BLACK MOUNTAIN CAPITAL CORPORATION
Third Quarter Report
September 30, 2006
Black Mountain's shares are quoted on the NASD OTC Bulletin Board in the United States under the symbol "BMMUF" and on the TSX Venture Exchange, in U.S. dollars under the symbol "BMM.U".
NOTICE TO SHAREHOLDERS
Under National Instrument 51-102, Part 4, subsection 4.3 (3)(a), if an auditor has not performed a review of the interim financial statements, they must be accompanied by a notice indicating that the financial statements have not been reviewed by an auditor.
The accompanying unaudited interim consolidated financial statements of the Company have been prepared by and are the responsibility of the Company’s management.
The Company’s independent auditor has not performed a review of these financial statements in accordance with the standards established by the Canadian Institute of Chartered Accountants for a review of interim financial statements by an entity’s auditor.
BLACK MOUNTAIN CAPITAL CORPORATION
UNAUDITED CONSOLIDATED BALANCE SHEETS
(Expressed in U.S. dollars)
Sept. 30, 2006 | December 31, 2005 (1) | ||||||
ASSETS | |||||||
CURRENT | |||||||
Cash and cash equivalents | $ | 154,945 | $ | 14,392 | |||
Marketable securities (Note 3) | - | 112,234 | |||||
Loans, prepaids and receivables (Note 4) | 4,704 | 21,669 | |||||
159,649 | 148,295 | ||||||
Long-term investments, cost (Note 5) | - | 337 | |||||
| Total assets | $ | 159,649 | $ | 148,632 | |||
LIABILITIES AND SHAREHOLDERS' (DEFICIENY) | |||||||
CURRENT | |||||||
Accounts payable and accrued liabilities | $ | 53,227 | $ | 166,794 | |||
Loan payable (Note 6) | 359,002 | 343,053 | |||||
Shareholders' deficiency | |||||||
Capital stock (Note 8) | |||||||
Authorized | |||||||
| Unlimited number of common shares | |||||||
| Unlimited number of Class A preferred shares | |||||||
Issued and outstanding - 10,683,733 common shares | 3,631,139 | 3,456,139 | |||||
Less: Treasury stock - 2,250,219 common shares | (1,294,050 | ) | (1,294,050 | ) | |||
Additional paid-in capital | 971,859 | 971,859 | |||||
Cumulative translation adjustment | 365,553 | 388,464 | |||||
Deficit | (3,927,081 | ) | (3,883,627 | ) | |||
Total shareholders’ deficiency | (252,580 | ) | (361,215 | ) | |||
Total liabilities and shareholders’ deficiency | $ | 159,649 | $ | 148,632 | |||
The accompanying notes are an integral part of these consolidated financial statements.
(1) Audited
BLACK MOUNTAIN CAPITAL CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(Expressed in U.S. dollars)
Nine Months Ended September 30, | Three Months Ended September 30, | ||||||||||||
2006 | 2005 | 2006 | 2005 | ||||||||||
REVENUE | $ | (57,505 | ) | $ | 46,714 | $ | (72,734 | ) | $ | 4,064 | |||
EXPENSES | |||||||||||||
Amortization | - | 1,306 | - | 435 | |||||||||
Directors and management fees | 37,617 | 72,365 | 38,463 | 18,988 | |||||||||
General and administrative expenses (Note 7) | 41,733 | 208,789 | 19,618 | 8,605 | |||||||||
Interest expense | 17,036 | 10,812 | 6,065 | 5,030 | |||||||||
| 96,386 | 293,272 | 64,146 | 33,058 | ||||||||||
Loss before other items | (153,891 | ) | (246,558 | ) | (136,880 | ) | (28,994 | ) | |||||
OTHER ITEMS | |||||||||||||
Write-down of marketable securities | (3,892 | ) | - | (16 | ) | - | |||||||
| Gain on sale of long-term investments | 57,338 | 82,903 | 44,101 | 64,911 | |||||||||
Write-down of loan receivable | (19,450 | ) | - | (19,450 | ) | - | |||||||
Reassessment of GST | 52,808 | - | 52,808 | - | |||||||||
Gain on settlement of debt | 23,633 | - | - | - | |||||||||
Loss on investigation settlement | - | (40,693 | ) | - | - | ||||||||
Net income (loss) for the period | (43,454 | ) | (204,348 | ) | (59,437 | ) | 35,917 | ||||||
Deficit, beginning of the period | (3,883,627 | ) | (3,583,348 | ) | (3,867,644 | ) | (3,823,613 | ) | |||||
Deficit, end of the period | $ | (3,927,081 | ) | $ | (3,787,696 | ) | $ | (3,927,081 | ) | $ | (3,787,696 | ) | |
Basic and diluted income (loss) per share | $ | (0.006 | ) | $ | (0.03 | ) | $ | (0.008 | ) | $ | 0.006 | ||
Weighted average number of common shares outstanding | 7,069,045 | 5,933,514 | 7,069,045 | 5,933,514 | |||||||||
The accompanying notes are an integral part of these consolidated financial statements.
