SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 2O549
FORM 1O-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
(Mark one)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2001 or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR l5(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ______________ to ______________
Commission File Number 0-16097
BAY RESOURCES LTD.
(Exact name of Registrant as specified in its charter)
Delaware 98-0079697
------------------------------- ---------------------------
(State or other jurisdiction of (IRS Employer incorporation
or organisation) Identification No.)
210 Kings Way South Melbourne, Victoria, 3205 Australia
-------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 0ll (613) 9234 - 1100
Securities registered pursuant to Section 12(b) of the Act :
Title of each class Name of each exchange
on which registered
N/A N/A
--- ---
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.0001 per share
(Title of Class)
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 the past 90 days.
Yes X No
----- -----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the restraint has filed all documents and
reports required to be filed by Section 12,13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a
plan confirmed by a court. Yes No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. There were 6,347,089
outstanding shares of Common Stock as of September 30, 2001.
1
PART 1
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INTRODUCTION TO INTERIM FINANCIAL STATEMENTS.
The interim financial statements included herein have been prepared by Bay
Resources Ltd. (the "Company") without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission (The "Commission").
Certain information and footnote disclosure normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations, although
the Company believes that the disclosures are adequate to make the information
presented not misleading. These interim financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended June 30, 2001.
In the opinion of management, all adjustments, consisting of normal
recurring adjustments and consolidating entries, necessary to present fairly the
financial position of the Company and subsidiaries as of September 30, 2001 and
September 30, 2000, the results of its operations for the three month periods
ended September 30, 2001 and September 30, 2000, and the changes in its cash
flows for the three month periods ended September 30, 2001 and September 30,
2000, have been included. The results of operations for the interim periods are
not necessarily indicative of the results for the full year.
UNLESS OTHERWISE INDICATED, ALL FINANCIAL INFORMATION PRESENTED IS IN
AUSTRALIAN
DOLLARS.
2
BAY RESOURCES LTD. AND SUBSIDIARIES
Consolidated Balance Sheets
September 30, 2001 and June 30, 2001
and September 30, 2000
(Unaudited)
Sept 30 June 30 Sept 30
2001 2001 2000
A $000's A $000's A $000's
-------- -------- --------
ASSETS
Current Assets:
Cash $1 $1 $8
--------------------------------
Total Current Assets 1 1 8
--------------------------------
Other Assets:
Investments - - 49
Organisational Costs, net - - -
--------------------------------
Total Other Assets - - 49
--------------------------------
Total Assets $1 $1 $57
================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable and Accrued Expenses $288 $264 $250
--------------------------------
Total Current Liabilities 288 264 250
--------------------------------
Long-Term Debt 717 641 430
--------------------------------
Total Liabilities 1,005 905 680
--------------------------------
Stockholders' Equity (Deficit):
Common Stock: $.0001 par value
25,000,000 shares authorised,
6,347,089 issued and outstanding 1 1 1
Less Treasury Stock at Cost, 2,500 shares (20) (20) (20)
Additional Paid-in-Capital 25,175 25,175 25,175
Accumulated other Comprehensive Loss (1,989) (1,989) (6,456)
Retained Deficits (24,171) (24,071) (19,328)
--------------------------------
Total Stockholders' Deficit (1,004) (904) (623)
--------------------------------
Total Liabilities and
Stockholders' Equity $1 $1 $57
================================
The accompanying notes are an integral part of these
consolidated financial statements.
