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, 2006 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
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GOLDEN RIVER RESOURCES CORPORATION
(formerly BAY RESOURCES LTD)
(Exact name of Registrant as specified in its charter)
Delaware 98-0079697
------------------------------------ --------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) 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
------------------------
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
----------- -----------
Indicate by check mark whether the Registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes No X
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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 26,711,630
outstanding shares of Common Stock as of February 12, 2007. (Does not include
10,000,000 shares of common stock that are issuable upon exercise of Special
Warrants, without the payment of any additional consideration.)
Transitional Small Business Disclosure Format (Check one) Yes No x
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Table Of Contents
PAGE NO
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PART I. FINANCIAL INFORMATION
Item 1 Financial Statements 2
Item 2 Management's Discussion and Analysis or Plan of Operation 11
Item 3 Controls and Procedures 15
PART II OTHER INFORMATION
Item 1 Legal Proceedings 17
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds 17
Item 3 Defaults Upon Senior Securities 17
Item 4 Submission of Matters to a Vote of Security Holders 17
Item 5 Other Information 17
Item 6 Exhibits 17
SIGNATURES 18
EXHIBIT INDEX 19
Exh. 31.1 Certification 20
Exh. 31.2 Certification 22
Exh. 32.1 Certification 24
Exh. 32.2 Certification 25
1
Item 1. FINANCIAL STATEMENTS
Introduction to Interim Financial Statements.
The interim financial statements included herein have been prepared by
Golden River Resources Corporation ("Golden River 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, 2006.
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, 2006, the
results of its operations for the three and six month periods ended December 31,
2006 and December 31, 2005, and the changes in its cash flows for the three and
six month periods ended December 31, 2006 and December 31, 2005, 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 accounting
principles generally accepted in the United States of America 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.
2
GOLDEN RIVER RESOURCES CORPORATION AND SUBSIDIARIES
(An Exploration Stage Company)
Consolidated Balance Sheet
December 31, 2006
(Unaudited)
A$000's
-------
ASSETS
Current Assets
Cash 821
Receivables 154
Prepayments and Deposits 47
-----------------
Total Current Assets 1,022
-----------------
Non Current Assets
Property and Equipment, net 6
-----------------
Total Non Current Assets 6
-----------------
Total Assets 1,028
=================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable and Accrued Expenses 245
-----------------
Total Current Liabilities 245
-----------------
Total Liabilities 245
-----------------
Stockholders' Equity:
Common Stock: $.0001 par value 3
100,000,000 shares authorized,
26,714,130 issued
Additional Paid-in-Capital 34,370
Less Treasury Stock at Cost, 2,500 shares (20)
Other Comprehensive Loss (4)
Retained Deficit during exploration stage (7,164)
Retained Deficit prior to exploration stage (26,402)
-----------------
Total Stockholders' Equity 783
-----------------
Total Liabilities and Stockholders' Equity 1,028
=================
See Notes to Consolidated Financial Statements
3
GOLDEN RIVER RESOURCES CORPORATION AND SUBSIDIARIES
(An Exploration Stage Company)
Consolidated Statements of Operations
Three and Six Months Ended December 31, 2006 and 2005
and for the cumulative period July 1, 2002
(inception of exploration activities) to
December 31, 2006
(Unaudited)
July 1,
Three Three Six Six 2002
Months Months Months Months to
Ended Ended Ended Ended December
December December December December 31,
31, 2006 31, 2005 31, 2006 31, 2005 2006
A$000's A$000's A$000's A$000's A$000's
------------------------------------------------
Revenues:
Interest - net, related entity 4 - 7 - 7
- other - - 2 - 2
------------------------------------------------
4 - 9 - 9
------------------------------------------------
Costs and Expenses:
Stock Based Compensation 36 58 43 136 611
Exploration Expenditure 50 87 424 125 3,086
Loss on Disposal of Equipment - - - - 1
Interest Expense, net - 37 - 63 412
Legal, Accounting and Professional 55 24 78 39 565
