UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 2O549
FORM 10-QSB
(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, 2004 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
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(State or other jurisdiction of (IRS Employer
incorporation or organisation) Identification No.)
Level 8, 580 St. Kilda Road, Melbourne, Victoria, 3004 Australia
----------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code
0ll (613) 8532 2860
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Indicate by check mark whether the Registrant (1) filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the past 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 [_]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12,13 or 15(d) of the Exchange Act after
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 16,711,630
outstanding shares of Common Stock as of December 31, 2004.
Transitional Small Business Disclosure Format (Check one) Yes [_] No [X]
PAGE NO
PART I. FINANCIAL INFORMATION
Item 1 Financial Statements 2
Item 2 Management's Discussion and Analysis or Plan of Operations 9
Item 3 Controls and Procedures 13
PART II OTHER INFORMATION
Item 1 Legal Proceedings 14
Item 2 Changes in Securities and Use of Proceeds 14
Item 3 Defaults Upon Senior Securities 14
Item 4 Submission of Matters to a Vote of Security Holders 14
Item 5 Other Information 14
Item 6 Exhibits and Reports on Form 8-K 14
SIGNATURES 15
EXHIBIT INDEX 16
Exh. 31.1 Certification 17
Exh. 31.2 Certification 19
Exh. 32.1 Certification 21
Exh. 32.2 Certification 22
Item 1. FINANCIAL STATEMENTS
Introduction to Interim Financial Statements.
The interim financial statements included herein have been prepared by Bay
Resources Ltd. ("Bay Resources" or 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-KSB for the year
ended June 30, 2004.
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 December 31, 2004, the results of
its operations for the three and six month periods ended December 31, 2004 and
December 31, 2003, and the changes in its cash flows for the six month periods
ended December 31, 2004 and December 31, 2003, have been included. The results
of operations for the interim periods are not necessarily indicative of the
results for the full year.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
UNLESS OTHERWISE INDICATED, ALL FINANCIAL INFORMATION PRESENTED IS IN AUSTRALIAN
DOLLARS.
BAY RESOURCES LTD. AND SUBSIDIARIES
(An Exploration Stage Company)
Consolidated Balance Sheet
December 31, 2004
(Unaudited)
A$000's
ASSETS
Current Assets:
Cash 1
Receivables 136
Prepayments and Deposits 111
-------
Total Current Assets 248
-------
Non Current Assets:
Property and Equipment, net 21
-------
Total Non Current Assets 21
-------
Total Assets 269
=======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts Payable and Accrued Expenses 511
Short Term Loan - Affiliate 577
-------
Total Current Liabilities 1,088
-------
Total Liabilities 1,088
-------
Stockholders' Equity (Deficit):
Common Stock: $.0001 par value
25,000,000 shares authorized,
16,714,130 issued and outstanding 2
Less Treasury Stock at Cost, 2,500 shares (20)
Additional Paid-in-Capital 29,700
Other Comprehensive Loss --
Retained (Deficit) (30,501)
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Total Stockholders' Equity (Deficit) (819)
-------
Total Liabilities and Stockholders' Equity (Deficit) 269
=======
The accompanying notes are an integral part of these
consolidated financial statements.