3
BAY RESOURCES LTD. AND SUBSIDIARIES
Consolidated Statements of Operations
Three Months Ended September 30 2001, Year Ended June 30, 2001
and three months ended September 30, 2000
(Unaudited)
Three Twelve Three
Months Months Months
Ended Ended Ended
Sept 30 June 30 Sept 30
2001 2001 2000
A $000's A $000's A $000's
-------- -------- --------
Revenues:
Other Income $- $- $-
-------------------------------
Costs and Expenses:
Interest Expense 20 69 14
Legal, Accounting & Professional 1 43 9
Administrative 79 295 152
-------------------------------
100 407 175
-------------------------------
Loss from Operations (100) (407) (175)
Permanent decline of Investment - (4,516) -
-------------------------------
Income (Loss) before Income Tax (100) (4,923) (175)
Provision for Income Tax - - -
-------------------------------
Net Income (Loss) $(100) $(4,923) $(175)
===============================
Earnings Per Common Equivalent Share (.02) (.78) (.03)
===============================
Weighted Number of Common
Equivalent Shares Outstanding 6,347 6,347 6,347
===============================
The accompanying notes are an integral part of these
consolidated financial statements
4
BAY RESOURCES LTD. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
September 30, 2001 and June 30, 2001
and September 30, 2000
(Unaudited)
Accumulated
Common Treasury Retained Other
Stock Stock Paid in Earnings Comprehensive
Shares Amount at Cost Capital Deficit Loss Total
000's A$000's A$000's A$000's A$000's A$000's A$000's
----- ------- ------- ------- ------- ------- -------
Balance June 30, 2000 6,347 $1 $(20) $25,175 $(19,148) $(6,456) $(448)
Comprehensive Income
Net loss three
months ending 9-30-00 - - - - (175) - (175)
--------
Total Comprehensive Income - - - - - - 175
-------------------------------------------------------------------------------
Balance September 30, 2000 6,347 1 $(20) $25,175 $(19,323) $(6,456) (623)
Comprehensive Income
Net unrealised loss on
marketable securities - - - - - (49) (49)
Net loss nine months
ending 6-30-01 - - - - (4,748) 4,516 (232)
--------
Total Comprehensive Income - - - - - - 281
-------------------------------------------------------------------------------
Balance June 30, 2001 6,347 1 (20) 25,175 (24,071) (1,989) (904)
Comprehensive Income
Net loss three months
ending 9-30-01 - - - - (100) - (100)
--------
Total Comprehensive Income - - - - - - (100)
-------------------------------------------------------------------------------
Balance September 30, 2001 6,347 $1 $(20) $25,175 $(24,171) $(1,989) $(1,004)
-------------------------------------------------------------------------------
The accompanying notes are an integral part of these
consolidated financial statements.
5
BAY RESOURCES LTD. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Three Months Ended September 30, 2001 and 2000
and Year Ended June 30, 2001
(Unaudited)
Three Three
Months Year Months
Ended Ended Ended
Sept 30 June 30 Sept 30
2001 2001 2000
A$000's A$000's A$000's
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $(100) $(4,923) $(175)
Adjustments:
Permanent Decline of Investment - 4,516 -
Accounts Payable and Accrued Liabilities 24 (21) (35)
-----------------------------
Net Cash Provided (Used) in Continuing Operations (76) (428) (210)
-----------------------------
CASH FLOW FROM INVESTING ACTIVITIES:
Investment in Treasury Stock - - -
Capital Expenditures, Net - - -
Net Proceeds from Investments - - -
Investment in Subsidiary - - -
-----------------------------
Net Cash Provided (Used) in Investing Activities - - -
-----------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Borrowing under Credit Line Arrangements - - -
Net Borrowing from Affiliate 76 427 216
Net Borrowings Sale of Options - - -
-----------------------------
Net Cash Provided by Financing Activities 76 427 216
-----------------------------
Net Increase (Decrease) in Cash - (1) 6
Cash at Beginning of Year 1 2 2
-----------------------------
Cash at End of Year $1 $1 $8
=============================
Supplemental Disclosures:
Common Stock Issued in Lieu of
Debt Repayment $ - - -
Interest Paid (Net Capitalised) 20 69 14
Income Tax Paid $ - - -
The accompanying notes are an integral part of these
consolidated financial statements
6
BAY RESOURCES LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 2001, June 30, 2001 and
September 30, 2000
(1) ORGANISATION
Bay Resources Ltd. (Bay Resources) is incorporated in the State of Delaware. The
principal shareholder of Bay Resources is Edensor Nominees Proprietary Limited
(Edensor), an Australian corporation. Edensor owned 78.8% of Bay Resources as of
September 30, 2001. Bay Resources acquired a controlling interest on September
3, 1987 in former subsidiary, Solmecs Corporation N.V. ("Solmecs") and 100%
ownership on January 2, 1992. Bayou sold its interest in Solmecs effective June
5, 1998. During fiscal 1998, Bay Resources incorporated a further subsidiary,
Baynex.com Pty Ltd, under the laws of Australia. Baynex.com Pty Ltd has not
traded at September 30, 1998. On August 21, 2000, Bay Resources incorporated a
new wholly owned subsidiary, Bay International Pty Ltd, a corporation
incorporated under the laws of Australia.
(2) INVESTMENT SECURITIES
The following is a summary of Investment Securities at September 30, 2001, June
30, 2001 and September 30, 2000:
Sept 30 June 30 Sept 30
2001 2001 2000
A$000's A$000's A$000's
------- ------- -------
Investment Cost Method
Available for Sale Securities $4,516 $4,516 $4,516
Gross Unrealised Losses (4,516) (4,516) (4,467)
-------------------------------
Marketable Equity Securities,
at fair value - - $49
===============================
The investment using this cost method is carried at cost. Dividends received
from the investment carried at cost are included in other income. Dividends
received in excess of the Company's proportionate share of accumulated earnings
("return of capital dividends") are applied as a reduction of the cost of the
investment. No securities were sold during 2001 and 2000 and all securities were
treated as available for sale for 2001 and 2000.
