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Nevada Chemicals 10-Q 2007

Documents found in this filing:

  1. 10-Q
  2. Ex-31.1
  3. Ex-31.2
  4. Ex-32.1
  5. Ex-32.2
  6. Ex-99.1
  7. Ex-99.1

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q

(Mark One)

 

 

 

 

 

 

x

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

 

 

For the quarterly period ended March 31, 2007

 

 

 

 

o

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

 

For the transition period from                       to

 

Commission File No. 0-10634


Nevada Chemicals, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Utah

 

87-0351702

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)

 

9149 So. Monroe Plaza Way, Suite B

Sandy, Utah 84070

(Address of principal executive offices, zip code)

 

(801) 984-0228

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x  No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Large Accelerated Filer o   Accelerated Filer o   Non-accelerated Filer x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o  No x

The number of shares outstanding of the registrant’s par value $0.001 Common Stock as of May 08, 2007 was 6,983,172.

 




Nevada Chemicals, Inc.
Form 10-Q
Table of Contents

Part I

 

Financial Information

 

 

 

 

 

 

 

Item 1.

 

Financial Statements

 

 

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets as of March 31, 2007 (Unaudited) and December 31, 2006

 

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Income for the Three Months Ended March 31, 2007 and March 31, 2006 (Unaudited)

 

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2007 and March 31, 2006 (Unaudited)

 

 

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

 

 

 

 

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

 

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosure About Market Risk

 

 

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

 

 

 

 

 

 

Part II

 

Other Information

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

 

 

 

 

 

 

Item 1A.

 

Risk Factors

 

 

 

 

 

 

 

Item 2.

 

Changes in Securities, Use of Proceeds and Issuer Repurchases of Equity Securities

 

 

 

 

 

 

 

Item 6.

 

Exhibits

 

 

 

 

 

 

 

Signatures

 

 

 

 

 

2




PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

NEVADA CHEMICALS, INC.
Condensed Consolidated Balance Sheets

 

 

March 31, 2007

 

December 31, 2006

 

 

 

(Unaudited)

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

16,320,000

 

$

15,875,000

 

Receivables

 

66,000

 

57,000

 

Income tax deposits

 

 

239,000

 

Prepaid expenses

 

51,000

 

44,000

 

 

 

 

 

 

 

Total current assets

 

16,437,000

 

16,215,000

 

 

 

 

 

 

 

Investment in joint venture

 

9,120,000

 

9,193,000

 

Other assets

 

255,000

 

254,000

 

 

 

 

 

 

 

 

 

$

25,812,000

 

$

25,662,000

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

Current liabilities – accounts payable and accrued expenses

 

$

1,619,000

 

$

1,572,000

 

 

 

 

 

 

 

Deferred income taxes

 

865,000

 

980,000

 

 

 

 

 

 

 

Total liabilities

 

2,484,000

 

2,552,000

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Common stock

 

7,000

 

7,000

 

Capital in excess of par value

 

4,286,000

 

4,286,000

 

Retained earnings

 

19,035,000

 

18,817,000

 

 

 

 

 

 

 

Total stockholders’ equity

 

23,328,000

 

23,110,000

 

 

 

 

 

 

 

 

 

$

25,812,000

 

$

25,662,000

 

 

See accompanying notes to condensed consolidated financial statements

3




NEVADA CHEMICALS, INC.
Condensed Consolidated Statements of Income

(Unaudited)

 

 

Three Months Ended March 31,

 

 

 

2007

 

2006

 

 

 

 

 

 

 

Revenues and equity in earnings:

 

 

 

 

 

Management fee from joint venture

 

$

169,000

 

$

198,000

 

Equity in earnings of joint venture

 

927,000

 

1,570,000

 

 

 

 

 

 

 

Total

 

1,096,000

 

1,768,000

 

 

 

 

 

 

 

General and administrative expenses

 

286,000

 

311,000

 

 

 

 

 

 

 

Operating income

 

810,000

 

1,457,000

 

 

 

 

 

 

 

Investment and other income

 

152,000

 

150,000

 

 

 

 

 

 

 

Income before provision for income taxes

 

962,000

 

1,607,000

 

 

 

 

 

 

 

Provision for income taxes

 

185,000

 

529,000

 

 

 

 

 

 

 

Net income

 

$

777,000

 

$

1,078,000

 

 

 

 

 

 

 

Earnings per common share:

 

 

 

 

 

Basic

 

$

0.11

 

$

0.16

 

 

 

 

 

 

 

Diluted

 

$

0.11

 

$

0.15

 

 

 

 

 

 

 

Weighted average number of shares outstanding:

 

 

 

 

 

