UNITED STATES
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 June 30, 2005
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 001-06412
LITTLE SQUAW GOLD MINING COMPANY
Alaska 91-0742812
(State of other jurisdiction of incorporation (I.R.S. Employer Identification No.)
or organization)
3412 S. Lincoln Drive
Spokane, WA 99203-1650
(Address of principal executive offices) (Zip Code)
(509) 624-5831
(Issuer's telephone number, including area code)
Check whether the issuer (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 at least the past 90 days.
Yes X No_______
State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 15,633,420 shares of Common Stock as of July 31, 2005
Transitional Small Business Disclosure Format (check one); Yes ____ No X
1
TABLE OF CONTENTS
Page
PART I – FINANCIAL INFORMATION
Item 1: Financial Statements
Balance Sheets, June 30, 2005 and December 31, 2004
1
Statements of Operations for the three and six month periods ended June 30, 2005 and 2004 and
from the date of inception on March 26, 1959 through June 30, 2005
2
Statements of Cash Flows for the six months ended June 30, 2005 and 2004 and from the
date of inception on March 26, 1959 through June 30, 2005
3
Notes to Financial Statements
4
Item 2: Managements Discussion and Analysis of Financial Condition or Plan of Operation
6
Item 3: Controls and Procedures
8
PART II – OTHER INFORMATION
Item 1: Legal Proceedings
8
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds
8
Item 3: Default Upon Senior Securities
8
Item 4: Submission of Matters To A Vote
8
Item 5: Other Information
8
Item 6: Exhibits and Reports on Form 8-K
9
Signatures
10
Certifications
11
2
PART I
ITEM 1. FINANCIAL STATEMENTS
Little Squaw Gold Mining Company
(An Exploration Stage Company)
Balance Sheets
June 30, 2005 and December 31 2004
(unaudited)
June 30,
December 31,
2005
2004
ASSETS
Current assets:
Cash
$
35,298
$
32,855
Prepaid expenses
4,651
6,198
Other receivable
8,025
Total current assets
47,974
39,053
Plant, equipment, and mining claims:
Other equipment, net of depreciation
4,018
4,441
Mining and mineral properties
321,041
321,041
Other assets
3,025
3,025
Total assets
$
376,058
$
367,560
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
$
13,166
$
5,020
Accounts payable – related parties
63,628
32,772
Accrued interest
1,500
Notes payable
100,000
Total current liabilities
178,294
37,792
Long-term liabilities:
Accrued remediation costs
50,000
50,000
Total liabilities
228,294
87,792
Stockholders' equity
Preferred stock; no par value, 10,000,000
shares authorized; no shares issued or outstanding
Common stock; $0.10 par value, 200,000,000
shares authorized; 15,602,020 and 15,364,117
issued and outstanding, respectively
1,560,202
1,536,411
Additional paid-in capital
785,510
752,458
Deficit accumulated during the development stage
(2,197,948)
(2,009,101)
Total stockholders equity
147,764
279,768
Total liabilities and stockholders' equity
$
376,058
$
367,560
The accompanying notes are an integral part of these financial statements.
3
Little Squaw Gold Mining Company
(A Development Stage Company)
Statements of Operations
(unaudited)
From Inception
(March 26, 1959
Three Months Ended
Six Months Ended
Through
June 30,
June 30,
June 30,
2005
2004
2005
2004
2005
Revenue:
Royalties, net
$ 398,752
Lease and rental
99,330
Gold sales and other
-
-
-
-
31,441
-
-
-
-
$ 529,523
Expenses:
Other costs of operations
8,030
Management fees and salaries
$ 18,150
$ 15,825
$ 34,550
$ 33,400
986,607
Directors' fees
3,900
2,900
7,000
11,800
259,143
Professional services
52,174
62,752
114,793
130,617
767,402
Other general and administrative
expense
16,404
7,462
22,991
13,020
237,209
Mineral property maintenance
1,633
2,220
3,265
4,440
16,182
Office supplies and other expense
1,453
5,073
2,879
7,207
241,428
Depreciation
211
70
423
70
5,671
Reclamation and miscellaneous
115,102
Loss on partnership venture
53,402
Equipment repairs
25,170
93,924
96,302
185,901
200,554
2,715,346
Other (income) expense:
Interest expense
3,025
3,055
39,356
Interest income
(38)
(235)
(109)
(376)
(27,231)
Total other (income) expense
2,987
(235)
2,946
(376)
12,125
Net income (loss)
$
(96,911)
$
(96,067)
$
(188,847)
$
(200,178)
$ (2,209,948)
Net loss per common share
$
Nil
$
Nil
$
Nil
$
Nil
$ Nil
Weighted average common
shares outstanding-basic
15,508,077
14,974,117
15,453,097
14,360,062
6,575,055
The accompanying notes are an integral part of these financial statements.