BAY RESOURCES LTD. AND SUBSIDIARIES
(An Exploration Stage Company)
Consolidated Statements of Operations
Three and Six Months Ended December 31 2004,
and December 31, 2003
(Unaudited)
Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
Dec 31, Dec 31, Dec 31, Dec. 31,
2004 2003 2004 2003
A$000's A$000's A$000's A$000's
Revenues: $ -- $ -- $ -- $ --
-------- -------- -------- --------
Costs and Expenses:
Exploration Expenditure 132 17 1,188 26
Interest Expense, net 2 45 5 85
Legal, Accounting & Professional 47 17 86 27
Administrative 196 76 416 139
-------- -------- -------- --------
377 155 1,695 277
-------- -------- -------- --------
Loss from Operations (377) (155) (1,695) (277)
-------- -------- -------- --------
Income (Loss) before Income Tax (377) (155) (1,695) (277)
Provision for Income Tax -- -- -- --
-------- -------- -------- --------
Net Income (Loss) (377) (155) (1,695) (277)
-------- -------- -------- --------
(Loss) Per Common Equivalent Share $ (.02) $ (.02) $ (.10) $ (.04)
-------- -------- -------- --------
Weighted Number of Common
Equivalent Shares Outstanding (in thousands) 16,714 6,345 16,714 6,345
-------- -------- -------- --------
The accompanying notes are an integral part of these
consolidated financial statements
BAY RESOURCES LTD. AND SUBSIDIARIES
(An Exploration Stage Company)
Consolidated Statements of Cash Flows
Six Months Ended December 31, 2004 and 2003
(Unaudited)
2004 2003
A$000's A$000's
------- -------
CASH FLOWS FROM OPERATING ACTIVITIES
Net (Loss) (1,695) (277)
Adjustments
Foreign Currency Exchange Loss 9 --
Depreciation of Plant and Equipment 5 --
Accrued interest added to principal 7 85
Net Change in:
Receivables (49) --
Prepayments and Deposits 130 --
Accounts Payable and Accrued Liabilities 16 (9)
------- -------
Net Cash Provided (Used) in Operating Activities (1,577) (201)
------- -------
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of Plant and Equipment (6) --
------- -------
Net Cash (Used) in Investing Activities (6) --
------- -------
CASH FLOW FROM FINANCING ACTIVITIES
Net Borrowings from Affiliates 466 205
------- -------
Net Cash Provided in Financing Activities 466 205
------- -------
Net Increase (Decrease) in Cash (1,117) 4
Cash at Beginning of Period 1,118 1
------- -------
Cash at End of Period $ 1 $ 5
------- -------
The accompanying notes are an integral part of these
consolidated financial statements
BAY RESOURCES LTD. AND SUBSIDIARIES
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
December 31, 2004
(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 41.3% of Bay Resources as of
December 31, 2004, 2004. During fiscal 1998, Bay Resources incorporated a
further subsidiary, Baynex.com Pty Ltd (formerly Bayou Australia Pty Ltd), under
the laws of Australia. Baynex.com Pty Ltd has not traded since incorporation. On
August 21, 2000, Bay Resources incorporated a new wholly owned subsidiary, Bay
Resources (Asia) Pty Ltd (formerly Bayou International Pty Ltd), a corporation
incorporated under the laws of Australia. In June 2002, the Company incorporated
a new wholly owned subsidiary, Golden Bull Resources Corporation, formerly
4075251 Canada Inc, a corporation incorporated under the laws of Canada. Golden
Bull Resources Corporation is undertaking exploration activities for gold in
Canada.
(2) Affiliate Transactions
---------------------------
Bay Resources advances to and receives advances from various affiliates. All
advances between consolidated affiliates are eliminated on consolidation.
During the six months ending December 31, 2004 and 2003, Bay Resources paid
management fees to AXIS Consultants ("AXIS"), an affiliated management company,
in the amounts A$60,000 and A$60,000, respectively, reimbursed AXIS A$145,779
and A$14,484 for direct costs, including salaries, incurred on behalf of the
Company, respectively and paid an amount of A$105,120 owing to AXIS at June
30,2004. At December 31, 2004 and 2003, the Company owed AXIS A$nil and
A$623,707, respectively, for services provided in accordance with the Service
Agreement. During the six months ending December 31, 2004 and 2003, AXIS charged
interest of A$4,613 and A$27,530, respectively, on outstanding balances. AXIS is
affiliated through common management and ownership.