Basic

 

6,983,172

 

6,901,000

 

 

 

 

 

 

 

Diluted

 

6,999,548

 

6,978,000

 

 

 

 

 

 

 

Dividends declared per common share

 

$

0.08

 

$

0.07

 

 

See accompanying notes to condensed consolidated financial statements

4




NEVADA CHEMICALS, INC.
Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

 

Three Months Ended March 31,

 

 

 

2007

 

2006

 

 

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

Net income

 

$

777,000

 

$

1,078,000

 

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

 

 

 

 

 

Depreciation expense

 

1,000

 

1,000

 

Equity in earnings of joint venture

 

(927,000

)

(1,570,000

)

Deferred income taxes

 

(115,000

)

(242,000

)

Changes in operating assets and liabilities:

 

 

 

 

 

Receivables

 

(9,000

)

(9,000

)

Prepaid expenses

 

(7,000

)

(6,000

)

Other assets

 

 

 

Accounts payable and accrued expenses

 

286,000

 

675,000

 

 

 

 

 

 

 

Net cash provided by (used in) operating activities

 

4,000

 

(73,000

)

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Distributions from joint venture

 

1,000,000

 

1,000,000

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Payment of dividends

 

(559,000

)

(483,000

)

 

 

 

 

 

 

Net increase in cash

 

445,000

 

444,000

 

 

 

 

 

 

 

Cash and cash equivalents, beginning of period

 

15,875,000

 

16,784,000

 

 

 

 

 

 

 

Cash and cash equivalents, end of period

 

$

16,320,000

 

$

17,228,000

 

 

See accompanying notes to condensed consolidated financial statements

5




NEVADA CHEMICALS, INC.
Notes to Condensed Consolidated Financial Statements

(Unaudited)

NOTE 1.  ORGANIZATION AND BASIS OF PRESENTATION

Nevada Chemicals, Inc. (the “Company”), through its ownership in Cyanco Company (“Cyanco”), supplies chemicals to the gold mining industry in the western United States.  Winnemucca Chemicals, Inc. (“Winnemucca Chemicals”), a wholly owned subsidiary of the Company, has a fifty percent interest in Cyanco, a non-corporate joint venture engaged in the manufacture and sale of liquid sodium cyanide.  The Company accounts for its investment in Cyanco using the equity method of accounting with the book value of the investment recorded at an amount that approximates the balance of the Company’s capital account as reported in the financial statements of Cyanco.  Summarized financial information for Cyanco is included in Note 3.

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) on a basis consistent with the Company’s audited annual financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial information set forth therein. Certain information and footnote disclosures normally included in financial statements prepared in according with accounting principles generally accepted in the United States have been condensed or omitted pursuant to SEC rules and regulations, although the Company believes that the following disclosures, when read in conjunction with the audited annual financial statements and the notes thereto included in the Company’s most recent annual report on Form 10-K, are adequate to make the information presented not misleading. Operating results for the three months ended March 31, 2007 are not necessarily indicative of the operating results that may be expected for the year ending December 31, 2007.

NOTE 2.  SIGNIFICANT ACCOUNTING POLICIES

Cash and Cash Equivalents – The Company considers all investments purchased with original maturities of three or fewer months to be cash equivalents.  Cash equivalents were $15,699,000 and $15,606,000 as of March 31, 2007 and December 31, 2006, respectively.  Cash was $621,000 and $269,000 as of March 31, 2007 and December 31, 2006, respectively.  The Company has $200,000 of cash that is federally insured.  All remaining amounts of cash and cash equivalents exceed federally insured limits.

Deferred Income Taxes - As part of the process of preparing consolidated financial statements, the Company is required to estimate income taxes in each of the jurisdictions in which it operates.  This process involves estimating the Company’s actual current income tax exposure together with assessing temporary differences resulting from differing treatment of items for income tax and financial accounting purposes.  These temporary differences result in deferred tax assets and liabilities, the net amount of which is included in the Company’s consolidated balance sheet.  When appropriate, the Company records a valuation allowance to reduce its deferred tax assets to the amount that the Company believes is more likely than not to be realized.  At March 31, 2007 the Company had reduced its deferred tax assets by recording a valuation allowance of $479,000 (see Note 5).

Revenue Recognition – The Company’s revenues and equity in earnings consist mainly of earnings from Cyanco based on the equity method of accounting and management fees from Cyanco.  Equity in net earnings of Cyanco is based on the Company’s 50% ownership in Cyanco, and is calculated and recognized at the end of each month.  Management fee income from Cyanco is recognized monthly based on the Cyanco joint venture agreement.