4
Little Squaw Gold Mining Company
(An Exploration Stage Company)
Statements of Cash Flows (unaudited)
From Inception
(March 26, 1959)
Six Months Ended
Through
June 30,
June 30,
2005
2004
2005
Cash flows from operating activities:
Net loss
Net loss
$
(188,847)
$
(200,178)
$
(2,197,948)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation
423
70
6,164
Common stock, warrants, and options
issued for salaries and fees
39,968
11,910
426,562
Change in:
Prepaid expenses
1,547
1,326
(4,651)
Gold inventory
(3,025)
(3,025)
Other receivable
(8,025)
(8,025)
Accounts payable, other
8,146
4,865
13,165
Accounts payable, related party
30,856
83,628
Accrued compensation, related party
255,450
Accrued payroll taxes
19,323
Accrued interest
1,500
1,500
Convertible success award, Walters LITS
88,750
Accrued remediation costs
50,000
Net cash used - operating activities
(114,432)
(185,032)
(1,269,107)
Cash flows from investing activities:
Receipts attributable to unrecovered
promotional, exploratory, and development
costs
626,942
Proceeds from the sale of equipment
60,000
Additions to property, plant, equipment, and
unrecovered promotional, exploratory, and
development costs
(4,934)
(370,342)
Net cash - investing activities
(4,934)
316,600
Cash flows from financing activities:
Issuance of common stock, net of offering costs
16,875
288,313
895,979
Proceeds from notes payable
100,000
100,000
Acquisitions of treasury stock
(8,174)
Net cash - financing activities
116,875
288,313
987,805
Net increase in cash
2,443
98,347
35,298
Cash, beginning of period
32,855
98,834
0
Cash, end of period
$
35,298
$
197,181
$
35,298
Supplemental disclosures of cash flow information:
Non-cash investing activities:
Mining claims purchased - common stock
$
35,000
$
35,000
Non-cash financing activities:
Related party liabilities compensation
converted to common stock
$
88,750
$
301,086
The accompanying notes are an integral part of these financial statements.
5
Notes to Financial Statements (Unaudited)
1.
BASIS OF PRESENTATION:
The unaudited financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America for interim financial information, as well as the instructions to Form 10-QSB. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of the Company’s management, all adjustments (consisting of only normal recurring accruals) considered necessary for a fair presentation of the interim financial statements have been included. Operating results for the three-month and six-month periods ended June 30, 2005 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2005.
For further information refer to the financial statements and footnotes thereto in the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2004.
2.
2003 SHARE INCENTIVE PLAN:
During the second quarter of 2005, the Company did not issue any stock options. The Company’s 2003 Share Incentive Plan (the “Plan) permits the granting of nonqualified stock options, incentive stock options and shares of common stock to employees, directors and consultants.
3.
STOCKHOLDERS’ EQUITY:
Common Stock Issued to a Director
On May 13, 2005, the Company issued one of its directors 112,903 shares of the Company’s restricted common stock in exchange for his services. As a result the Company recognized $25,968 share based expense for fees estimated by the fair value of the shares issued.
Stock Warrants
Warrants were issued in connection with the Company’s private placement of its common stock, and are exercisable at $0.45 per share ("$0.45 warrants") and expire on September 19, 2005. On May 18, 2005, directors consented to authorize the Company to reduce the warrant exercise price to $0.25 through June 24, 2005.
The following is a summary of warrants:
Shares | Exercise Price | Expiration Date | |
Balance, December 31, 2004 | 1,036,389 | – | September 19, 2005 |
Warrants exercised in second quarter | (75,000) | 0.25 | |
Outstanding and exercisable at June 30, 2005 | 961,389 | 0.45 | |
Weighted average exercise of options granted during the quarter ended June 30, 2005 | $ 0.25 |
As a result of the reductions of exercise price 75,000 warrants were exercised during the second quarter yielding net cash proceeds of $16,875.
6
4.
RELATED PARTY TRANSACTIONS:
In January of 2005 the Company issued three convertible promissory notes (“the Notes”) in order to finance the Company until it is able to raise additional capital. Two of the Notes were to shareholders for $25,000 and $50,000, respectively, and one of the Notes was to a director for $25,000. The Notes are dated January 21, 2005, and are payable on demand, or if no demand is made, on July 20, 2005. The Notes accrue interest at 6% per annum and interest only payments are due on the unpaid balances on the quarterly anniversary dates with the first payment due on April 21, 2005.
