FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934.
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1995.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934.
COMMISSION FILE NO. 0-13933
THERMAL EXPLORATION COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
California 94-2185688
(State or other jurisdiction (I.R.S. identification No.)
of incorporation or organization)
11525 Caroline Lane, Nevada City, California 95959
(Address of principal executive offices)
Registrant's telephone number including area code: (916) 265-0653
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past
twelve months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to the filing requirements
for the past 90 days. Yes X No___
The number of shares outstanding of the issuer's common
stock, as of December 31, 1995 is 17,050,528
Thermal\10QSB2A9.WPD
Part I - Financial Information
Item 1.Financial Statements
Thermal Exploration Company
Statements of Financial Position
(Unaudited)
Dec. 31, 1995 June 30, 1995
Assets
Cash & Cash Equivalents $ 261 $ 958
Receivables 8,800 75,497
Total Current Assets 9,061 76,455
Deferred Exploration Costs and
Mineral Claims 1,676,443 1,591,095
Other 516 630
Total Assets $ 1,686,020 $ 1,668,180
Liabilities and Shareholders' Equity
Accounts Payable and Accrued Expenses $ 230,281 $ 97,494
Total Current Liabilities 230,281 97,494
Accounts Payable to be Refinanced -0- 108,000
Total Liabilities 230,281 205,494
Convertible Series A Preferred Stock
5,000,000 Shares Authorized: shares
issued and outstanding: December 31,
1995: 120,000; June 30, 1995: 155,000;
$3.00 Per Share Liquidation Preference 76,561 465,000
Common Stock, 100,000,000 Shares
Authorized, No Par: shares issued and
outstanding: December 31, 1995:
17,050,518; June 30, 1995: 16,415,528 7,246,910 6,730,910
Accumulated Deficit <5,867,732> <5,733,224>
Total Shareholders' Equity 1,455,739 1,462,686
Total Liabilities and
Shareholders' Equity $ 1,686,020 $ 1,668,180
The Accompanying Notes are an Integral Part of These Financial Statements.
Thermal\10QSB2A9.WPD
Thermal Exploration Company
Statements of Operations
(Unaudited)
For the Three Months For the Six Months
Ended December 31 Ended December 31
1995 1994 1995 1994
Revenue:
Income $ -0- $ -0- $ -0- $ -0-
Total -0- -0- -0- -0-
Expenses:
Consulting Fees
& Contract Labor 5,820 10,680 17,040 19,500
Professional Fees 42,197 16,250 96,010 18,106
Rent & Utilities 2,580 3,278 5,417 5,882
Stock Maintenance 2,880 2,540 6,986 5,192
Travel 257 128 712 449
Other 3,570 4,361 6,824 8,356
Total Expenses 57,304 37,237 132,989 57,485
Gain on Sale of Assets -0- 3,715 -0- 44,433
Interest Income 517 407 518 408
Currency Gain <Loss> -0- <820> <1,137> <455>
Miscellaneous Income -0- 7,484 -0- 7,484
Loss from Operations <56,787> <26,451> <133,608> <5,615>
Provision for Income Tax 100 -0- 900 800
Net Loss $<56,887> $<26,451> $<134,508> $<6,415>
Net Loss Per Share $ -0- $ <.01> $ <.01> $ -0-
Common Shares Outstanding 17,050,528 14,865,531 17,050,528 14,865,531
The Accompanying Notes are an Integral Part of These Financial Statements.