Earnings per Common Share – The computation of basic earnings per common share is based on the weighted average number of shares outstanding during the period.  The computation of diluted earnings per common share is based on the weighted average number of shares outstanding during the period plus the weighted average common stock equivalents which would arise from the exercise of stock options outstanding using the treasury stock method and the average market price per share during the period.

6




The shares used in the computation of the Company’s basic and diluted earnings per share are reconciled as follows:

 

 

Three Months Ended March 31

 

 

 

2007

 

2006

 

Weighted average number of shares outstanding – basic

 

6,983,172

 

6,901,000

 

Dilutive effect of stock options

 

16,376

 

77,000

 

 

 

 

 

 

 

Weighted average number of shares outstanding – diluted

 

6,999,548

 

6,978,000

 

 

Stock-Based Compensation – On January 1, 2006, the Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 123(R), Share-Based Payment.  SFAS No. 123(R) replaces SFAS No. 123, Accounting for Stock-Based Compensation, and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees.  This statement requires the Company to measure the compensation cost of stock options and other stock-based compensation to employees and directors at fair value at the grant date and recognize compensation expense over the requisite service period for awards expected to vest.  The fair value of stock options is computed using the Black-Scholes valuation model.  No stock options were granted to employees or directors during the three months ended March 31, 2007, resulting in no impact on the consolidated financial statements of the Company for that period.

Recent Accounting Pronouncements – The FASB has issued SFAS Statement No. 157, Fair Value Measurements.  This new standard provides enhanced guidance for using fair value to measure assets and liabilities, and requires expanded information about the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value, and the effect of fair value measurements on earnings.  The standard applies whenever other standards require (or permit) assets or liabilities to be measured at fair value.  Under the new standard, fair value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the reporting entity transacts.  The standard clarifies the principle that fair value should be based on the assumptions market participants would use when pricing the asset or liability.  The new standard is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years.  Early adoption is permitted.  The Company anticipates adopting SFAS No. 157 on January 1, 2008, but is currently unable to determine the impact of the adoption of the standard on its consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities — Including an Amendment of FASB Statement No. 115.” SFAS No. 159 allows companies the choice to measure financial instruments and certain other items at fair value. This allows the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. The Statement is effective for fiscal years beginning after November 15, 2007. The Company is currently reviewing the potential impact, if any,  of SFAS No. 159 on our consolidated financial statements.

NOTE 3.  INVESTMENT IN JOINT VENTURE

Summarized financial information for Cyanco is as follows:

 

Three Months Ended March 31,

 

 

 

2007

 

2006

 

 

 

 

 

 

 

Revenues

 

$

11,251,000

 

$

13,195,000

 

Costs and expenses

 

9,396,000

 

10,055,000

 

Net income before taxes

 

1,855,000

 

3,140,000

 

Company’s equity in earnings

 

927,000

 

1,570,000

 

 

Cyanco reviews its long-lived assets, including customer relationships and other intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.  Cyanco assesses the recoverability of the long-lived assets by comparing the estimated undiscounted cash flows associated with the related asset or group of assets against their respective carrying amounts.

NOTE 4.  DIVIDENDS

In March 2007, the Company declared a cash dividend of $.08 per share on a total of 6,983,172 outstanding shares of record as of March 20, 2007, payable on April 10, 2007.  As of March 31, 2007, dividends payable of approximately $559,000 were included in accounts payable and accrued expenses in the accompanying condensed consolidated balance sheet.

7




In January 2007, the Company paid dividends of approximately $559,000, which were declared in December 2006.  In January 2006, the Company paid dividends of approximately $483,000, which were declared in December 2005.

NOTE 5.  INCOME TAXES

Adoption of Financial Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48)

Effective January 1, 2007, we adopted FIN 48. The validity of any tax position is a matter of tax law, and generally there is no controversy about recognizing the benefit of a tax position in a company’s financial statements. The tax law is, however, subject to varied interpretations, and whether a tax position will ultimately be sustained may be uncertain. Prior to January 1, 2007, the impact of an uncertain tax position, which did not create a difference between the financial statement basis and the tax basis of an asset or liability and that would have future tax consequences was included in our income tax provision if it was probable the position would be sustained upon audit. The benefit of any uncertain tax position that created a basis difference in an asset or liability was reflected in our tax provision if it was more likely than not that the position would be sustained upon audit. Prior to the adoption of FIN 48, we recognized interest expense based on our estimate of the ultimate outcome of the uncertain tax position. Under FIN 48, the impact of an uncertain tax position that is more likely than not of being sustained upon audit by the relevant taxing authority must be recognized at the largest amount that is more likely than not to be sustained. No portion of an uncertain tax position will be recognized if the position in the aggregate has less than a 50% likelihood of being sustained. Also, under FIN 48, interest expense is recognized on the full amount of the deferred benefit for the uncertain tax position.