Wilzed Pty Ltd, a company associated with the President of the Company, Joseph
Gutnick, provided loan funds to enable the Company to meet its liabilities and
has paid certain expenses on behalf of the Company. During the six months ending
December 31, 2004, Wilzed loaned the Company A$574,078 and charged interest of
A$2,729. At December 31, 2004, the Company owed Wilzed A$576,807.
Chevas Pty Ltd, a company associated with the President of the Company, Joseph
Gutnick, provided loan funds to enable the Company to meet its liabilities and
has paid certain expenses on behalf of the Company. At June 30 2003, the Company
owed Chevas A$1,239,315. During the six months ending December 31, 2003, Chevas
loaned a further A$85,209 and charged A$57,775 in interest to the Company on the
loan account. At December 31, 2003 the Company owed Chevas A$1,382,299. The
amount owed to Chevas was repaid in full in March 2004. At December 31, 2004
there are no amounts owing to Chevas.
At June 30, 2003, the Company owed Tahera A$1,361. During the six months ending
December 31, 2003 Tahera incurred further exploration and administration costs
in Canada on behalf of the Company amounting to A$9,130. During the six months
ending December 31, 2003 , Tahera did not charge the Company interest on amounts
outstanding. At December 31, 2003, the Company owed Tahera $1,339. Mr. JI
Gutnick, the President of the Company, ceased to be the President and Chairman
of Tahera in October 2003 and the Company's principal stockholder, Edensor
Nominees Pty Ltd., of which Mr. Gutnick is a director and shareholder, ceased to
be a major stockholder of Tahera in October 2003.
BAY RESOURCES LTD. AND SUBSIDIARIES
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
December 31, 2004
(3) Affiliate Transactions (Cont'd)
------------------------------------
During the year ended June 30, 2003, Mr JI Gutnick paid certain amounts owing to
Tahera on behalf of the Company and at December 31, 2003, the amount of $47,000
was owing to Mr Gutnick. This amount was repaid in March 2004.
Quantum Resources Limited ("QUR"), a company associated with, Mr J I Gutnick,
incurred certain costs on behalf of the Company during the six months ended
December 31, 2003 amounting to A$43,941 in respect to the Company's activities
in Tibet China as a result of QUR's contacts in China. This amount remained
outstanding and was included in accounts payable and accrued expenses at
December 31, 2003. The amount was repaid in March 2004.
Kerisridge Pty Ltd, an entity associated with Mr J I Gutnick, loaned the Company
A$2,273,186 in March 2004 for the purpose of repaying long term debt. On March
31, 2004, Kerisridge agreed to convert all of the debt owed to them into common
stock and warrants of the Company. The Company issued 1,753,984 shares of common
stock and 1,753,984 warrants exercisable at US$1.30 per share and at any time up
to March 31, 2006 in full repayment of the $2,273,186 owing to Kerisridge.
On February 19, 2004 Edensor Nominees Pty Ltd ("Edensor") advised the Company
that it was exercising the 6,000,000 options for common stock of the Company it
held utilizing the cashless exercise feature of the terms and conditions of the
issue of the options. The Company issued 5,142,857 shares of common stock to
Edensor on March 3, 2004 as a result of the exercise of the options.
Interest expense incurred on loans and advances due to affiliated entities
approximated A$7,342 and A$85,305 in the six months ended December 31, 2004 and
2003, respectively.
(4) 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. Bay Resources is in the
exploration stage, has sustained recurring losses and has a net working capital
deficiency which raises substantial doubts as to its ability to continue as a
going concern. However, Bay Resources anticipates that it will be able to defer
repayment of obligations 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.
BAY RESOURCES LTD. AND SUBSIDIARIES
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
December 31, 2004
(5) Income Taxes
-----------------
Bay Resources should have carry forward losses of approximately US$20.5 million
as of June 30, 2004 which will expire in the years 2005 through 2023. Bay
Resources will need to file tax returns for those years having losses on which
returns have not been filed to establish the tax benefits of the net operating
loss carry forwards. Due to the uncertainty of the availability and future
utilization of those operating loss carry forwards, management has provided a
full valuation against the related tax benefit.