Administrative 106 164 235 315 2,424
------------------------------------------------
247 370 780 678 7,099
------------------------------------------------
(Loss) from Operations (243) (370) (771) (678) (7,090)
Foreign Currency Exchange Gain (Loss) (45) (16) (61) (23) (74)
------------------------------------------------
(Loss) before Income Tax (288) (386) (832) (701) (7,164)
Provision for Income Tax - - - - -
------------------------------------------------
Net (Loss) (288) (386) (832) (701) (7,164)
------------------------------------------------
Basic net (Loss) Per Common Equivalent Shares $ (0.01) $ (0.02) $ (0.03) $ (0.04) $ (0.50)
------------------------------------------------
Equivalent Shares Outstanding (000's) 26,714 16,714 26,714 16,714 14,237
------------------------------------------------
See Notes to Consolidated Financial Statements
4
GOLDEN RIVER RESOURCES CORPORATION AND SUBSIDIARIES
(An Exploration Stage Company)
Consolidated Statements of Cash
Flows Six Months Ended December 31, 2006 and 2005
and for the cumulative period
July 1, 2002 (inception of exploration activities) to December 31, 2006
(Unaudited)
July 1, 2002
to December
2006 2005 31, 2006
A$000's A$000's A$000's
------- ------- -------
CASH FLOWS FROM OPERATING ACTIVITIES
Net (Loss) (832) (701) (7,164)
Adjustments to reconcile net (loss) to net cash used
in Operating Activities
Foreign Currency Exchange Loss/(Gain) 61 23 74
Depreciation of Plant and Equipment 4 4 22
Stock based compensation 43 136 611
Accrued interest added to principal - 40 184
Net Change in:
Receivables (121) 33 (154)
Staking Deposit - - 23
Prepayments and Deposits - - (54)
Accounts Payable and Accrued Expenses (342) 21 (274)
Short Term Advance - Affiliates (1) - (36)
------------------------------------------------------
Net Cash (Used) in Operating Activities (1,188) (444) (6,768)
------------------------------------------------------
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of Plant and Equipment - - (27)
------------------------------------------------------
Net Cash (Used) in Investing Activities - - (27)
------------------------------------------------------
CASH FLOW PROVIDED BY FINANCING ACTIVITIES
Net Borrowings from Affiliates - 447 1,031
Sale of Warrants (net) (7) - 4,311
Proceeds from Loan Payable - - 2,273
------------------------------------------------------
Net Cash Provided by (Used in)Financing Activities (7) 447 7,615
------------------------------------------------------
Net Increase (decrease) in Cash (1,195) 3 820
Cash at Beginning of Period 2,016 2 1
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Cash at End of Period 821 5 821
------------------------------------------------------
Supplemental Disclosures
Interest Paid - 15 359
NON CASH FINANCING ACTIVITY
Debt repaid through issuance of shares - - 4,273
Stock Options recorded as Deferred Compensation - - 575
See Notes to Consolidated Financial Statements
5
GOLDEN RIVER RESOURCES CORPORATION AND SUBSIDIARIES
(An Exploration Stage Company)
Consolidated Statements of Stockholders' Equity (Deficit)
December 31, 2006
and for the cumulative period July 1, 2002
(inception of exploration activities) to December 31, 2006
(Unaudited)
Retained Retained
Treasury (Deficit) (Deficit) Other
Common Stock, Additional (during the (prior to Deferred Compre-
Stock at Paid-in Exploration Exploration Compen- hensive
Shares Amount Cost Capital stage) stage) sation Loss Total
------- ------- -------- ---------- ------------ ------------ -------- ------- --------
000's A$000's A$000's A$000's A$000's A$000's A$000's A$000's A$000's
Balance June 30, 2002 6,347 $1 $(20) $25,175 - $(26,402) - - $(1,246)
Net loss - - - - $(681) - - - (681)
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Balance June 30, 2003 6,347 $1 $(20) $25,175 $(681) $(26,402) - - $(1,927)
Issuance of 1,753,984 shares and
warrants in lieu of debt
repayment 1,754 - - $2,273 - - - - $2,273
Sale of 1,670,000 shares and
warrants 1,670 - - $2,253 - - - - $2,253
Issuance of 6,943,057 shares on
cashless exercise of options 6,943 $1 - $(1) - - - - -
Net unrealized loss on foreign
exchange - - - - - - - $(9) $(9)
Net (loss) - - - - $(1,723) - - - $(1,723)
---------------------------------------------------------------------------------------
Balance June 30, 2004 16,714 $2 $(20) $29,700 $(2,404) $(26,402) - $(9) $867
Amortization of 1,400,000 options
under 2004 stock option plan - - - - - - $377 - $377
Net unrealized gain on foreign
exchange - - - - - - - $6 $6
Net/(loss) - - - - $(2,600) - - - $(2,600)