The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. During the three months ended March 31, 2007, the Company recognized approximately $ 10,000 in interest and penalties.

The Company’s corporate income tax returns filed in Canada for the years ended December 31, 1995 through 2001 are under audit by the Canada Customs and Revenue Agency (“CCRA”).  This audit has been ongoing for the past five years without final resolution.  The first phase of the audit has been completed, and the Company has been assessed additional income taxes based on positions taken by CCRA on certain matters that differ from positions taken by the Company.

The Company, based on consultation with its professional tax advisors in Canada, believes that, in most instances, the facts and circumstances support the positions taken by the Company, and has filed with CCRA formal notices of objection for each year under audit, and the audit has progressed to the appeals level.  The timing of the completion of the appeals process is currently uncertain.

Certain of the Company’s United States corporate income tax returns are currently under audit by the IRS.  The IRS has taken the position that the Company owes additional income taxes, penalties and interest where the IRS has disagreed with certain tax positions taken by the Company.  During 2006 the Company has reviewed the position taken by the IRS and paid certain taxes for which it believes it has liability.  The Company is pursuing the internal appeal process at the IRS for those positions taken by the IRS with which the Company disagrees.  The ultimate outcome of the IRS audit and the impact of the final audit results on the consolidated financial statements of the Company cannot be determined at this time.

The Company believes that amounts accrued and included in accounts payable and accrued expenses at March 31, 2007 will be adequate for the resolution of the audits by CCRA and the IRS.  However, there can be no assurance that such costs will not ultimately exceed the current estimate.

Deferred tax assets (liabilities) are comprised of the following:

 

March 31, 
2007

 

December 31,
2006

 

 

 

 

 

 

 

Deferred tax assets:

 

 

 

 

 

Foreign income taxes and credit carryforwards

 

$

726,000

 

$

926,000

 

Accrued expenses

 

140,000

 

136,000

 

Stock based compensation

 

92,000

 

92,000

 

Other

 

31,000

 

31,000

 

Less valuation allowance

 

(479,000

)

(611,000

)

 

 

 

 

 

 

 

 

510,000

 

574,000

 

Deferred tax liabilities – depreciation and amortization

 

(1,375,000

)

(1,554,000

)

 

 

 

 

 

 

 

 

$

(865,000

)

$

(980,000

)

 

8




Due to uncertainties surrounding the realization of the benefit of certain foreign tax payments, the Company is currently unable to conclude that the realization of portions of the deferred tax assets meet the “more likely than not” criterion. Therefore, as of March 31, 2007, the Company recorded a valuation allowance of $479,000 relating to the foreign income tax payments and accruals.

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

The operations reported in the condensed consolidated statements of income for the three months ended March 31, 2007 and March 31, 2006 consist primarily of the Company’s proportionate share of the operating results from its 50% interest in Cyanco, a non-corporate joint venture engaged in the manufacture and sale of liquid sodium cyanide, management fee income from Cyanco, investment income earned on cash and cash equivalents and short-term investments, and corporate overhead, costs and expenses.  Since the Company does not own more than 50% of Cyanco, and has determined that other factors requiring consolidation do not exist, the financial statements of Cyanco are not consolidated with the financial statements of the Company.  Summarized financial information for Cyanco for the three months ended March 31, 2007 and March 31, 2006 is presented in Note 3 to the Company’s condensed consolidated financial statements.

Cyanco represents one of two sources of sodium cyanide for use in the mining industry in the western United States.  E.I. DuPont Nemours (“DuPont”) is presently the sole competitor of Cyanco in supplying sodium cyanide to the mining industry in the western United States.

Cyanco’s business is characterized by reliance on the mining industry, competitive demands, dependence on a relatively small number of customers, fluctuating market prices for energy and raw materials, and increases in the cost of labor.  The Company believes that the important competitive factors in the sodium cyanide market are service, quality and price.  Cyanco delivers product to its customers pursuant to supply contracts, which vary in length.  Cyanco must meet competitive demands in order for its customers to renew product supply contracts as they expire, and has been able to achieve results by being creative and service-oriented and offering competitive prices.