Thermal\10QSB2A9.WPD
Thermal Exploration Company
Statements of Cash Flows
(Unaudited)
For the Six Months Ended
December 31,
1995 1994
Cash Flows From Operating Activities:
Net Loss $ <134,508> $ <6,415>
Adjustments to Reconcile Net
Loss to Cash Provided By
Operating Activities:
Depreciation 114 270
Amortization of Intangibles -0- 471
Gain on Sale of Assets -0- <44,433>
Decrease <Increase> in Receivables 66,697 <600>
Increase in Accounts Payable and Accrued
Expenses for Operating Items 144,953 6,219
Payments of Accounts Payable to be
Refinanced <108,000> <71,000>
Net Cash Flows From
Operating Activities <30,744> <115,488>
Cash Flows From Investing Activities:
Investment in Joint Venture <111,445> <7,679>
Cash Flows From Financing Activities:
Proceeds from Sale of Asset -0- 24,248
Proceeds of Stock Issue 111,000 72,000
Proceeds from Borrowings from Western 30,492
Net Cash Flows from Financing Activities 141,492 96,248
Net Decrease in Cash <697> <26,919>
Cash at Beginning of Period 958 29,330
Cash at End of Period $ 261 $ 2,411
Schedule of Noncash Financing Activities:
Securities Received on Sale of Investment in
Mining Claim $ 44,433
Conversion of Preferred Stock to
Common Stock $ 405,000
Conversion of Debt to Preferred Stock $ 16,561
The Accompanying Notes are an Integral Part of these Financial Statements.
Thermal Exploration Company
Notes to Financial Statements
December 31, 1995
(Unaudited)
Note 1 - Financial Statements
The statement of financial position as of December 31, 1995, the statements of
operations for the six month periods ended December 31, 1995 and 1994, and the
statements of cash flows for the six month periods then ended have been
prepared by the Company without audit. In the opinion of management, all
necessary adjustments have been made to present fairly the financial position,
results of operations, and the cash flows for all periods presented.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these financial
statements be read in conjunction with the audited financial statements and
notes thereto included in the Company's June 30, 1995, Annual Report to
shareholders. The results of operations for the periods ended December 31,
1995 and 1994, are not necessarily indicative of the operating results for
these full years.
Note 2 - Related Parties
On November 2, 1995, the Company's president was appointed to also serve as
president of Western Copper Holdings Limited (Western), the Company's joint
venture partner in the Carmacks Copper Project.
Note 3 - Equity
During the quarter ended December 31, 1995, 135,000 shares of Series A
Preferred Stock were converted into 135,000 shares of common stock. In
addition, during the quarter ended December 31, 1995, 100,000 shares of Series
A Preferred were issued in exchange for the cancellation of U.S. $16,561 in
liabilities. In connection with the issuance of the Series A Preferred Stock,
the holder granted a proxy to the Board of Directors of the Company to vote
such stock.
Note 4 - Related Party Payable
Included in accounts payable and accrued expenses are amounts owed to Western.
At December 31, 1995 the Company owed Western $117,700, consisting of accrued
costs for the joint venture and certain cash advances.
Thermal\10QSB2A9.WPD
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
A. LIQUIDITY AND CAPITAL RESOURCES
Thermal Exploration Company (the "Company") had a cash balance of $261
as of December 31, 1995, a decrease of $697 from the previous balance of
$958 as at June 30, 1995. Total liabilities as at December 31, 1995 were
$230,281 as compared to $205,494 on June 30, 1995. The decrease in the cash
balance is insignificant with respect to day to day operations. The
increase in liabilities is attributable to exploration expenses incurred by
the Company to Western Copper Holdings Limited ("Western Copper"), its
joint venture partner in the Carmacks Copper Project, loans from Western
Copper for the proposed Arrangement involving the Company and Western
Copper, and day to day operating expenses. As of December 31, 1995, the
Company owes Western Copper approximately $117,700. The Company has no
current obligations other than day to day administrative expenses and its
on-going commitment to fund its 50% joint venture interest in the
exploration and development of the Carmacks Copper Project near Carmacks,
Yukon. The Company currently has no revenue generating activity, and is
dependent on corporate loans from Western Copper and equity financing to
meet its short term and joint venture obligations.
During December 1995, a holder of 135,000 shares of Series A Preferred
Stock converted such stock into 135,000 shares of common stock. No
proceeds were received by the Company. In addition, the Company issued
100,000 shares of Series A Preferred Stock in exchange for the cancellation
of $16,561 in liabilities due to Queenston Mining Corporation
("Queenston"). Each share of Series A Convertible Preferred Stock is
convertible into one share common stock. In connection with the issuance,
Queenston gave the Board of Directors of the Company a proxy to vote such
Preferred Stock.