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Balance June 30, 2005 16,714 $2 $(20) $30,275 $(5,004) $(26,402) $(198) $(3) $(1,350)
To eliminate deferred
compensation against Paid-In
Capital - - - $(198) - - $198 - -
Issuance of 10,000,000 shares and
20,000,000 options in lieu of
debt repayment 10,000 $1 - $1,999 - - - - $2,000
Sale of 20,000,000 normal
warrants - - - $997 - - - $997
Sale of 10,000,000 special
warrants - - - $1,069 - - - - $1,069
See Notes to Consolidated Financial Statements
6
GOLDEN RIVER RESOURCES CORPORATION AND SUBSIDIARIES
(An Exploration Stage Company)
Consolidated Statements of Stockholders' Equity (Deficit)
December 31, 2006
and for the cumulative period July 1, 2002
(inception of exploration activities) to December 31, 2006
(Unaudited) Continued
Retained Retained
Treasury (Deficit) (Deficit) Other
Common Stock, Additional (during the (prior to Deferred Compre-
Stock at Paid-in Exploration Exploration Compen- hensive
Shares Amount Cost Capital stage) stage) sation Loss Total
------- ------- -------- ---------- ------------ ------------ -------- ------- --------
000's A$000's A$000's A$000's A$000's A$000's A$000's A$000's A$000's
Net unrealized loss on foreign
exchange - - - - - - - $(8) $(8)
Net (loss) - - - - $(1,328) - - - $(1,328)
---------------------------------------------------------------------------------------
Balance June 30, 2006 26,714 $3 $(20) $34,333 $(6,332) $(26,402) $- $(11) $1,571
Costs associated with sale of
normal and special warrants - - - $(5) - - - - $(5)
Amortization of 1,400,000 options
under 2004 stock option plan - - - $7 - - - - $7
Amortization of 4,650,000 options
under 2006 stock option plan - - - $35 - - - - $35
Net unrealized loss on foreign
exchange - - - - - - - $7 $7
Net (loss) - - - - $(832) - - - $(832)
---------------------------------------------------------------------------------------
Balance December 31, 2006 26,714 $3 $(20) $34,370 $(7,164) $(26,402) $- $(4) $783
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See Notes to Consolidated Financial Statements
7
GOLDEN RIVER RESOURCES CORPORATION AND SUBSIDIARIES
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
December 31, 2006
(1) Organisation
-----------------
Golden River Resources Corporation ("Golden River Resources"), formerly
Bay Resources Ltd, is incorporated in the State of Delaware. The principal
shareholders of Golden River Resources are companies associated with Mr JI
Gutnick and Mrs S Gutnick. These companies owned 77.48% of Golden River
Resources as of December 31, 2006. During fiscal 1998, Golden River 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, Golden River 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. On March 8, 2006,
shareholders approved the change of the Company's name to Golden River
Resources.
(2) Short-Term Advance - Affiliate
----------------------------------
During the six months ended December 31, 2006 the Company repaid
A$1,329 owing to Joseph Gutnick, President of Golden River Resources.
(3) Affiliate Transactions
---------------------------
Golden River Resources advances to and receives advances from various
affiliates. All advances between consolidated affiliates are eliminated on
consolidation.
Included in receivables at December 31, 2006 was A$112,374 due by AXIS,
an affiliated management company. At December 31, 2005 the Company owed AXIS
A$34,003. During the six months ended December 31, 2006 and 2005 AXIS advanced
Golden River Resources A$53,000 and A$577,500, respectively, provided services
in accordance with the service agreement of A$183,169 and A$187,192 respectively
and advanced/reimbursed AXIS A$362,000 and A$546,000 respectively for
outstanding amounts, including carried forward outstanding amounts and a short
term advance to assist with the payment of anticipated future costs incurred on
the behalf of the Company. During the six months ended December 31, 2005 AXIS
charged interest of A$18,366 at an interest rate of 9.35%. During the six months
ended December 31, 2006 the Company charged AXIS interest of A$6,992 at an
interest rate between 9.35% to 10.10%.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 ended December 31, 2005, Wilzed loaned the Company A$742,199 and
charged interest of A$36,893. The interest rate charged by Wilzed for the six
months ended December 31, 2005 was 9.35%. At December 31, 2005, the Company owed
Wilzed A$1,455,244. At December 31, 2006, there were no amounts owing to Wilzed
as they had been repaid in full during the twelve months ended June 30, 2006.