All of Cyanco’s sales occur within the western United States.  Since most of Cyanco’s cyanide customers are large mining companies, the number of companies it services is relatively small compared to those of a wholesale distribution or retail business.  Each large mining concern may have multiple operating properties within Cyanco’s operating region.  A loss of one or more of these customers could adversely affect future sales, and may have a material adverse effect on the Company’s results of operations.  Such a loss can occur either from the customer switching to another source or from the customer electing to close or suspend a mining operation.  With high or increasing gold prices, existing gold mining operations tend to expand and new or old mines are opened.  The reverse is true with falling gold prices.  During the first quarter, anticipated sales to a new mine were reduced due to metallurgical challenges at the new operation, and a separate mining operation ceased active mining but will continue its use of sodium cyanide in heap leach operations for some time.

Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires management to make judgments, estimates and assumptions that affect the reported amounts in the Company’s consolidated financial statements.  The Company’s significant accounting policies are summarized in Note 1 to the Company’s consolidated financial statements and the most critical of such policies are discussed below.

·                  Investment in Cyanco

·                  Accounting for Income Taxes

·                  Stock-Based Compensation

Investment in Cyanco – As previously discussed, the Company does not own more than 50% of Cyanco, and as a result, the financial statements of Cyanco are not consolidated with the financial statements of the Company.  The Company accounts for its investment in Cyanco using the equity method of accounting.  Equity in earnings of Cyanco is based on the Company’s 50% ownership in Cyanco and is calculated and recognized at the end of each month.  Management fees from Cyanco are recognized monthly and are calculated as a percentage of Cyanco revenues based on the joint venture agreement.

9




The determination of useful lives and depreciation and amortization methods utilized by Cyanco for its property and equipment and intangible assets are considered critical accounting estimates.  Cyanco management uses its judgment to estimate the useful lives of long-lived assets, taking into consideration historical experience, engineering estimates, industry information and other factors.  Inherent in these estimates of useful lives is the assumption that periodic maintenance will be performed and there will be an appropriate level of annual capital expenditures.  Without on-going capital improvements and maintenance, productivity and cost efficiency declines and the useful lives of assets would be shorter.

Cyanco reviews its long-lived assets, including customer relationships and other intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.  Cyanco assesses the recoverability of the long-lived assets by comparing the estimated undiscounted cash flows associated with the related asset or group of assets against their respective carrying amounts, using assumptions concerning the following factors:

·                  Contract price per pound of product delivered

·                  Projected number of pounds of product to be delivered

·                  Projected life of the contract, including reasonable assumptions for renewals beyond the initial contract period

·                  Projected costs of raw materials

·                  Projected reductions in cash flows for revenue sharing obligation

If the carrying amount of the asset exceeds the estimated undiscounted cash flows, the amount of impairment loss recorded in Cyanco’s statement of operations is calculated based on the excess of the carrying amount over the estimated fair value of those assets, calculated using the discounted cash flows expected during the remaining useful life of the asset.

Accounting for Income Taxes - As part of the process of preparing consolidated financial statements, the Company is required to estimate income taxes in each of the jurisdictions in which it operates.  This process involves estimating the Company’s actual current income tax exposure together with assessing temporary differences resulting from differing treatment of items for income tax and financial accounting purposes.  These temporary differences result in deferred tax assets and liabilities, the net amount of which is included in the Company’s consolidated balance sheet.  When appropriate, the Company records a valuation allowance to reduce its deferred tax assets to the amount that the Company believes is more likely than not to be realized.  Key assumptions used in estimating a valuation allowance include potential future taxable income, projected income tax rates, expiration dates of foreign and other tax credit carryforwards, anticipated results of tax audits, and ongoing prudent and feasible tax planning strategies.  At March 31, 2007 the Company had reduced its deferred tax assets by recording a valuation allowance of $479,000.  If the Company were to determine that it would be able to realize its deferred tax assets in the future in excess of the net recorded amount, an adjustment to reduce the valuation allowance would increase income in the period such determination was made.  Similarly, should the Company determine that it would not be able to realize all or part of its net deferred tax assets in the future, an adjustment to increase the valuation allowance would be charged to income in the period such determination was made.

Certain of the Company’s United States and Canadian income tax returns are currently under audit.  The ultimate outcome of these audits and the impact of the final audit results on the consolidated financial statements of the Company cannot be determined at this time.  The Company believes that amounts accrued and included in accounts payable and accrued expenses at March 31, 2007 will be adequate for the resolution of the audits.  However, there can be no assurance that such costs will not ultimately exceed the current estimate.  The Company reviews the accrued amount at each balance sheet date.  Any increase in the accrual or the final resolution of the amount due in excess of the accrual would reduce income in the period such determination is made.  Similarly, any decrease in the accrual or final determination that the amount due is less than the accrual would increase income in the period such determination is made.