The Company and Western Copper are currently proceeding with a
reorganization pursuant to an Arrangement whereby shareholders of the
Company shall receive one common share of Western Copper for each five
common shares of Thermal. It is also proposed that Thermal shareholders,
other than Western Copper, will receive shares in Pacific Cascade Resources
Corporation ("Pacific"), a to-be-formed corporation whose assets will
consist of all of the assets of Thermal other than its interest in the
Carmacks Project. All liabilities will remain with Thermal. The assets to
be transferred to Pacific have nominal value. The Arrangement is subject
to shareholder, regulatory, and court approval.
Rothschild Australia Ltd. ("Rothschild") has entered into a letter
agreement to loan Cdn $2.5 million to Western Copper to be used primarily
for engineering of the Carmacks Project. Under the letter agreement, the
loan to Western has been guaranteed by Thermal and will be secured by
Thermal's interest in the Carmacks Copper Project. The financing is
subject to Western and Rothschild entering into a definitive agreement
expected to close on February 23, 1996.
Thermal and Western Copper are also holding discussions with
Rothschild which could lead to senior equity and debt funding for the
Carmacks Copper Project. There is no assurance that these financing
discussions will be successful.
The Company has no operating revenues and is entirely dependent on its
ability to either borrow funds from Western Copper, or raise funds through
the sale of assets or the sale of its common shares to meet its
administrative and exploration/development obligations.
In the event that the Arrangement with Western is not effected,
Thermal will be required to meet its obligations to the joint venture. In
the event Thermal fails to meet these obligations, its interest in the
joint venture may be diluted.
B. RESULTS OF OPERATIONS
During the three month period ended December 31, 1995 the Company had
no operating revenue. The Company also had no operating revenue for the
corresponding three month period in 1994. The Company does not anticipate
receiving any significant income prior to placing the Carmacks Copper
Project into production. To meet its monthly operating expenses the
Company will need to raise additional funds by loans from Western Copper or
through the sale of assets or the private placement of its preferred or
common stock.
Total operating expenses for the three month period ended December 31,
1995 were $57,304 which represents an increase of $20,067 from the prior
year's corresponding period when operating costs were $37,237. The
increase is primarily the result of legal and accounting costs associated
with the proposed Arrangement with Western Copper.
During the next twelve months, the joint venture expects to incur
substantial costs of approximately $2,000,000 (Cdn) to develop and permit
the Carmacks Copper Projects. The joint venture intends to fund these
expenses through a $2,5000,000 (Cdn) loan from Rothschild to Western
Copper. Thermal has guaranteed repayment of the loan and has secured its
repayment with its joint venture interest in the Carmacks Project. As
discussed above, the financing is subject to Western and Rothschild
entering into a definitive agreement expected to close on February 23,
1996.
Thermal\10QSB2A9.WPD
In the event the proposed Arrangement with Western is not effected,
Thermal will be responsible for its pro rata expenses to the joint venture
and obligations under the guaranty to the Rothschild loan.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
On November 1, 1995 Prime Equities International Corporation, a
Canadian mining company, acquired Teck Corporation's 35% interest in
Western Copper and became the largest shareholder of Western Copper.
Western Copper is the Company's joint venture partner in the Carmacks
Copper Project and is the Company's largest shareholder, owning
approximately 34% of the outstanding common stock of the Company. In
connection with the transaction, Dale Corman, President of and a director
of the Company, is now President of and a director of Western Copper.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None
Thermal\10QSB2A9.WPD
SIGNATURE
In accordance with the requirements of the Securities Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
THERMAL EXPLORATION COMPANY
February 23rd, 1996 By:____F. Dale Corman_________________
F. DALE CORMAN
Chairman & President
(Chief Executive and
Principal Financial Officer)
Thermal\10QSB2A9.WPD