Interest expense incurred on loans and advances due to affiliated
entities approximated A$55,239 in the six months ended December 31, 2005 and
$nil in the six months ended December 31, 2006.
(4) Going Concern
------------------
The accompanying consolidated financial statements have been prepared
in conformity with generally accepted accounting principles, which contemplate
continuation of Golden River Resources as a going concern. Golden River
Resources is in the exploration stage, has sustained recurring losses which
raises substantial doubts as to its ability to continue as a going concern.
8
GOLDEN RIVER RESOURCES CORPORATION AND SUBSIDIARIES
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
December 31, 2006
(4) Going Concern (Cont'd)
---------------------------
In addition Golden River Resources has historically relied on loans and
advances from corporations affiliated with the President of Golden River
Resources. Based on discussions with these affiliate companies, Golden River
Resources believes this source of funding will continue to be available. Other
than the arrangements noted above, Golden River Resources has not confirmed any
other arrangement for ongoing funding. As a result Golden River 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.
The accumulated deficit of the Company from inception through December
31, 2006 amounted to A$33,566,000 of which A$7,164,000 has been accumulated from
July 2002, the date the Company entered the Exploration Stage, through December
31, 2006.
(5) Income Taxes
-----------------
Golden River Resources should have carried forward losses of
approximately US$22.6 million as of June 30, 2006 which will expire in the year
2007 through 2025. Golden River 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) Issue of Options under Stock Option Plan
---------------------------------------------
On January 1, 2006, the Company adopted revised SFAS No.123,
Share-Based payment, which addresses the accounting for share-based payment
transactions in which a company receives employee services in exchange for (a)
equity instruments of that company or (b) liabilities that are based on the fair
value of the company's equity instruments or that may be settled by the issuance
of such equity instruments. Because the Company had previously adopted the fair
value recognition provisions of SFAS No. 123, the revised standard did not have
a material impact on its financial statements.
Consistent with the provisions of APB No.25, the Company recorded the
fair value of stock option grants in stockholders equity. Under SFAS No.123R an
equity instrument is not considered to be issued until the instrument vests.
Accordingly, as provided in SFAS No.123R, effective July 1, 2005, the Company
has reversed A$198,000 representing the unamortized restricted stock
compensation included in stockholders equity, at June 30, 2005, for the unvested
portions of stock option grants awarded prior to the effective date of SFAS
No.123R.
The Company has accounted for all options issued based upon their fair
market value using either the Black Scholes or Binomial option pricing model.
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 vested immediately following shareholder
approval, 50,000 vested on September 30, 2005, 333,331 vested on July 27, 2005,
333,334 vested on January 27, 2006 and 333,335 vested on July 27, 2006. An
additional 500,000 options were not granted as the proposed recipient had
resigned prior to the date on which the options were issuable. The exercise
price of US$1.00 was derived from the issue price of common stock from the
placement of shares on September 30, 2004 and is considered by the Company's
Directors to be the fair value of the common stock. The options expire on
October 15, 2014.
The Company has calculated the fair value of the 1,400,000 options
using the Black Scholes valuation method using a fair value share price of
US$1.00, strike price of US$1.00, maturity period of 5 years 7 1/2 months, risk
free interest rate of 5.15% and volatility of 20%. This equates to a value of
US31.85
9
GOLDEN RIVER RESOURCES CORPORATION AND SUBSIDIARIES
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
December 31, 2006
(6) Issue of Options under Stock Option Plan (Cont'd)
------------------------------------------------------
cents per option. The total value of the options equates to A$575,100
(US$445,900) and is being amortized over the vesting period. For the six months
ended December 31, 2006, the amortization amounted to A$6,771. At December 31,
2006, the options were fully vested.