Stock-Based Compensation - On January 1, 2006, the Company adopted SFAS No. 123(R), which requires the Company to measure the compensation cost of stock options and other stock-based awards to employees and directors at fair value at the grant date and recognize compensation expense over the requisite service period for awards expected to vest.  The fair value of stock options is computed using the Black-Scholes valuation model, which model utilizes inputs that are subject to change over time, including the volatility of the market price of the Company’s common stock, risk-free interest rates, requisite service periods, and assumptions made by the Company regarding the assumed life and vesting of stock options and stock-based awards.  As new options or stock-based awards are granted and vest, additional non-cash compensation expense will be recorded by the Company.

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Results of Operations

Equity in earnings of Cyanco decreased $643,000, or 41%, to $927,000 in the three months ended March 31, 2007 compared to $1,570,000 in the three months ended March 31, 2006.  Cyanco revenues decreased $1,944,000, or 15%, to $11,251,000 in the three months ended March 31, 2007 compared to $13,195,000 in the three months ended March 31, 2006.  The decrease in Cyanco revenues is due primarily to a decrease in product sales and the “lag effect” in our historical cost plus pricing agreements, which beneficially affected the prior year quarter.  Product sales volumes for the first quarter of 2007 were down 8% primarily due to one mining operations decision to cease operations at one facility, and a much slower than anticipated start up of a new replacement mining facility in the first quarter of 2007.  In addition, we experienced lower margins in 2007 as compared to the same period in 2006 as a result of the “lag effect” of its cost plus pricing arrangements.   Cyanco has the ability, under certain of its contracts, to pass on increases in the cost of raw materials to its customers and the obligation to pass on decreases.  However, price changes to Cyanco’s customers historically often lagged the changes in the cost of raw materials by two to four months.  As a result of dropping raw material prices in the first quarter of 2006, this “lag effect” resulted in Cyanco realizing a higher price per pound for sodium cyanide sold during the three months ended March 31, 2006 as compared to the same period in 2007.  This delay in pricing adjustments has been eliminated from most of Cyanco’s contracts and the agreements are now largely adjusted on a monthly basis.  Cyanco’s costs and expenses decreased $659,000, or 7%, to $9,396,000 in the three months ended March 31, 2007 compared to $10,055,000 in the three months ended March 31, 2006.  The decrease in operating costs in the current year resulted primarily from the lower volumes of product sold.  As a result, Cyanco’s net income before taxes (on a 100% basis) decreased $1,285,000, or 41%, to $1,855,000 during the three months ended March 31, 2007 compared to $3,140,000 in the three months ended March 31, 2006.

Management fee income from Cyanco decreased $29,000, or 15%, to $169,000 in the three months ended March 31, 2007 compared to $198,000 in the three months ended March 31, 2006, due to the decrease in Cyanco’s revenues as discussed above, upon which the management fee is computed.

Investment and other income increased $2,000, or 1%, to $152,000 in the three months ended March 31, 2007 compared to $150,000 in the three months ended March 31, 2006.  This increase is due primarily to an increase in the average balance of cash and cash equivalents during the period and to more favorable rates realized during the current year.

General and administrative expenses decreased $25,000, or 8%, to $286,000 in the three months ended March 31, 2007 compared to $311,000 in the three months ended March 31, 2006.  This decrease is due to primarily to decreases in professional fees and other expenses related to income tax audits, and the Company’s dispute with the Cyanco joint venture partner.

The Company’s corporate income tax returns filed in Canada for the years ended December 31, 1995 through 2001 are under audit by the Canada Customs and Revenue Agency (“CCRA”).  This audit has been ongoing for the past five years without final resolution.  The first phase of the audit has been completed, and the Company has been assessed additional income taxes based on positions taken by CCRA on certain matters that differ from positions taken by the Company.

The Company, based on consultation with its professional tax advisors in Canada, believes that, in most instances, the facts and circumstances support the positions taken by the Company, and has filed with CCRA formal notices of objection for each year under audit, and the audit has progressed to the appeals level.  The timing of the appeals process is currently uncertain.

Certain of the Company’s United States corporate income tax returns are currently under audit by the IRS.  The IRS has taken the position that the Company owes additional income taxes, penalties and interest where the IRS has disagreed with certain tax positions taken by the Company.  The Company has reviewed the position taken by the IRS and paid the taxes for which it believes it may be liable.  The Company anticipates pursuing the internal review process at the IRS for those positions taken by the IRS with which the Company does not agree.  The ultimate outcome of the IRS audit and the impact of the final audit results on the consolidated financial statements of the Company cannot be determined at this time.

