultramafic unit of green-brown serpentinite occurs between Relay Creek and the eastern edge of the property. Both units have been highly folded. A unit of quartz pebble conglomerate (multiple colors - fine matrix 0.3-0.5cm dia. with local pyrite and Iron staining) has been emplaced over, and subsequently scowered away by glaciation, the two aforementioned units. This has created a horizontal banding of alternating quartz pebble conglomerate and the respective underlying unit. Within the central area of the property, oriented at 328o, is a less interrupted mass of the quartz pebble conglomerate unit. Dykes and dyke-like intrusions of dark purplish andesite intrude the western areas of the property. There is a major fault running along (parallel to) the Relay Creek valley at 328o.
Only two of the soil samples returned greater than 8ppb Au. Both samples (68ppb and 92 ppb Au) were collected from soil overlaying the central body of quartz pebble conglomerate. None of the other elements were anomalous in other economic elements. The two most anomalous rock samples (MW 037 & 040) returned values of 10ppb Au each.
Management is evaluating the results of this program to decide the best choices for further exploration of the property.
Other than the foregoing, we have not conducted any exploration on our property.
Based on their most recent evaluation, which was completed within 90 days of the filing of this Form 10-QSB, the Company's president believes the Company's disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) are effective to ensure that information required to be disclosed by the Company in this report is accumulated and communicated to the Company's management, including its principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. There were no significant changes in the Company's internal controls or other factors that could significantly affect these controls subsequent to the date of their evaluation and there were no corrective actions with regard to significant deficiencies and material weaknesses.
The affairs of the company are not complex and therefore the president has reason to believe that controls and procedures are adequate at this time. There were no significant changes in the Company's internal controls or other factors that could significantly affect these controls subsequent to the date of their evaluation.
The company follows the 'open folder' method of reality-checking whereby any shareholder, or any individual with a valid business purpose, may examine the books, records, documentation and bills, checks and accounts of the company during business hours at our main office. This policy is expected to continue while the present directors remain directors of the company.
(d) However this updates and corrects the reporting in the same section of the December 2002 Quarterly.
On February 14, 2002, the Securities and Exchange Commission declared our form SB-2 Registration Statement effective (SEC file no. 333-59872), permitting us to offer up to 2,000,000 shares of common stock at $0.10 per share.
From the commencement on February 14, 2002 of the offering shares until closing on November 2002 we sold 1,113,934 shares for net proceeds of $111,393. There were no charges made by directors and no commissions paid.
The funds (along with others advanced by directors) were spent as follows:
| Transfer Agent and regulatory fees | $ | 2,547 |
| Travel | $ | 2,874 |
| Mining Exploration Expense | $ | 10,438 |
| Professional Fees | $ | 49,987 |
| General and Administrative | $ | 37,577 |
| Rent | $ | 9,906 |
Total | $ | 113,329 |
From the effective date of the registration statement to the ending date of the reporting period, March 31, 2003, no funds were used for the construction of plant, buildings or facilities, no funds were used for purchases of real estate or acquisition of other business or temporary investments other than bank accounts.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on this 9th day of May, 2003.
| Relay Mines Limited |
|
/s/ Carlo Civelli
Carlo Civelli, President, Treasurer, Principal Accounting Officer and a member of the Board Of Directors
CERTIFICATION
I, Carlo Civelli, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Relay Mines Limited;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report.
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Dated this 9th day of May, 2003.
/s/ Carlo Civelli
Carlo Civelli, Principal Executive Officer and Principal Financial Officer
CERTIFICATION PURSUANT TO
18 U.S.C. Section 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Relay Mines Limited on Form 10-QSB for the period ended March 31, 2003 as filed with the Securities and Exchange Commission on the date here of (the "report"), I, Carlo Civelli, Chief Executive Officer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated this 9th day of May, 2003.
/s/ Carlo Civelli
Carlo Civelli
Chief Executive Officer and Chief Financial Officer
