U.S. 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 ended March 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Utah Clay Technology, Inc.
(Exact name of registrant as specified in its charter)
Utah 87-0520575
(state of 333-34308 (IRS Employer
incorporation) (Commission File Number) I.D. Number)
3985 South 2000 East
Salt Lake City, UT 84124
801-424-0223
-----------------------------------------------
(Address and telephone number of registrant's principal
executive offices and principal place of business)
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 twelve 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 ___
As of March 31, 2001, there were 27,093,253 shares of the Registrant's Common
Stock, par value $0.001 per share, outstanding.
Transitional Small Business Disclosure Format (check one): Yes ___ No _X_
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Item 1. Financial Statements
Utah Clay Technology, Inc.
(An Exploration Stage Company)
BALANCE SHEET
March 31, 2001
(Unaudited)
ASSETS
------------
Current Assets
Receivables $ 350
-------------
Properties & Equipment
Laboratory equipment 2,484
Machine design & configuration 128,000
Mining leases 7,716
-------------
Total Properties & Equipment 138,200
-------------
$ 138,550
=============
The accompanying notes are an integral part of these financial statements.
2
Utah Clay Technology, Inc.
(An Exploration Stage Company)
BALANCE SHEET
March 31, 2001
(Unaudited)
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------------
Current Liabilities
Accounts payable $ 55,645
Advances payable- officers and directors 248,387
Notes payable 178,482
--------------
Total Current Liabilities 482,514
Stockholders' deficit
Preferred stock, par value $0.001;
10,000,000 shares authorized;
84, 817 shares issued and outstanding 85
Common stock, par value $0.001;
30,000,000 shares authorized; 27,093,253
shares issued and Outstanding 27,093
Additional paid-in capital 2,274,011
Stock subscription receivable (59,880)
Deficit accumulated during the exploration stage (2,585,273)
--------------
Total Stockholders' deficit (343,964)
--------------
$ 138,550
==============
The accompanying notes are an integral part of these financial statements.
3
Utah Clay Technology, Inc
(An Exploration Stage Company)
STATEMENTS OF OPERATIONS
(Unaudited)
Quarter ended March 31,
2001 2000
------------ ------------
Revenues $ - $ -
Expenses:
Mineral lease rentals 15,150 15,000
General and Administrative 4,931 98,436
------------ ------------
Loss before income taxes (20,081) (113,436)
Income taxes 25 25
------------ ------------
NET LOSS $ (20,106) $ (113,461)
============ ============
Basic and diluted Loss per
common share $ (0.001) $ (0.005)
============ ============
Basic and diluted weighted average
number of common shares
outstanding 25,154,574 23,534,951
============ ============
The accompanying notes are an integral part of these financial statements.
4
Utah Clay Technology, Inc.
(An Exploration Stage Company)
STATEMENTS OF CASH FLOWS
(Unaudited)
Cumulative
from inception
Quarter Quarter (March 1, 1994)
ended March ended March to March 31,
31, 2001 31, 2000 2001
---------------- -------------- -----------------
Cash flows from operating activities:
Net loss $ (20,106) $ (113,461) $ (2,585,273)
Adjustments to reconcile net loss to net cash
used in operating activities:
Issuance of common stock for services - 10,600 688,053
(Increase) in receivables - - (350)
Decrease in prepaid expenses - 37,926 -
Increase (Decrease) in Accounts payable 6,920 (38,980) 249,222
---------------- -------------- -----------------
Net cash used in operating activities (13,186) (103,915) (1,648,348)
Cash flows from investing activities:
Mining leases 7,716 15,000 10,024
Machine design & configuration - - (130,484)
---------------- -------------- -----------------
Net cash provided by (used in) investing
activities 7,716 15,000 (120,460)
Cash flows from financing activities:
Net proceeds from advances by
Officers/directors 5,470 - 1,070,183
Proceeds from (payments of) notes payable - (1,586) 178,482
Issuance of shares - 90,000 520,143
---------------- -------------- -----------------
Net cash provided by financing activities: 5,470 88,414 1,768,808
Net increase (decrease) in cash & cash
equivalent - (501) -
Cash & cash equivalent - beginning of period - 640 -
---------------- -------------- -----------------
Cash at end of period $ - $ 139 $ -
================ ============== =================
The accompanying notes are an integral part of these financial statements.