During the three months ended September 30, 2005, 50,000 options lapsed
when Mr P. Ehrlich resigned as a Director and during the three months ended
September 30, 2006 250,000 options lapsed when Mr P. Althaus resigned as Chief
Operating Officer.
A summary of the options outstanding and exercisable at December 31,
2006 are as follows:
Outstanding Exercisable
Number of options 1,100,000 1,100,000
Exercise price US$1.00 US$1.00
Expiration date October 15, 2014 October 15, 2014
On October 19, 2006, the Directors of the Company agreed to offer a
further 4,650,000 options under the Stock Option Plan. The options have no issue
price, an exercise price of US30.84 cents, and a latest exercise date of October
19, 2016. The options vest 1/3 on October 19, 2007 ("T1"), 1/3 on October 19,
2008 ("T2") and 1/3 on October 19, 2009 ("T3"). The Company obtained an external
valuation on the options from an unrelated third party..
The Company has calculated the fair value of the 4,650,000 options
using the binomial option pricing model using a fair value share price of
US$0.166, exercise price of US30.84 cents, expected life T1 - 5 years 6 months,
T2 - 6 years, T3 - 6 years 6 months, risk-free interest rate of 4.75% and
volatility of 90%. The total value of the options equates to A$696,976
(US$550,100) and is being amortized over the vesting periods. For the six months
ended December 31, 2006, the amortization amounted to A$35,814. At December 31,
2006, the unamortized deferred compensation related to these 4,650,000 options
amounted to A$494,628.
When aggregated with the amortization of the options issued in October
2004, for the six months ended December 31, 2006, the total amortization
amounted to $42,585.
A summary of the options outstanding and exercisable at December 31,
2006 are as follows:
Outstanding Exercisable
Number of options 4,650,000 0
Exercise price US$0.308 US$0.308
Expiration date October 19, 2016 October 19, 2016
10
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, 2005 A$1.00 = US$.7301
6 months ended December 31, 2006 A$1.00 = US$.7893
6 months ended December 31, 2005 A$1.00 = CDN$.8513
6 months ended December 31, 2006 A$1.00 = CDN$.9207
RESULTS OF OPERATION
Three Months Ended December 31, 2006 vs. Three Months Ended December 31, 2005.
Revenue increased from A$nil in the three months ended December 31,
2005 to A$4,073 in the three months ended December 31, 2006. The increase in
revenue is a result of interest earned on monies owed to the Company by AXIS
A$3,529 and from the monies held in bank accounts A$528.
Costs and expenses decreased from A$370,000 in the three months ended
December 31, 2005 to A$247,000 in the three months ended December 31, 2006. The
Company's financial statements are prepared in Australian dollars (A$). 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 the three months
ended December 31, 2006 to the three months ended December 31, 2005 does not
always present a true comparison.
The decrease in expenses is a net result of:
a) a decrease in interest expense (net) from A$37,009 for the
three months ended December 31, 2005 to A$nil for the three
months ended December 31, 2006. For the three months ended
December 31, 2006, the Company had no interest bearing
liabilities as they had been repaid in full. AXIS provides
management and geological services to the Company pursuant to
a Service Deed dated November 25, 1988. AXIS charged A$10,460
in interest on outstanding amounts at a rate of 9.35% for the
three months to December 31, 2005, Wilzed charged A$20,039 in
interest and A$8,000 general interest was charged on
outstanding accounts payable liabilities.
b) an increase in legal, accounting and professional expense from
A$24,000 for the three months ended December 31, 2005 to
A$55,000 for the three months ended December 31, 2006
primarily as a result of additional work in reviewing
agreements for which there was no comparable amount in the
three months ended December 31, 2005.
c) a decrease in administrative costs including salaries from
A$164,000 in the three months ended December 31, 2005 to
A$106,000 in the three months ended December 31, 2006,
primarily as a result of reduced administrative salaries and
costs following the resignation of the Chief Operating
Officer.
d) a decrease in the exploration expenditure expense from
A$87,000 for the three months ended December 31, 2005 to
A$50,000 for the three months ended December 31, 2006
primarily as a result of decreased exploration activity. The
cost for the three months ended December 31, 2006 represents
the field and sampling program undertaken at the Company's
exploration properties within the Slave Craton in Nunavut,
Canada and the cost of the Vice President Exploration and
associated costs. No field exploration was undertaken during
the 2005 field season due to the high level of field
exploration in the 2004 field season and limited funding.