(6) Contingent Liabilities
---------------------------
The Company has received an invoice from a corporation that conducted the
pegging of the claims in Canada on behalf of the Company. A number of claims
that were pegged were not ultimately issued to the Company due to a number of
errors by the pegging Company. The Company had advised the pegging company that
it does not believe any further payments are due to the pegging company as a
result of the economic loss incurred by Bay Resources. The Company believes that
if it is unsuccessful in defending any claim that is brought against it, the
maximum potential liability is CDN$59,000. No accrued liability has been
recorded in the accompanying financial statements pending the ultimate
disposition of this matter.
(7) Employment Contract
------------------------
In October 2004, the Company entered into an employment agreement with a new
Chief Operating Officer. The agreement expires on December 31, 2006 and provides
for an annual salary of US$110,000. As part of this employment contract, the
Company granted options to purchase 750,000 shares of the Company common stock
at US$1.00 per share (see Note 8). The 750,000 options vest as follows: 250,000
immediately, 250,000 on September 1, 2005 and 250,000 on December 31, 2006. The
issue of the second 250,000 and third 250,000 options are subject to
availability of options in the Stock Option Plan.
(8) Events Subsequent to Balance Date
--------------------------------------
In October 2004, the Board of Directors and Remuneration Committee of the
Company adopted a Stock Option Plan and agreed to issue 1,400,000 options and up
to a further 500,000 options to acquire shares of common stock in the Company,
at an exercise price of US$1.00 per option, subject to shareholder approval
which was subsequently received on January 27, 2005. Of the total 1,400,000
options issued, 350,000 vest immediately following shareholder approval, 50,000
vest on March 31, 2005, 333,331 vest on July 27, 2005, 333,334 vest on January
27, 2006 and the balance of 333,335 vest on July 27, 2006. If the additional
500,000 options are granted, they will vest 250,000 on October 31, 2005 and
250,000 on December 31, 2006. The exercise price of US$1.00 was derived from the
issue price of common stock from the placement of shares on March 31, 2004 and
is considered by the Company's Directors to be the fair value of the common
stock.
The Company plans to account for stock-based employee compensation arrangements
using the intrinsic value method in accordance with provisions of Accounting
Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to
Employees". Under APB Opinion No. 25, compensation cost is generally recognized
on the date of grant based on the difference, if any, between the fair value of
the Company's stock and the amount an employee must pay to acquire the stock.
In December 2004, the Financial Accounting Standards Board issued Statement
Number 123 (revised 2004) ("SAS 123 (R)"), Share-Based Payments. SAS 123 (R)
requires all entities to recognize compensation expense in an amount equal to
the fair value of share-based payments, such as stock options granted to
employees. The Company is required to apply SFAS 123 (R) on a modified
prospective method. Under this method, the Company is required to record
compensation expense (as previous awards continue to vest) for the unvested
portion of previously granted awards that remain outstanding at the date of
adoption. In addition, the Company may elect to adopt SFAS 123 (R) by restating
previously issued financial statements, basing the amounts on the expense
previously calculated and reported in their pro forma disclosures that had been
required by SFAS 123. For public entities that file as small business issuers
SFAS 123 (R) is effective as of the beginning of the first interim or annual
reporting period that begins after December 15, 2005. Management has not
completed its evaluation of the effect that SFAS 123 (R) will have, but believes
that the effect will be consistent with the application disclosed in its pro
forma disclosures.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
FUND COSTS CONVERSION
The consolidated statements of operations 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 and Canadian dollar during the periods indicated:
6 months ended December 31, 2003 A$1.00 = US$0.68
6 months ended December 31, 2004 A$1.00 = US$0.78
6 months ended December 31, 2003 A$1.00 = CDN$0.97
6 months ended December 31, 2004 A$1.00 = CDN$0.94
RESULTS OF OPERATION
Three Months Ended December 31, 2004 vs. Three Months Ended December 31 2003.