(3) SHORT TERM AND LONG TERM DEBT
The following is a summary of Bay Resources borrowing arrangements as of
September 30, 2001, June 30, 2001 and September 30, 2000.
Sept 30 June 30 Sept 30
2000 2000 1999
A$000's A$000's A$000's
------- ------- -------
Long-Term
Loan from corporations affiliated with the
President of Bay Resources. Interest
accrues at the ANZ Banking Group Limited
rate + 1% for overdrafts over $100,000.
Repayment of loan not required
before June 30, 2002. (1) 717 641 $430
----------------------------
Total Long-Term 717 $641 $430
============================
(1) Repaid through the issuance of 4,000,000 post split shares. Balance at the
date of the stock issuance was approximately $4,076,000. An amount of
A$7,000 was repaid on January 20, 2000 partly through the issuance of
8,000,000 options to purchase previously unissued stock. Both issuance's
were to a company affiliated with the President of Bay Resources.
(4) AFFILIATE TRANSACTIONS
Bay Resources advances to and receives advances from various affiliates. All
advances between consolidated affiliates are eliminated on consolidation. At
September 30, 2001, Bay Resources had no outstanding advances to or from
unconsolidated affiliated companies. $266,000, $213,000 and $245,000 of accounts
payable for the years shown is due to an affiliated management company.
7
BAY RESOURCES LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 2001, June 30, 2001 and
September 30, 2000
(5) GOING CONCERN
The accompanying consolidated financial statements have been prepared in
conformity with generally accepted accounting principles, which contemplates
continuation of Bay Resources as a going concern. However, Bay Resources has
sustained recurring losses. In addition, Bay Resources has a net working capital
deficiency which raises substantial doubts as to its ability to continue as
going concerns. Bay Resources anticipates that it will be able to defer
repayment of certain of its short term loan commitments until it has sufficient
liquidity to enable these loans to be repaid or other arrangements to be put in
place. In addition Bay Resources has historically relied on loans and advances
from corporations affiliated with the President of Bay Resources. Based on
discussions with these affiliate companies, Bay Resources believes this source
of funding will continue to be available. Other than the arrangements noted
above, Bay Resources has not confirmed any other arrangement for ongoing
funding. As a result Bay Resources may be required to raise funds by additional
debt or equity offerings in order to meet its cash flow requirements during the
forthcoming year.
(6) SALE OF SOLMECS
Pursuant to a stock purchase agreement dated as of June 5, 1998, the Company
acquired 499,701 shares in SCNV Acquisition Corp ("SCNV"), representing
approximately 24% of the issued and outstanding share capital of SCNV, in return
for the whole of the share capital of Solmecs Corporation N.V., a Netherlands
Antilles company which prior to the exchange was formerly a wholly owned
subsidiary of the Company. The 499,701 shares has been valued at US$2,800,000 or
A$4,516,000 and will be accounted for using the cost method because the Company
does not exercise significant influences over SCNV's operating and financial
activities (see note 4). The sale resulted in a gain of $5,899,000.
SCNV is a Delaware corporation established May 1997 to select, develop and
commercially exploit proprietary technologies, in various stages of development,
invented primary by scientists who immigrated to Israel from and by scientists
and institutions in Russia and other countries that formerly comprised the
Soviet Union. Simultaneously with the SCNV stock acquisition by the Company,
SCNV completed an initial public offering of common stock and warrants which
resulted in gross proceeds of approximately US$5,900,000.
The Company has been granted certain demand and "piggyback" registration rights
with respect to the SCNV shares. Notwithstanding the foregoing, the Company has
agreed not to sell, grant options for sale or assign or transfer any of the SCNV
shares, for a period of 24 months from the closing of the ("Lock-up") agreement,
which expired in June 2000. Bay Resources has requested SCNV to take the
necessary steps to register Bay Resources' shareholding in SCNV. The Company
does not currently have any plans to distribute the shares.
(7) INCOME TAXES
Bay Resources files its income tax returns on an accrual basis. Bayou has
carry forward losses of approximately US$17.5 million as of June 30, 2001 which
expire in the years 1999 through 2012. Bay Resources will need to file tax
returns for those years of the NOL carryforwards. Due to the uncertainty as to
realisation of these losses, a valuation allowance of US$6.0 million has been
recorded to off set the tax benefit of the carry forward losses. During the year
ended June 30, 2001, Bay Resources provided an additional valuation allowance of
US$1.0 million.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FUND COSTS CONVERSION
The consolidated statements of income and other financial and operating data
contained elsewhere here in and the consolidated balance sheets and financial
results have been reflected in Australian dollars unless otherwise stated.