During this period, exploration expenditure related to the
cost of the Vice President Exploration and associated costs.
11
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION (Cont'd)
Three Months Ended December 31, 2006 vs. Three Months Ended December 31, 2005
Cont'd)
e) a decrease in stock based compensation from A$58,000 for the
three months ended December 31, 2005 to A$36,000 for the three
months ended December 31, 2006. Following shareholder approval
on January 27, 2005 the Company issued 1,400,000 options
pursuant to the 2004 Stock Option Plan.
Of the total 1,400,000 options issued, 350,000 vested
immediately following shareholder approval, 50,000 vested on September
30, 2005, 333,331 vested on July 27, 2005, 333,334 vested on January
27, 2006 and the balance of 333,335 vested on July 27, 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 has calculated the fair value of the 1,400,000 options
issued in January 2005 using the Black Scholes valuation method using a
share price of US$1.00, strike price of US$1.00, maturity period of 5
years 7 1/2 months, risk free interest rate of 5.15% and volatility of
20%. This equates to a value of US31.85 cents per option or a total of
A$575,100 (US$445,900). Of this amount, A$6,771 has been amortized and
charged to operations in the December 2006 quarter.
A summary of the 2004 options outstanding and exercisable at
December 31, 2006 are as follows:
Outstanding Exercisable
Number of options 1,100,000 1,100,000
Exercise price US$1.00 US$1.00
Expiration date October 15, 2014 October 15, 2014
On October 19, 2006, the Directors of the Company agreed to
offer a further 4,650,000 options under the Stock Option Plan. The
options have no issue price, an exercise price of US30.84 cents, and a
latest exercise date of October 19, 2016. The options vest 1/3 on
October 19, 2007 ("T1"), 1/3 on October 19, 2008 ("T2") and 1/3 on
October 19, 2009 ("T3"). The Company obtained an external valuation on
the options for the purpose of determining the amortization of the
options.
The Company has calculated the fair value of the 4,650,000
options using the binomial option pricing model using a share price of
US$0.166, exercise price of US30.84 cents, expected life T1 - 5 years 6
months, T2 - 6 years, T3 - 6 years 6 months, risk-free interest rate of
4.75%, volatility of 90%. The total value of the options equates to
A$696,976 (US$550,100) and is being amortized over the vesting periods.
For the six months ended December 31, 2006, the amortization amounted
to $35,814.
When aggregated with the amortization of the options issued in
October 2004, for the six months ended December 31, 2006, the total
amortization amounted to $42,585.
A summary of the 2006 options outstanding and exercisable at
December 31, 2006 are as follows :
Outstanding Exercisable
Number of options 4,650,000 0
Exercise price US$0.308 US$0.308
Expiration date October 19, 2016 October 19, 2016
As a result of the foregoing, the loss from operations decreased from
A$370,000 for the three months ended December 31, 2005 to A$243,000 for the
three months ended December 31, 2006.
12
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION (Cont'd)
Six Months Ended December 31, 2006 vs. Six Months Ended December 31, 2005.
The net loss was A$288,000 for the three months ended December 31, 2006
compared to a net loss of A$386,000 for the three months ended December 31,
2005.
Revenue increased from A$nil in the six months ended December 31, 2005
to A$9,401 in the six months ended December 31, 2006. The increase in revenue is
a result of interest earned on monies owed to the Company by AXIS (A$6,992) and
from the monies held in bank accounts A$2,409.
Costs and expenses increased from A$678,000 in the six months December
31, 2005 to A$780,000 in the six months ended December 31, 2006. The Company's
financial statements are prepared in Australian dollars (A$). 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 the six months
December 31 2006 to the six months December 31, 2005 does not always present a
true comparison.