BLACK MOUNTAIN CAPITAL CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in U.S. dollars)
Nine Months Ended September 30, | Three Months Ended September 30, | ||||||||||||
2006 | 2005 | 2006 | 2005 | ||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | |||||||||||||
Net income (loss) for the period | $ | (43,454 | ) | $ | (204,348 | ) | $ | (59,437 | ) | $ | 35,917 | ||
Items not affecting cash: | |||||||||||||
Amortization | - | 1,306 | - | 435 | |||||||||
Write-down marketable securities | 3,892 | - | 16 | - | |||||||||
Gain on sale of long-term investments | (57,338 | ) | (82,903 | ) | (44,101 | ) | (64,911 | ) | |||||
Write-off loan receivable | 19,450 | - | 19,450 | - | |||||||||
Gain on settlement of debt | (23,633 | ) | - | - | - | ||||||||
Changes in current assets and current liabilities: | |||||||||||||
(Increase) decrease in marketable securities | 17,972 | 3,811 | 19,532 | 5,421 | |||||||||
(Increase) decrease in loans and receivables | 113,560 | (14,771 | ) | 108,961 | 19,316 | ||||||||
Increase (decrease) in accounts payable | (121,321 | ) | (773,234 | ) | (43,495 | ) | (80,948 | ) | |||||
Net cash used in operating activities | (90,872 | ) | (1,070,139 | ) | 926 | (84,770 | ) | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES | |||||||||||||
Long-term investment purchases/costs | - | (617 | ) | - | - | ||||||||
Proceeds on sale of long-term investments | 57,674 | 85,546 | 44,402 | 65,118 | |||||||||
Net cash provided by investing activities | 57,674 | 84,929 | 44,402 | 65,118 | |||||||||
CASH FLOWS FROM FINANCING ACTIVITIES | |||||||||||||
Loans payable | - | 341,501 | (42,994 | ) | 12,662 | ||||||||
Issuance of share capital | 175,000 | - | - | - | |||||||||
Net cash provided by financing activities | 175,000 | 341,501 | (42,994 | ) | 12,662 | ||||||||
Effect of foreign exchange on cash and cash equivalents | (1,249 | ) | 8,883 | (19,240 | ) | 20,420 | |||||||
| Increase (decrease) in cash | 140,553 | (634,826 | ) | (16,906 | ) | 13,430 | |||||||
| Cash, beginning of the period | 14,392 | 657,988 | 171,851 | 9,732 | |||||||||
Cash, end of the period | $ | 154,945 | $ | 23,162 | $ | 154,945 | $ | 23,162 | |||||
The accompanying notes are an integral part of these consolidated financial statements.
BLACK MOUNTAIN CAPITAL CORPORATION
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
These interim consolidated financial statements should be read in conjunction with the Company’s most recent annual consolidated financial statements.
1. Basis of Presentation
The consolidated financial statements contained herein include the accounts of the Company and its wholly-owned subsidiaries.
The interim period consolidated financial statements have been prepared by the Company in accordance with Canadian generally accepted accounting principles. All financial summaries included are presented on a comparative and consistent basis showing the figures for the corresponding period in the preceding year. The preparation of financial data is based on accounting principles and practices consistent with those used in the preparation of annual consolidated financial statements. Certain information and footnote disclosure normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These interim period statements should be read together with the audited consolidated financial statements and the accompanying notes included in the Company's latest annual report. In the opinion of the Company, its unaudited interim consolidated financial statements contain all adjustments necessary in order to present a fair statement of the results of the interim periods presented.
Certain reclassifications have been made to the prior period financial statements to conform to the current period presentation.
2. Organization and Operations
Black Mountain Capital Corporation (the "Company") is organized under the Yukon Business Corporations Act and changed its name from Mercury Partners & Company Inc. on May 2, 2005. The Company currently operates in the financial services industry in Canada, engaging in private equity, merchant banking, consulting activities and asset-based commercial lending.
All amounts are expressed in United States dollars except for certain amounts denoted in Canadian dollars ("CAD$").