The following table shows the average rate of exchange of the Australian dollar
as compared to the US dollar during the periods indicated:
3 months ended September 30, 2000 A$1.00 = U.S. $.5407
3 months ended September 30, 2001 A$1.00 = U.S. $.4915
RESULTS OF OPERATION
THREE MONTHS ENDED SEPTEMBER 30, 2001 VS. THREE MONTHS ENDED SEPTEMBER 30
2000.
Costs and expenses decreased from A$175,000 in the three months ended September
30, 2000 to A$100,000 in the three months ended September 30, 2001. The
Company's financial statements are prepared in Australian dollars (A$). Since
September 30, 2000 the A$ compared to the United States dollar (US$) has fallen
by 9%. A number of the costs and expenses of the Company are incurred in US$ and
the conversion of these costs to A$ means that the comparison of September 2001
to 2000 does not always present a true comparison. The decrease is a net result
of:
a) an increase in interest expense from A$14,000 for the three months ended
September 30, 2000 to A$20,000 for the three months ended September 30,
2001 as a result of the increase in long term debt of the Company required
to fund the Company's operations which partially offset a decrease in
interest rates over that period.
b) a decrease in legal accounting and professional expense from A$9,000 for
the three months ended September 30, 2000 to A$1,000 for the three months
ended September 30, 2001.
c) a decrease in administrative costs including salaries from A$152,000 in
the three months ended September 30, 2000 to A$79,000 in the three months
ended September 30, 2001. In the comparable period in 2000, the Company
was conducting a review of a new business activity such as the business to
business (B2B) project being undertaken with Primus Telecom. There was no
comparable work being undertaken in the current period.
As a result of the foregoing, the loss from operations decreased from A$175,000
for the three months ended September 30, 2000 to A$100,000 for the three months
ended September 30, 2001.
The net loss was A$100,000 for the three months ended September 30, 2001
compared to a net loss of A$175,000 for the thee months ended September 30,
2000.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2001 the Company had short-term obligations of A$288,000
comprising accounts payable and accrued expenses and long term debt of
A$717,000.
The Company anticipates that it will be able to defer repayment of certain of
its short term loan commitments, until it has sufficient liquidity to enable
these loans to be repaid, of which there can be no assurance. In addition the
Company has historically relied upon loans and advances from affiliates to meet
a significant portion of the Company's cash flow requirements which the Company
believes, based on discussions with such affiliates, will continue to be
available during fiscal 2002.
Other than the arrangements above the Company has not confirmed any further
arrangements for ongoing funding. As a result the Company may be required to
raise funds from additional debt or equity offerings and/or increase the
revenues from operations in order to meet its cash flow requirements during the
forthcoming year.
CAUTIONARY SAFE HARBOR STATEMENT UNDER THE UNITED STATES PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995.
Certain information contained in this Form 10-Q is forward looking information
within the meaning of the Private Securities Litigation Act of 1995 (the "Act")
which became law in December 1995. In order to obtain the benefits of the "safe
harbor" provisions of the act for any such forwarding looking statements, the
Company wishes to caution investors and prospective investors about significant
factors which among others have affected the Company's actual results and are in
the future likely to affect the Company's actual results and cause them to
differ materially from those expressed in any such forward looking statements.
This Form 10-Q report contains forward looking statements relating to future
financial results. Actual results may differ as a result of factors over which
the Company has no control including the strength of the domestic and foreign
economies, slower than anticipated completion of research and development
projects and movements in the foreign exchange rate. Additional information
which could affect the Company's financial results is included in the Company's
Form 10-K on file with the Securities and Exchange Commission.
9
ITEM 3. QUANTITIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Bay Resources is exposed to interest rate risk primarily through its loan
facilities. The Company utilizes these borrowings to meet its working capital
needs.
At September 30, 2001, the Company had outstanding borrowings of approximately
$717,000 under its Loan Facilities. In the event that interest rates associated
with these facilities were to increase 100 basis points, the impact on future
cash flows would be a decrease of approximately $10,000 annually.
10
PART II
Item 1. LEGAL
Not Applicable
Item 5. OTHER INFORMATION
Not Applicable
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
The Company did not file any Report on Form 8-K during the three
months ended September 30, 2001.
11
(FORM 10-Q)
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 thereinto duly authorised.
BAY RESOURCES LTD.
By: /s/ Joseph I. Gutnick
Joseph I. Gutnick
Chairman of the Board, President and
Chief Executive Officer
(Principal Executive Officer)
Dated: November 14, 2001 /s/ Peter Lee
Peter Lee
Peter Lee, Director, Secretary and
Chief Financial Officer
(Principal Financial Officer)
12