The increase in expenses is a net result of:
a) a decrease in interest expense (net) from A$63,000 for the six
months ended December 31, 2005 to A$nil for the six months
ended December 31, 2006. For the six months ended December 31,
2006, the Company had no interest bearing liabilities as they
had been repaid in full. AXIS provides management and
geological services to the Company pursuant to a Service Deed
dated November 25, 1988. AXIS charged A$18,366 in interest on
outstanding amounts at a rate of 9.35% for the six months to
December 31, 2005, Wilzed charged A$36,873 in interest and
A$8,000 general interest was charged on outstanding accounts
payable liabilities.
b) an increase in legal, accounting and professional expense from
A$39,000 for the six months ended December 31, 2005 to
A$78,000 for the six months ended December 31, 2006. An
increase in share register activity increased the fee for
maintenance of the records by the external share registrar,
and legal expenses for reviewing agreements.
c) a decrease in administrative costs including salaries from
A$315,000 in the six months ended December 31, 2005 to
A$235,000 in the six months ended December 31, 2006. In the
six month period to December 31, 2005, the Company employed a
Chief Operating Officer and the costs of his salary and
operating costs were treated as administrative expenses. The
Chief Operating officer resigned in April 2006 and this
resulted in a reduction in administrative costs as the Company
did not have to pay the salary and operating costs in the six
months ended December 31, 2006.
d) an increase in the exploration expenditure expense from
A$125,000 for the six months ended December 31, 2005 to
A$424,000 for the six months ended December 31, 2006. The cost
for the six months ended December 31, 2006 represents the
field and sampling program undertaken of the Company's
exploration properties within the Slave Craton in Nunavut,
Canada. No field exploration was completed during the six
months ended December 31,2005 due to the high level of field
exploration in 2004 and limited funding.
e) a decrease in stock based compensation from A$136,000 for the
six months ended December 31, 2005 to A$43,000 for the six
months ended December 31, 2006. Following shareholder approval
on January 27, 2005 the Company issued 1,400,000 options
pursuant to the 2004 Stock Option Plan. Of the total 1,400,000
options issued, 350,000 vested immediately following
shareholder approval, 50,000 vested on March 31, 2005, 333,331
vested on July 27, 2005, 333,334 vested on January 27, 2006
and the balance of 333,335 vested on July 27, 2006. An
additional 500,000 options were not granted as the proposed
recipient resigned prior to the date on which the options were
issuable. The exercise price of US$1.00 was derived from the
issue price of common stock from the placement of shares on
stock.
The Company has calculated the fair value of the 1,400,000
options issued in January 2005 using the Black Scholes valuation method
using a share price of US$1.00, strike price of US$1.00, maturity
period of 5 years 7 1/2 months, risk free interest rate of 5.15% and
volatility of 20%. This equates to a value of US31.85 cents per option
or a total of A$575,100 (US$445,900).
13
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION (Cont'd)
Six Months Ended December 31, 2006 vs. Six Months Ended December 31, 2005
(Cont'd)
Of this amount, A$6,771 has been amortized and charged to operations
for the six month period to December 31, 2006.
A summary of the 2004 options outstanding and exercisable at
December 31, 2006 are as follows:
Outstanding Exercisable
Number of options 1,100,000 1,100,000
Exercise price US$1.00 US$1.00
Expiration date October 15, 2014 October 15, 2014
On October 19, 2006, the Directors of the Company agreed to
offer a further 4,650,000 options under the Stock Option Plan. The
options have no issue price, an exercise price of US30.84 cents, and a
latest exercise date of October 19, 2016. The options vest 1/3 on
October 19, 2007 ("T1"), 1/3 on October 19, 2008 ("T2") and 1/3 on
October 19, 2009 ("T3"). The Company obtained an external valuation on
the options for the purpose of determining the amortization of the
options.
The Company has calculated the fair value of the 4,650,000
options using the binomial option pricing model using a share price of
US$0.166, exercise price of US30.84 cents, expected life T1 - 5 years 6
months, T2 - 6 years, T3 - 6 years 6 months, risk-free interest rate of
4.75%, volatility of 90% and 20% discount on share price. The total
value of the options equates to A$696,976 (US$550,100) and is being
amortized over the vesting periods. For the six months ended December
31, 2006, the amortization amounted to $35,814.
When aggregated with the amortization of the options issued in
October 2004, for the six months ended December 31, 2006, the total
amortization amounted to $42,585.