5
Utah Clay Technology, Inc.
(An Exploration Stage Company)
STATEMENTS OF CASH FLOWS (CONTINUE)
(Unaudited)
Cumulative
from inception
Quarter Quarter (March 1, 1994)
ended March ended March to March 31,
31, 2001 31, 2000 2001
------------- -------------- ----------------
Supplemental disclosures:
Cash paid during the period for:
Interest $ 692 $ - $ 10,899
============= ============== ================
Income tax $ - $ - $ 950
============= ============== ================
Non-cash investing and financing activities:
Issuance of common stock for services $ - $ 10,600 $ 688,053
============= ============== ================
Issuance of preferred stock for debt $ - $ - $ 424,085
============= ============== ================
Issuance of common stock for acquisition
of Mining rights $ - $ - $ 17,740
============= ============== ================
Issuance of common stock against
cancellation of debt - Prepaid, Advances
and accrued expenses $ 213,138 $ 313,695 $ 1,040,373
============= ============== ================
Subscription receivable $ - $ 130,000 $ 130,000
============= ============== ================
The accompanying notes are an integral part of these financial statements.
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Utah Clay Technology, Inc.
(An Exploration Stage Company)
Notes to Unaudited Financial Statements
March 31, 2001 and 2000
Note 1- Summary of significant accounting policies
Organization and nature of operations
Utah Clay Technology, Inc. (the "Company"), a Utah corporation, was
incorporated on March 1, 1994. The planned operations of the Company are to
engage in mining, processing and marketing of minerals. For the period from
inception (March 1, 1994) to March 31, 2001, the Company had no revenues. The
Company is classified as an exploration stage company because its principal
activities involve obtaining the capital necessary to execute its strategic
business plan.
Cash and cash equivalents
The Company considers all liquid investments with a maturity of
three months or less from the date of purchase that are readily convertible
into cash to be cash equivalents.
Issuance of share for services
Valuation of shares for services is based on the fair market value
of services.
Use of estimates
The preparation of financial statements in conformity with 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.
Equipment and mining properties
Equipment is recorded at cost. The Company has adopted the straight-
line method in computing depreciation for financial reporting purposes and
generally uses accelerated methods for income tax purposes. The annual
provision for depreciation will be computed principally in accordance with the
following ranges of asset lives: laboratory equipment- 3 to 5 years;
processing equipment- 3 to 10 years. Equipment was acquired and set up in
late, 1997. No depreciation expense has been recorded in the financial
statements, as the company is yet to use any of its equipment and mining
properties.
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Utah Clay Technology, Inc.
(An Exploration Stage Company)
Notes to Unaudited Financial Statements
March 31, 2001 and 2000
Income taxes
Deferred income tax assets and liabilities are computed annually for
differences between the financial statements and tax basis of assets and
liabilities that will result in taxable or deductible amounts in the future
based on enacted laws and rates applicable to the periods in which the
differences are expected to affect taxable income (loss). Valuation allowance
is established when necessary to reduce deferred tax assets to the amount
expected to be realized.
Basic and diluted net loss per share
Net loss per share is calculated in accordance with the Statement of
financial accounting standards No. 128 (SFAS No. 128), "Earnings per share".
SFAS No. 128 superseded Accounting Principles Board Opinion No.15 (APB 15).