Costs and expenses increased from A$155,000 in the three months December 31,
2003 to A$377,000 in the three months ended December 31, 2004. The Company's
financial statements are prepared in Australian dollars (A$). Since December 31,
2003 the A$ compared to the United States dollar (US$) has appreciated by 14.7%.
A number of the costs and expenses of the Company are incurred in US$ and CDN$
and the conversion of these costs to A$ means that the comparison of December
2004 to 2003 does not always present a true comparison. The increase in expenses
is a net result of:
a) a decrease in interest expense from A$45,000 for the three months
ended December 31, 2003 to A$2,000 for the three months ended
December 31, 2004 as all long term debt was converted into equity in
March 2004 and the Company raised funds through the issue of shares
and warrants in March 2004 to fund the Company's operations. During
the 2003 quarter, the interest rate of 8.60% was charged on
outstanding amounts by Chevas. Chevas is a company associated with
Mr. J.I. Gutnick, our President, which provided funding for the
Company's operations during the prior year. AXIS Consultants
provides management and geological services to the Company pursuant
to a Service Deed dated November 25, 1988. AXIS Consultants charged
interest at a rate of 10.60% for fiscal 2004 compared to 9.60% and
10.10% for fiscal 2003.
b) an increase in legal, accounting and professional expense from
A$17,000 for the three months ended December 31, 2003 to A$47,000
for the three months ended December 31, 2004 as a result of an
increase in legal fees in relation to discussions with external
financiers and the preparation of a listing of the Company's
securities on the Toronto Venture Exchange.
c) an increase in administrative costs including salaries from A$76,000
in the three months ended December 31, 2003 to A$196,000 in the
three months ended December 31, 2004 as a result of the increase in
the direct costs reimbursed to AXIS Consultants from A$20,000 for
the three months ended December 31, 2003 to A$70,000 for the three
months ended December 31, 2004, the costs of our Chief Operating
Officer who undertakes business development, capital raising and
investor relations work for the Company and associated business
expenses of A$41,000 (2003: $25,000 as he was employed as a
consultant from November 2003); the costs of preparation, lodgement
with the SEC and printing of documentation forwarded to shareholders
for the 2004 annual general meeting and a quarterly allocation of
the insurance costs for Canada to cover the exploration programme of
A$14,000. There was no comparable cost in the prior comparable
quarter for the annual general meeting and insurance.
d) an increase in the exploration expenditure expense from $17,000 for
the three months ended December 31, 2003 to $132,000 for the three
months ended December 31, 2004. In March 2004, we appointed a Vice
President Exploration in Canada and commenced the exploration
program on the Committee Bay and Slave Properties. These properties
are in Nunavet in an isolated area and exploration can only be
undertaken between June and September each year due to ground
conditions. Exploration is costly as we were required to hire and
construct a temporary camp which also had to be transported by
charter flight. All supplies and temporary employees also needed to
be transported to the temporary camp by charter flights and/or
helicopter. The properties are located approximately 100 kilometers
from the camp and employees are transported by helicopter daily from
camp to the exploration site. For the three months ended December
2003, exploration in Canada related to monitoring the staking of
claims in the Committee Bay Greenstone Belt at a cost of A$17,000.
For the three months ended December 2004, exploration in Canada
amounted to the receipt of assay results and assessment of the field
programme.
As a result of the foregoing, the loss from operations increased from A$155,000
for the three months ended December 31, 2003 to A$377,000 for the three months
ended December 31, 2004.
The net loss was A$155,000 for the three months ended December 31, 2003 compared
to a net loss of A$377,000 for the thee months ended December 31, 2004.
Six Months Ended December 31, 2004 vs. Six Months Ended December 31, 2003.