A summary of the 2006 options outstanding and exercisable at
December 31, 2006 are as follows:
Outstanding Exercisable
Number of options 4,650,000 -
Exercise price US$0.308 -
Expiration date October 19, 2016 -
As a result of the foregoing, the loss from operations increased from
A$678,000 for the six months ended December 31, 2005 to A$771,000 for the six
months ended December 31, 2006.
The net loss was A$832,000 for the six months ended December 31, 2006
compared to a net loss of A$701,000 for the six months ended December 31, 2005.
Liquidity and Capital Resources
For the six months ended December 31, 2006, net cash used in operating
activities was A$1,188,000 primarily consisting of the net loss of A$832,000; an
increase in receivables of A$121,000 and a decrease in accounts payable and
accrued expenses of A$342,000.
Effective as of June 9, 2006, Golden River Resources, entered into
a Subscription Agreement with RAB Special Situations Fund (Master) Limited
("RAB") pursuant to which the Company issued to RAB in a private placement
transaction (the "Private Placement") for an aggregate purchase price of
A$2,000,000 (US$1,542,000): (i)10,000,000 special warrants (the "Special
Warrants"), each of which is
14
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION (Cont'd)
Liquidity and Capital Resources (Cont'd)
exercisable at any time to acquire, without additional consideration, one (1)
share (the "Special Warrant Shares") of Common Stock, US$0.001 par value
("Common Stock"), of the Company, and (ii) warrants (the
"Warrants") for the purchase of 20,000,000 shares of Common Stock, US$0.001 par
value (the "Warrant Shares"), at an exercise price of A$0.20 (US$0.1542) to be
exercisable until April 30, 2011.
The Company agreed to prepare and file with the Securities and Exchange
Commission a registration statement covering the resale of the shares of Common
Stock issuable upon exercise of the Special Warrants and the Warrants, which
registration statement was declared effective on October 17, 2006.
The Company is obligated to keep such registration statement effective
until the earlier of (i) the date that all of the Registrable Securities have
been sold pursuant to such registration statement, (ii) all Registrable
Securities have been otherwise transferred to persons who may trade such shares
without restriction under the Securities Act, and the Company has delivered a
new certificate or other evidence of ownership for such securities not bearing a
restrictive legend, or (iii) all Registrable Securities may be sold at any time,
without volume or manner of sale limitations pursuant to Rule 144(k) or any
similar provision then in effect under the Securities Act; or (iv) 2 years from
the effective date.
As of December 31, 2006 the Company had short-term obligations of
A$245,000 comprising accounts payable and accrued expenses.
We have A$821,000 in cash at December 31, 2006.
During fiscal 2004 and 2005, we undertook a field exploration program
on our Committee Bay and Slave Properties. In relation to the Committee Bay
Properties, this was more than the minimum required expenditure and as a result,
we do not have a legal obligation to undertake further exploration on those
properties during their life. However our properties are prospective for gold
and other minerals. We undertook further exploration in August 2006 on the Slave
Properties and to date we have spent A$374,000 on such exploration activities in
fiscal 2007. We are currently investigating capital raising opportunities which
may be in the form of either equity or debt, to provide funding for working
capital purposes and future exploration programs. There can be no assurance that
such a capital raising will be successful, or that even if an offer of financing
is received by the Company, it is on terms acceptable to the Company.
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, movements in the foreign exchange rate and the availability of
additional financing for the Company. 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
15
Item 3. CONTROLS AND PROCEDURES (Cont'd)
Act Rule 13a-15 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 required to be disclosed by
the Company in this report is recorded, processed, summarized and reported 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.
16
PART II
OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Not Applicable
Item 2. UNREGISTERED SALES OF EQUITY 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
(a) Exhibit No. Description
---------- -----------
3.1 Amendment to Certificate of Incorporation of
the Company (Incorporated by reference to
Exhibit 3.7 to the Registrant's Registration
Statement on Form SB-2, SEC file no.
333-135633)
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
17
(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 thereunto duly authorized.
Golden River Resources Corporation
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 12, 2007
18
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
3.1 Amendment to Certificate of Incorporation of
the Company (Incorporated by reference to
Exhibit 3.7 to the Registrant's Registration
Statement on Form SB-2, SEC file no.
333-135633)
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
19