Net loss per share for all periods presented has been restated to reflect the
adoption of SFAS No. 128. Basic net loss per share is based upon the weighted
average number of common shares outstanding. Diluted net loss per share is
based on the assumption that all dilutive convertible shares and stock options
were converted or exercised. Dilution is computed by applying the treasury
stock method. Under this method, options and warrants are assumed to be
exercised at the beginning of the period (or at the time of issuance, if
later), and as if funds obtained thereby were used to purchase common stock at
the average market price during the period.
Stock-based compensation
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-
Based Compensation". SFAS No. 123 prescribes accounting and reporting
standards for all stock-based compensation plans, including employee stock
options, restricted stock, employee stock purchase plans and stock
appreciation rights. SFAS No. 123 requires compensation expense to be recorded
(i) using the new fair value method or (ii) using the existing accounting
rules prescribed by Accounting Principles Board Opinion No. 25, "Accounting
for stock issued to employees" (APB 25) and related interpretations with
proforma disclosure of what net income and earnings per share would have been
had the company adopted the new fair value method. The implementation of this
standard did not have any impact on its financial statements.
Fair value of financial instruments
Statement of financial accounting standard No. 107, Disclosures
about fair value of financial instruments, requires that the company disclose
estimated fair values of financial instruments. The carrying amounts reported
in the statements of financial position for current assets and current
liabilities qualifying, as financial instruments are a reasonable estimate of
fair value.
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Utah Clay Technology, Inc.
(An Exploration Stage Company)
Notes to Unaudited Financial Statements
March 31, 2001 and 2000
Accounting developments
In June 1998, the FASB issued SFAS No. 133, "Accounting for
derivative instruments and hedging activities", effective for fiscal years
beginning after June 15, 1999, which has deferred to June 30, 2000 by
publishing of SFAS No. 137. SFAS No. 133 establishes accounting and reporting
standards for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. This statement requires that an
entity recognize all derivatives as either assets or liabilities in the
statement of financial condition and measure those instruments at fair value.
The accounting for changes in the fair value of a derivative instrument
depends on its intended use and the resulting designation. The company does
not expect that the adoption of this standard will have a material impact on
its financial statements.
Note 2- Income taxes
Since the Company has not generated taxable income since inception,
no provision for income taxes has been provided (other than minimum franchise
taxes paid to the State of Utah). The company has provided a 100% valuation
allowance against the deferred income tax assets arisen due to net operating
losses carried forward.
Note 3- An exploration stage company
An exploration stage company is one for which principal operations
of mining have not commenced or principal operations have generated an
insignificant amount of revenue. Management of an exploration stage company
devotes most of its activities in conducting exploratory mining operations.
Operating losses have been incurred through March 31, 2001, and the Company
continues to use, rather than provide, working capital in this operation.
Although management believes that it is pursuing a course of action that will
provide successful future operations, the outcome of these matters is
uncertain.
Note 4-Going Concern uncertainty
The company's financial statements have been presented on the basis
that it is a going concern, which contemplates the realization of assets and
satisfaction of liabilities in the normal course of business. The company
incurred a net loss of $2,585,273 for the period from inception (March 1,
1994) to March 31, 2001. The company's current liabilities exceeded its
current assets by $482,164 and $682,912 as of March 31, 2001 and December 31,
2000, respectively. These factors, as well as the uncertain conditions that
the company faces in its day-to-day operations, create an uncertainty as to
the company's ability to continue as a going concern. The financial statements
do not include any adjustments that might be necessary should the company be
unable to continue as a going concern.
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Utah Clay Technology, Inc.
(An Exploration Stage Company)
Notes to Unaudited Financial Statements
March 31, 2001 and 2000
The company plans to finance the continued operations for the next year
through private funding and funding from officers of the company. In this
regard, the company received $5,470 from an officer in the first quarter of
2001.
Note 5 Issuance of stock
During the three month period ended March 31, 2001, the Company issued
2,131,379 shares of common stock in exchange for debt to shareholders
amounting $213,138.