3. Marketable Securities
September 30, 2006 | December 31, 2005 | ||||||||||||
FairValue | Carrying Value | Fair Value | Carrying Value | ||||||||||
| Variable Income Securities | |||||||||||||
Publicly Traded Securities | |||||||||||||
Canadian | $ | - | $ | - | $ | 10,575 | $ | 2,132 | |||||
Other | - | - | 357,070 | 110,102 | |||||||||
Total | $ | - | $ | - | $ | 367,645 | $ | 112,234 | |||||
4. Loans, Prepaids and Receivables
September 30, 2006 | December 31, 2005 | ||||||
Loan | $ | - | $ | 16,439 | |||
Receivables and prepaids | 4,704 | 5,230 | |||||
Total | $ | 4,704 | $ | 21,669 | |||
The loan and interest receivable totalling $19,450 were written-off during the quarter ended September 30, 2006, as management deemed it was uncollectible.
| 5. | Long-Term Investments |
September 30, 2006 | December 31, 2005 | ||||||||||||
| Investments, carried at cost | Fair Value | Carrying Value | Fair Value | Carrying Value | |||||||||
| Variable Income Securities | |||||||||||||
Publicly Traded Securities - Canadian | $ | - | $ | - | $ | 147,513 | $ | 337 | |||||
| Total | $ | - | $ | - | $ | 147,513 | $ | 337 | |||||
| 6. | Loan Payable |
| The loan is payable to a private company of a director of the Company and bears interest at 6%. |
| 7. | General and Administrative Expenses |
For the nine months ended September 30, general and administrative expenses were comprised of the following:
Sept. 30, 2006 | Sept. 30, 2005 | ||||||
| Administration office and travel | $ | 325 | $ | 3,165 | |||
| Consulting fees, salaries and employee benefits | - | 304 | |||||
| Non-recoverable GST | 2,733 | 5,361 | |||||
| Professional fees | 31,475 | 189,670 | |||||
| Regulatory, transfer agent and shareholder communications | 7,200 | 10,289 | |||||
| Total | $ | 41,733 | $ | 208,789 | |||
8. Capital Stock
Number of shares | Amount | ||||||
Issued and Outstanding - December 31, 2005 | 8,183,733 | $ | 3,456,139 | ||||
Less: Treasury Stock - December 31, 2005 | (2,250,219 | ) | (1,294,050 | ) | |||
Balance December 31, 2005 | 5,933,514 | 2,162,089 | |||||
Shares Issued | 2,500,000 | 175,000 | |||||
Balance September 30, 2006 | 8,433,514 | $ | 2,337,089 | ||||
On May 30, 2006, the Company completed a non-brokered private placement for 2,500,000 units. Each unit consists of one common share of the Company and one share purchase warrant. Each warrant entitled the holder to purchase one common share of the Company at a price of $0.10 for a term of one year from the date of issuance of the warrant. The Company raised an aggregate of $175,000 from the sale of the units priced at $0.07 per unit.
| 9. | Income (Loss) per Share |
The weighted average number of common shares outstanding used in determining income (loss) per share amounts was 7,069,045 (2005 - 5,933,514).
| 10. | Summary of Securities Issued and Options and Warrants Granted During the Period |
During the nine months ended September 30, 2006 and the years ended December 31, 2005, 2004 and 2003 no stock options were granted, exercised, forfeited or cancelled, nor does the Company have any common shares held in escrow or subject to any pooling agreements.
During the year ended December 31, 2005, 120,000 stock options expired. As at September 30, 2006, there are no stock options remaining.
On May 30, 2006, the Company completed a non-brokered private placement for 2,500,000 units. Each unit consists of one common share of the Company and one share purchase warrant. Each warrant entitled the holder to purchase one common share of the Company at a price of $0-.10 for a term of one year from the date of issue of the warrant. The Company has raised an aggregate of $175,000 from the sale of the units priced at $0.07 per unit.
11. | Related Party Transactions |
| The Company entered into the following transactions with related parties for the nine months ended September 30, 2006: |
| a) | Paid in cash or in kind or accrued in aggregate $38,463 (2005 - $72,636) in management fees to private companies of a former director of the Company. |
| b) | Paid or accrued directors fees of $Nil (2005 - $17,888) to independent directors of the Company. Directors fees of $846, which were accrued during the year ended December 31, 2005, were cancelled during the nine months ended September 30, 2006. |
| c) | Accrued interest of $17,015 (2005 - $10,807) to a private company of a former director of the Company who made a loan to the Company in the amount of CAD$400,000 during the year ended December 31, 2005 and made further advances of CAD$48,158 during the six months ended June 30, 2006. During the quarter ended September 30, 2006, CAD $49,472 was repaid in cash or in kind. |
12. Contingencies
Litigation
A statement of claim has been filed against the Company to recover certain oil and gas properties, which the claimant alleges were sold to it by the former management of the Company. The Company believes these oil and gas properties were not included as part of the properties sold to the claimant. The Company has offered to transfer certain of the interests in exchange for a waiver of court costs.
13. | Subsequent Event |
Subsequent to September 30, 2006, the Company completed a non-brokered private placement of 2,600,000 units at a subscription price of $US$0.12 for aggregate gross proceeds of $US$312,000. Each unit consists of one common share of the Company and one share purchase warrant. Each warrant entitles the holder to purchase one common share of the Company at a price of US$0.15 for a term of one year from the date of issuance of the warrant.
14. | Directors and Executive Officers at September 30, 2006 |
Name of Director | Principal Position |
Navchand Jagpal | President & Secretary |
Greg MacRae | Director |
J. Lewis Dillman | Director |
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