The Company has the right to, at any time prior to the maturity date and without notice to convert the Notes into restricted shares of the Company’s common stock and warrants. The conversion rate is $0.30 per share and includes one warrant per share initially at $0.45. The exercise price of the warrants escalates to $0.55 and $0.75 in the second and third year from the date of issuance.
On July 20, 2005 all parties to the notes agreed to extend the term of the Notes to an indefinite period until the Company has the financial resources to repay them. In connection with the agreement to extend the term of the Notes the parties also agree that the interest rate on the notes would increase from 6% to 12%. At June 30, 2005 the Company had accrued $1,500 of interest related to the Notes.
7
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION
Little Squaw Gold Mining Company is engaged in the business of identifying, acquiring and exploring gold properties throughout the Americas, starting with its Chandalar property in Alaska. The Company’s strategic objective is to create value at Chandalar and other properties by conducting cost-efficient and effective exploration to discover and delineate economically viable gold deposits. The Company intends to systematically build a pipeline of drill-ready gold projects, and to become a recognized leader in the gold exploration business. It expects to fund these objectives using its own equity capital and also by property joint venture earn-in deals with senior mining companies.
The Chandalar property is located in the Alaskan arctic approximately 190 miles north of Fairbanks and about 50 miles east of Coldfoot. In the summer of 2004, Little Squaw Gold conducted a limited geological and surface sampling program on the Chandalar property that identified six new gold-bearing veins as well as eight drill-ready targets. The total number of known high-grade gold-bearing veins and vein swarms on the property is more than 30. Results of the 2004 program are described in the Company’s 2004 10-KSB report, as amended. This annual report to the SEC as well as a detailed technical report of the 2004 field work by an independent registered geologist is available on the Company’s website at www.littlesquawgold.com.
On April 11, 2005 the State of Alaska filed a lawsuit against the United States to quiet title to the state’s right-of-way for the historic Coldfoot to Chandalar Lake Trail. This action by the State of Alaska to resolve title and right-of-way issues for road access into Chandalar is considered to be a material event for the Company. If the State prevails, it would clear the way for possible construction of an all weather road to the Company’s 15 square mile property in the Chandalar gold mining district. Road access would link Chandalar to the state highway road network and would have a substantial positive impact on the future development of any gold deposits the Company may find on its claims.
As disclosed in an 8-K report the Company filed with the SEC on March 1, 2005, the Company entered into a Placement Agent Agreement with Strata Partners LLC, a Washington limited liability company, for Strata Partners to use its best efforts to sell 9,166,666 units of the Company’s securities to accredited investors in a private placement. Proceeds from the sale of the securities were to be used to fund the Company’s 2005 exploration program at Chandalar, acquire additional gold exploration properties and for general corporate purposes.
The private equity placement attempt through Strata Partners was unsuccessful. Despite an extensive and highly professional marketing program, no funds were raised and no securities were issued. The Company terminated the Placement Agent Agreement on July 1, 2005. In doing so and in compliance with the Placement Agent Agreement, 31,400 common shares of the Company were issued to Strata Partners at $0.30 per share as debt settlement for $9,420 in offering expenses incurred by them.
The Strata Partners sales effort targeted institutional funds. Although many institutional fund managers expressed keen interest in the Chandalar property and the equity financing, the funds were in a period of redemptions caused by extremely weak market conditions for natural resource stocks across the board, and for that reason were not able to participate. The Company believes that offering restricted securities (according to SEC Rule 144) in an atmosphere of poor market conditions was the reason for the lack of success.
As also disclosed in the 8-K report the Company filed with the SEC on March 1, 2005, the Company had retained John H. Resing as a consultant to among other things introduce the Company to broker-dealers and assist the Company with negotiating terms for the Strata Partners, LLC private placement financing. Mr. Resing had introduced the Company to Strata Partners, LLC. The Company also terminated Mr. Resing’s consulting contract as of July 1, 2005.
8
The failure of the Offering through Strata Partners LLC resulted in the Company canceling a substantial field program involving drilling it had planned at Chandalar this summer field season. Detailed information regarding those plans for the Chandalar exploration program may be found in the Company’s 2004 10-KSB report, as amended. The Company is no longer planning any drilling of the gold prospects on the Chandalar property this year. Instead, the Company has now launched a limited exploration program at Chandalar which continues geologic work on drill targets development with further prospecting of the district for new gold showings.
The Company is planning to undertake another equity financing in the second half of this year. The structure of the anticipated financing has not yet been determined, but it will be significantly different than what had been attempted this last Spring. There can be no guarantee the Company will undertake the planned financing, or if it does the offering would be successful.