Note-6 Basis of preparation
The accompanying unaudited condensed interim financial statements
have been prepared in accordance with the rules and regulations of the
Securities and Exchange Commission for the presentation of interim financial
information, but do not include all the information and footnotes required by
generally accepted accounting principles for complete financial statements.
The audited financial statements for the two years ended December 31, 2000 was
filed on April 13, 2001 with the Securities and Exchange Commission and is
hereby referenced. In the opinion of management, all adjustments considered
necessary for a fair presentation have been included. Operating results for
the three-month period ended March 31, 2001 are not necessarily indicative of
the results that may be expected for the year ended December 31, 2001.
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion and analysis should be read in conjunction
with the financial statements and the accompanying notes thereto and is
qualified in its entirety by the foregoing and by more detailed financial
information appearing elsewhere. See "Item 1. Financial Statements."
Plan of Operations for the Next Twelve Months
We earlier entered into two agreements for the preliminary
evaluation of our properties and the cost of building a processing facility.
ISG Resources, Inc. We provided access to our properties to ISG
Resources, Inc. of Salt Lake City, Utah, for the purpose of enabling it to
determine the feasibility of a joint venture between it and our company for
the mining, production and marketing of certain kaolin clay products from our
properties. ISG Resources twice extended the term of this agreement. It
finally advised us that our kaolin would be acceptable for producing a product
that it markets but that it markets an insufficient quantity of this product
to justify building a production facility solely for this product.
Precision Systems Engineering. Precision Systems Engineering of
Salt Lake City, Utah was employed in June 1999 to provide an estimate of the
cost of designing and constructing a kaolin clay processing facility for our
company. It provided an initial estimate but, due to our inability to pay for
a complete study, design and estimate, we and it suspended further efforts in
this regard until we can pay for a complete design and estimate.
During the next twelve months we propose to re-analyze the seven
core holes that were drilled on the White Mountain property by Buena Vista
Mining in 1992. This analysis will cover the brightness, alteration minerals,
percent of alteration and color along with other tests. Then, subject to the
availability of funds, we will conduct a new drilling program. Our plan
provides that holes will be drilled on 200-foot spacing to define the areas of
greatest shallow, high brightness kaolinite. The drilling will commence
outward from the test pit where a previous hole encountered 136 feet of white
kaolin. The next phase of drilling will concentrate on the highest potential
areas found in the first holes. The spacing will be 100 feet. The holes will
be drilled to 150 feet. The drilling will produce cores. Samples from these
cores will be tested for brightness, color, specific gravity, chemical
composition and contaminates. The goal of this drilling and analysis of the
cores is to establish the presence of mineralized material. We will then
combine this information with the requirements of industry standards, prices
of marketable kaolin and recovery costs to determine the degree of legal and
economic feasibility of further activities.
Should this determination be favorable for further activities, we
will seek the funds needed to construct a processing facility. The initial
engineering and design work performed for us by Precision Systems Engineering
concluded that the cost of a processing facility will be from $5 million to
$10 million, depending on the capacity of the facility. We have not located
a source of these funds.
11
We estimate it will take approximately one year after the funds are
committed to the facility to complete its design and construction and to make
it operational. Only then would we first obtain revenues for our company.
We have not identified a source of capital for our drilling
program. We propose to approach persons known to our management and familiar
with our company's history as the source of this capital.
Oro Blanco.
A drilling and testing program similar to that planned for White
Mountain is contemplated. There was an indication from the previous program
that a promising trend of kaolin continues to the east past where the previous
drilling program stopped. This trend will be explored in the new drilling
program.
Koosharem, Kimberly and Topaz Claims. We have no present proposed
program of exploration on these properties that are subject to our options to
acquire. They are without known reserves.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Forms 8-K
None
SIGNATURES
Pursuant to the requirements of the Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: May 10, 2001 Utah Clay Technology, Inc.
By /s/ Dennis Engh
--------------------------
Dennis Engh, President
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