The results of operations for the three months March 31, 2007 have been positively impacted by the Company adjusting its estimates of the amount of taxes, penalties and interest that will be due in Canada related to the ongoing audit of the Company’s Canadian tax returns (see Note 5).  As a result, the provision for income taxes reported in the Company’s condensed consolidated statements of income for the three months March 31, 2007 is substantially lower than amounts which would be computed by applying the statutory federal income tax rate to income before provision for income taxes, resulting in higher net income.  The Company believes that amounts accrued and included in accounts payable and accrued expenses at March 31, 2007 will be adequate for the resolution of the audits by CCRA and the IRS.  However, there can be no assurance that such costs will not ultimately exceed the current estimate.

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Liquidity and Capital Resources

At March 31, 2007, the liabilities of the Company consisted of current liabilities of $1,619,000 and deferred income taxes of $865,000.  Current liabilities consisted of trade accounts payable of $41,000, dividends payable of $559,000 and accrued expenses (comprised primarily of accrued income taxes) of $1,019,000.  These current liabilities compare favorably to total current assets of $16,437,000 at March 31, 2007.  Current assets were comprised primarily of cash and cash equivalents of $16,320,000.

The Company’s current strategy is to invest cash in excess of short-term operating needs in highly liquid, variable interest rate investments with maturities of 90 days or less.  The Board of Directors of the Company is currently evaluating alternative uses for the cash of the Company, including optimizing short-term investment results without exposing the Company to high levels of market risk, diversification of the Company’s business, further investment in Cyanco, the payment of dividends to shareholders and other strategies.

Net cash provided in operating activities for the three months ended March 31, 2007 was $4,000 compared to net cash used by operating activities of $(73,000) for the three months ended March 31, 2006.  This increase in net cash provided in operations is due primarily to the decrease in accounts payable and accrued expenses.  Because the Company accounts for its investment in Cyanco using the equity method, equity in earnings of Cyanco, a non-cash item, is eliminated from operating activities in the condensed consolidated statements of cash flows, with cash distributions from Cyanco included in cash flows from investing activities.

Net cash provided by investing activities was $1,000,000 for the three months ended March 31, 2007, and 2006, consisting of distributions from Cyanco.

Net cash used in financing activities was $559,000 and $483,000 for the three months ended March 31, 2007, and 2006, respectively, consisting of the payment of dividends.

The Company considers its cash resources sufficient to meet the operating needs of its current level of business for the next twelve months.

The Company’s operations have not been, and are not expected to be, materially affected by inflation.

Forward Looking Statements

Within this quarterly report on Form 10-Q, including the discussion in this Item 2, there are forward-looking statements made in an effort to inform the reader of management’s expectation of future events.  These expectations are subject to numerous factors and assumptions, any one of which could have a material effect on future results.  The factors which may impact future operating results include, but are not limited to, decisions made by Cyanco’s customers as to the continuation, suspension, or termination of mining activities in the area served by Cyanco; decisions made by Cyanco’s customers with respect to the use or sourcing of sodium cyanide used in their operations; changes in world supply and demand for commodities, particularly gold; changes in the costs of raw materials, labor, and consumables used by Cyanco in the production of sodium cyanide; political, environmental, regulatory, economic and financial risks; resolution of contingencies related to the audits of the Company’s U.S. and Canadian income tax returns; major changes in technology which could affect the mining industry as a whole or which could affect sodium cyanide specifically; competition; and the continued availability of qualified technical and other professional employees of the Company and Cyanco.  Many of these risks are outside the control of the Company, and the actions taken by the Company may not be sufficient to avoid the adverse consequences of one or more of the risks.  Consequently, the actual results could differ materially from those indicated in the statements made.

Item 3.  Quantitative and Qualitative Disclosure About Market Risk

A significant portion of the Company’s cash equivalents bear variable interest rates that are adjusted to market conditions.  Changes in market rates will affect interest earned on these instruments, and potentially the carrying value of the investments.  The Company does not utilize derivative instruments to offset the exposure to interest rates.  The cash equivalents and short-term investments are placed in a variety of products with different institutions.  Significant changes in interest rates could have an impact on the Company’s consolidated financial position and results of operations.  Assuming that the balance of cash and cash equivalents at March 31, 2007 of $16,320,000 was outstanding during the 2007 year, a 1% change in interest rates would result in a change of annual earnings of approximately $163,000.

The Company has no foreign operations and is currently not exposed to material risks from changes in foreign currency.

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Item 4.  Controls and Procedures

Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures designed to ensure that information required to be disclosed in its reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized, and reported within the required time periods and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow for timely decisions regarding required disclosure.  In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objective, and management is required to exercise its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by Rule 13a-15(b) under the Exchange Act, management conducted an evaluation, under the supervision and with the participation of the chief executive officer and the chief financial officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of March 31, 2007.  Based on this evaluation, the chief executive officer and the chief financial officer have concluded that our disclosure controls and procedures were effective as of the period covered by this quarterly report.