Costs and expenses increased from A$277,000 in the six months December 31, 2003
to A$1,695,000 in the six months ended December 31, 2004. The Company's
financial statements are prepared in Australian dollars (A$). Since December 31,
2003 the A$ compared to the United States dollar (US$) has appreciated by 14.7%.
A number of the costs and expenses of the Company are incurred in US$ and CDN$
and the conversion of these costs to A$ means that the comparison of December
2004 to December 2003 does not always present a true comparison. The increase in
expenses is a net result of:
a) an decrease in interest expense from A$85,000 for the six months
ended December 31, 2003 to A$5,000 for the six months ended December
31, 2004 as all long term debt was converted into equity in March
2004 and the Company raised funds through the issue of shares and
warrants in March 2004 to fund the Company's operations. During the
2003 period, the interest rate of 8.60% was charged on outstanding
amounts by Chevas. Chevas is a company associated with Mr. J.I.
Gutnick, our President, which provided funding for the Company's
operations during the prior year. AXIS provides management and
geological services to the Company pursuant to a Service Deed dated
November 25, 1988. AXIS charged interest at a rate of 10.60% for
fiscal 2004 compared to 9.60% and 10.10% for fiscal 2003
b) an increase in legal, accounting and professional expense from
A$27,000 for the six months ended December 31, 2003 to A$86,000 for
the six months ended December 31, 2004 as a result of an increase in
legal fees in relation to discussions with external financiers and
the preparation of a listing of the Company's securities on the
Toronto Venture Exchange .
c) an increase in administrative costs including salaries from
A$139,000 in the six months ended December 31, 2003 to A$416,000 in
the six months ended December 31, 2004 as a result of the increase
in the direct costs reimbursed to AXIS Consultants from A$37,000 for
the six months ended December 31, 2003 to A$190,000 for the six
months ended December 31, 2004, the costs of our Chief Operating
Officer who undertakes business development, capital raising and
investor relations work for the Company and associated business
expenses of A$91,000 (2003: $25,000 as he was employed as a
consultant from November 2003); the costs of preparation, lodgement
with the SEC and printing of documentation forwarded to shareholders
for the 2004 annual general meeting and the six monthly allocation
of the insurance costs for Canada to cover the exploration programme
of A$25,000. There was no comparable cost in the prior comparable
period for the annual general meeting and insurance as the Company
has only taken out insurance since it commenced its exploration
activities and the prior annual shareholders approval occurred in
June 2003.
d) an increase in the exploration expenditure expense from A$26,000 for
the six months ended December 31, 2003 to A$1,188,000 for the six
months ended December 31, 2004. In March 2004, we appointed a Vice
President Exploration in Canada and commenced the exploration
program on the Committee Bay Properties and Slave Properties. These
properties are in Nunavet in an isolated area and exploration can
only be undertaken between June and September each year due to
ground conditions. Exploration is costly as we were required to hire
and construct a temporary camp which also had to be transported by
charter flight. All supplies and temporary employees also needed to
be transported to the temporary camp by charter flights and/or
helicopter. The properties are located approximately 100 kilometers
from the camp and employees are transported by helicopter daily from
camp to the exploration site. For the six months ended December
2003, exploration in Canada related to monitoring the staking of
claims in the Committee Bay Greenstone Belt at a cost of A$17,000.
In the six months ended December 2004, we completed field programs
at both properties at a cost during the six month period of
A$1,188,000.
As a result of the foregoing, the loss from operations increased from A$277,000
for the six months ended December 31, 2003 to A$1,695,000 for the six months
ended December 31, 2004.
The net loss was A$277,000 for the six months ended December 31, 2003 compared
to a net loss of A$1,695,000 for the six months ended December 31, 2004.