As disclosed in an 8-K report the Company filed with the SEC on May 3, 2005, the Company entered into a Finder’s Fee Letter Agreement (the “Agreement”) with Mr. Otto Gold. Mr. Gold represents only himself, and he is independent of the Company and is not authorized to act as an agent for the Company. Mr. Gold has represented to the Company that he is able to introduce the Company to persons and/or business entities (Investors) which may have an interest in entering into arrangements with the Company to either participate in a private equity financing by the Company and/or in a joint venture development, earn-in or lease of the Company’s Chandalar mining property in Alaska.
The Agreement provides for the Company to pay Mr. Gold a finder’s fee should the it enter into such arrangements with Investors Mr. Gold introduces to the Company. In the event of a private placement, Mr. Gold’s finder’s fee shall be ten percent (10%) of the amount of the proceeds plus common share warrants equal to ten percent (10%) of the value of the financing, priced at a twenty five percent (25%) premium to market and valid for three (3) years. This provision also applies to subsequent financings the Investors may participate in during the two (2) years subsequent to their initial investment. In the event of a business venture on or lease of the Chandalar property, Mr. Gold’s finder’s fee shall be three percent (3%) of the annual amount spent by the Investors for a three (3) year period. In this case, the Company has the option to pay half plus an additional twenty five percent (25%) on that half of Mr. Gold’s finder’s fee in restricted common shares of the Company. The remaining terms, representations, conditions, and covenants contained in the Agreement are similar to those typically found in the mining industry for the payment of finder’s fees.
There is no material relationship between the Company and Mr. Gold other than as set forth in the Agreement.
Financial Condition and Liquidity
On June 30, 2005 the Company had total liabilities of $228,294, and total assets of $376,058. This compares to total liabilities of $87,792 and total assets of about $367,560 on December 31, 2004. As of the date of this report, the Company’s liabilities are limited to $100,000 for convertible notes due to a director and other shareholder, $1,500 for accrued interest, $50,000 for environmental clean up, $13,166 in outstanding accounts payable and $63,628 accounts payable – to officers and directors for services (related parties). The Company is currently attempting to raise money to finance a summer field program at its Chandalar property and other corporate activities. There can be no assurance that the Company will be successful in its efforts to raise such financing or be able to continue in existence for the upcoming twelve months.
The Company has incurred losses since its inception and has no recurring source of revenue. These conditions raise substantial doubt as to the Company’s ability to continue as a going concern. Management's plans for the continuation of the Company as a going concern include financing the Company's operations through sales of its common stock and the eventual profitable development of its mining properties. There are no assurances, however, with respect to the future success of these plans. The financial statements do not contain any adjustments, which might be necessary, if the Company is unable to continue as a going concern.
9
ITEM 3. CONTROLS AND PROCEDURES
An evaluation was performed by the Company's president and principal financial officer of the effectiveness of the design and operation of our disclosure controls and procedures. And on that evaluation, the Company's president and principal financial officer concluded that disclosure controls and procedures were effective as of June 30, 2005, in ensuring that all material information required to be filed in this quarterly report has been made known to them in a timely fashion.
There has been no change in our internal controls over financial reporting during the quarter ended June 30, 2005 that has materially affect or is reasonable likely to materially affect, our internal controls over financial reporting.
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Warrants were issued in connection with the Company’s private placement of its common stock, and are exercisable at $0.45 per share ("$0.45 warrants") and expire on September 19, 2005. On May 18, 2005, directors consented to authorize the Company to reduce the warrant exercise price to $0.25 through June 24, 2005. As a result of the reductions of exercise price 75,000 warrants were exercised during the second quarter yielding net cash proceeds of $16,875.
ITEM 3. DEFAULT UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
10
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Certification of Richard R. Walters, President and Chief Executive Officer pursuant to 18 U.S.C. 1350.
Certification of Becky Corigliano, Chief Financial Officer pursuant to 18 U.S.C. 1350.
Certification of Richard R. Walters, President and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Becky Corigliano, Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
REPORTS ON FORM 8-K
Item 1.01 Entry into a Material Definitive Agreement, Dated May 3, 2005
11
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: August 12, 2005
LITTLE SQUAW GOLD MINING COMPANY
By
/s/ Richard R. Walters
Richard R. Walters, President and
Chief Executive Officer
In accordance with Section 12 of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: August 12, 2005
LITTLE SQUAW GOLD MINING COMPANY
By /s/ Becky Corigliano
Becky Corigliano, Chief Financial Officer
12