FAIRCHILD INTERNATIONAL CORP (FRCD.OB)
Quarterly Report (SEC form 10QSB)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion of the financial condition and results of operations for Fairchild International Corporation (the "Company") should be read in conjunction
with the accompanying financial statements and related footnotes.
GENERAL AND PLAN OF OPERATION
The Company had been engaged in the pharmaceutical business, having entered into a licensing agreement to acquire an exclusive license to make, use and sell
pharmaceutical products and processes relating to arthritis and dermal wrinkles. As of February 28, 2001, the licensing agreement was terminated and the Company
was searching for another business opportunity.
As of April 12, 2001, the Company entered into an agreement with Hunter Exploration Group to acquire a 100% interest in certain lands encompassed by a Special
Exploration Permit, located in Northern Manitoba, Canada. The Company is to pay a total of US$30,000 in cash and issue 400,000 shares of its common stock. In
addition, the Company is responsible for a deposit with the Province of Manitoba for the exploration permit and fulfilling work commitment obligations on the
property totaling Cdn$500,000 through May 1, 2004. The property is subject to a 2% net smelter royalty and a 2% gross overriding royalty on diamond production.
On June 5, 2001, the Company entered into an initial option agreement with Indicator Explorations Ltd. for the right to acquire a 100% interest in the Exploration
Permit 182 and Special Exploration Permits 99-6, 2001-4 and 2001-9 located in Northeast Manitoba, Canada. In exchange for the initial option, the Company paid
Cdn$2,500 and issued 400,000 shares of common stock. This option will expire on August 15, 2001. If the Company exercises this option, it will be required to enter
into a formal agreement, pay a significant amount of money to Indicator and agree to undertake substantial exploration activities. The Company does not have sufficient
funds at this time to exercise this option and fulfill the required obligations.
On June 15, 2001, the Company entered into a participation agreement with Brothers Oil and Gas Inc. and Dasher Energy Corp. to acquire a 5% working interest in an
oil and gas prospect called the Coalinga Nose Property. The property is located in Fresno County, California, and consists of approximately 8,700 acres. In exchange
for this interest, the Company paid Brothers US$50,000 and Dasher US$15,000. The Company also agreed to issue 300,000 shares of common stock to Dasher, and
pay 100% of the initial test well to earn a 37% net revenue interest on the initial well, and a 28.125% net revenue interest on all subsequent wells.
To date, the Company has not generated any revenues from mineral exploration, product sales, royalties or license fees. The Company plans to conduct exploration
activities to the extent that it can obtain the necessary cash to do so.
RESULTS OF OPERATIONS
The Company continues to incur losses from operations. The net loss for the six months ended June 30, 2001 was $317,009, as compared to $39,845 during the
comparable six-month period in 2000. The increase in the net loss is due primarily to the increase in the level of the Company's operations. Promotion and travel
expenses were $142,483, as compared to $6,000 for the prior period. Also, in 2001, the Company expended $71,662 and $65,000, respectively, for the acquisition of
mineral interests and oil and gas interests. Professional fees increased from $6,793 in 2000 to $21,556 in 2001.
This most recent loss has increased the deficit accumulated since the inception of the Company to $1,336,686 at June 30, 2001.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the primary source of funding for the Company's operations has been the private sale of its securities and loans from related parties. Through June 30,
2001, the Company has sold stock for cash of $711,911 and borrowed $238,850 from related parties.
At June 30, 2001, the Company's working capital deficiency was $269,094, as compared to a deficiency of $124,908 at December 31, 2000. The decrease in working
capital was due primarily to the loss for the six-month period.
The Company will be dependent upon proceeds from the sale of securities for the near future. Further, substantial funds will be required to conduct exploration
activities before the Company can determine if its oil and gas and mineral property interests have sufficient potential for development. There is no assurance that the
Company will be able to obtain such additional funds on favorable terms, if at all. The Company's inability to raise sufficient funds could cause it to lose its property
interests and any work conducted and/or payments made on the properties.
GOING CONCERN
The notes to the financial statements include an explanatory paragraph relating to the uncertainty of the Company's ability to continue as a going concern. The
Company has suffered losses from operations, and requires additional financing. Ultimately, the Company needs to generate revenues and successfully attain profitable
operations. These factors raise substantial doubt about the Company's ability to continue as a going concern. There can be no assurance that it will be able to acquire
the oil and gas and mineral property interests, carry out adequate exploration activities, or engage in development activities, if warranted. Even if the Company were able
to ever develop its property interests, there is no assurance that it would be able to attain profitable operations.
FORWARD-LOOKING STATEMENTS
Certain statements in this Quarterly Report on Form 10-QSB and the Company's Annual Report on Form 10-KSB for its fiscal year ended December 31, 2000, as
well as statements made by the Company in periodic press releases, oral statements made by the Company's officials to analysts and shareholders in the course of
presentations about the Company, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause the actual results, performance or achievements of the
Company to be materially different from any future results, performance or achievements expressed or implied by the forward looking statements. Such factors
include, among other things, (1) general economic and business conditions; (2) interest rate changes; (3) the relative stability of the debt and equity markets; (4)
government regulations particularly those related to the natural resources industries; (5) required accounting changes; (6) disputes or claims regarding the Company's
property interests; and (7) other factors over which the Company has little or no control. |