Liquidity and Capital Resources
For the six months ended December 31, 2004, net cash used in operating
activities was A$1,577,000 primarily consisting of the net loss for the six
months ended December 31, 2004 of A$1,693,000; increases in accounts payable and
accrued expenses of A$16,000; a reduction of prepayments and deposits of
A$130,000; an increase in receivables of A$49,000. Net cash used in investing
activities consisted of a A$6,000 purchase of plant and equipment. Net cash from
financing activities was A$466,000 being an increase in borrowing from
affiliates to fund activities.
As of December 31, 2004 the Company had short-term obligations of A$1,088,000
comprising accounts payable, accrued expenses and a short term loan from an
affiliate.
We have A$1,000 in cash at December 31, 2004. We are investigating the
possibility of raising cash flow through money in Canada for exploration
purposes.
We have been preparing a listing application for the dual listing of our shares
of common stock on TSX-V. The listing application was lodged with TSX-V in June
2004 and we are currently in the process of responding to questions raised by
TSX-V. We believe that a dual listing of our shares of common stock will provide
liquidity in our shares. There can be no assurance that the dual listing on
TSX-V will eventuate or that such listing will create an increase in the volume
of trading of our shares of common stock.
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 2005.
Other than the arrangements above, the Company has not confirmed any further
arrangements for ongoing funding. As a result, the Company will be required to
raise funds from additional debt or equity offerings in order to meet its cash
flow requirements during the forthcoming year.
The Company will require substantial additional capital over the next year in
order to satisfy existing liabilities and to provide funding to achieve its
current business plan. Failure to obtain such capital could adversely impact the
Company's operations and prospects.
Cautionary Safe Harbor Statement under the United States Private Securities
Litigation Reform Act of 1995.
Certain information contained in this Form 10-QSB's 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-QSB 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, without limitation, the risks of
exploration and development stage projects, political risks of development in
foreign countries, risks associated with environmental and other regulatory
matters, mining risks and competition and the volatility of gold and copper
prices, 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-KSB on file with the Securities and Exchange Commission.
Item 3. CONTROLS AND PROCEDURES
The Company's Chief Executive Officer and Chief Financial Officer conducted an
evaluation of the effectiveness of the design and operation of our disclosure
controls and procedures pursuant to Exchange Act Rule 13a-14 as of the end of
the period covered by this report. Based upon that evaluation, such officers
concluded that our disclosure controls and procedures are effective to ensure
that information is gathered, analyzed and disclosed on a timely basis.
Internal Control Over Financial Reporting. There have not been any changes in
the Company's internal control over financial reporting during the fiscal
quarter to which this report relates that have materially affected, or are
reasonably likely to materially affect, the Company's internal control over
financial reporting.
PART II
OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Not Applicable
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not Applicable
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
Item 5. OTHER INFORMATION
Not Applicable
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit No. Description
----------- -----------
31.1 Certification of Chief Executive Officer
required by Rule 13a-14(a)/15d-14(a) under the
Exchange Act
31.2 Certification of Chief Financial Officer
required by Rule 13a-14(a)/15d-14(a) under the
Exchange Act
32.1 Certification of Chief Executive Officer
pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of Sarbanes-Oxley
act of 2002
32.2 Certification of Chief Financial Officer
pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of Sarbanes-Oxley
act of 2002
(b) The Company filed a Report on Form 8-K on October 15, 2004
with respect to Items 5.02 and 8.01..
(FORM 10-QSB)
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 the reinto 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)
By:
/s/ Peter Lee
------------------------------------
Peter Lee
Peter Lee, Director, Secretary and
Chief Financial Officer
(Principal Financial Officer)
Dated February 11, 2005
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
31.1 Certification of Chief Executive Officer
required by Rule 13a-14(a)/15d-14(a) under the
Exchange Act
31.2 Certification of Chief Financial Officer
required by Rule 13a-14(a)/15d-14(a) under the
Exchange Act
32.1 Certification of Chief Executive Officer
pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of Sarbanes-Oxley act
of 2002
32.2 Certification of Chief Financial Officer
pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of Sarbanes-Oxley act
of 2002