Change in Internal Control Over Financial Reporting

There have not been any changes in the Company’s internal controls over financial reporting identified in connection with the evaluation of disclosure controls and procedures discussed above that occurred during the quarter ended March 31, 2007 or subsequent to that date 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

The wholly-owned subsidiary of the Company, Winnemucca Chemicals, has reached a settlement of the claims asserted in WINNEMUCCA CHEMICALS, INC. vs. DEGUSSA CORPORATION and CYPLUS CORPORATION, Case
No.: CV-N-04-364-ECR (RAM), filed January 5, 2004. The parties to the litigation are in the process of finalizing the settlement agreement. The dispute arose over the transfer by Degussa Corporation of its 50% joint venture interest in Cyanco to CyPlus Corporation. CyPlus is an indirect, wholly-owned subsidiary of Degussa GmbH in Germany, which is also the direct parent of Degussa Corporation. This litigation had no impact on the operations of Cyanco.

The Company is, from time to time, subject to legal proceedings arising out of the normal conduct of its business, which the Company believes are not material to its financial position or results of operations.

Item 1A.  Risk Factors.

The business and operations of the Company, particularly through its 50% ownership in Cyanco, are subject to risks.  In addition to considering the other information in this Form 10-K, you should consider carefully the following factors in deciding whether to invest in the Company’s securities.  If any of these risks occur, or if other risks not currently anticipated or fully appreciated occur, the Company’s business and prospects could be materially adversely affected, which could have an adverse effect on the trading price for its shares.

The number of Cyanco customers is relatively small and a loss of one or more customers could adversely affect future Cyanco sales, and may have a material adverse effect on the Company’s results of operations.

All of the Company’s sales occur within the western United States.  Since most of Cyanco’s cyanide customers are large mining companies, the number of companies it services is relatively small compared to those of a wholesale distribution or retail business.  A loss of one or more customers could adversely affect future sales, and may have a material adverse effect on the Company’s results of operations.

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Price increases in energy and other raw materials could have a significant impact on Cyanco’s ability to sustain and grow earnings.

Cyanco’s manufacturing processes consume significant amounts of natural gas, electricity and other raw materials, such as ammonia and caustic soda.  The prices of energy and raw materials are subject to worldwide supply and demand as well as other factors beyond the control of Cyanco.  The Company expects energy costs to remain high and volatile in the near future, which may result in further increases in Cyanco costs.  Significant variations in the cost of energy and raw materials affect Cyanco’s operating results.  When possible, Cyanco purchases raw materials through negotiated long-term contracts to minimize the impact of price fluctuations.  Success in offsetting higher raw material costs with price increases is largely influenced by competitive and economic conditions and could vary significantly depending on the market served.  Cyanco does have the ability, under certain of its contracts, to pass on increases in the cost of raw materials to its customers.  If Cyanco is not able to fully offset the effects of higher energy and raw material costs, it could have a significant impact on Cyanco’s financial results and on the Company’s equity in earnings of Cyanco.

Cyanco is subject to risks caused by the production of hazardous materials, including legal liability created by its operations.

Cyanco’s operations are subject to the hazards and risks normally incident to production of a hazardous material, any of which could result in damage to life, property, or the environment.  Cyanco may be subject to significant legal liability for any damage caused by its operations, which could be substantial.

Changes to the extensive regulatory and environmental rules and regulations to which Cyanco is subject could have a material adverse effect on Cyanco’s future operations.

In addition to normal laws and regulations applicable to companies, Cyanco’s operations are subject to various additional laws and regulations governing the protection of the environment, production of chemicals, occupational health, waste disposal, toxic substances, and other similar matters.  New laws and regulations, amendments to existing laws and regulations, or more stringent implementation of existing laws and regulations could have a material adverse impact on Cyanco, increase costs, and cause a reduction in levels of production.  Compliance with these laws and regulations requires significant expenditures and increases the operating costs of Cyanco.  Changes in regulations and laws could adversely affect Cyanco’s operations or substantially increase the costs associated with those operations.

The Company may not be able to control the decisions and strategy of joint ventures to which it is a party.

Through its wholly owned subsidiary, Winnemucca Chemicals, Inc., the Company holds a 50% interest in Cyanco.  Because the Company shares ownership in Cyanco with another chemical company, it is subject to the risks normally associated with the conduct of joint ventures.  The existence or occurrence of one or more of the following circumstances and events could have a material adverse impact on the Company’s profitability or the viability of its interests held through the joint venture, which could have a material adverse impact on the Company’s results of operations and financial condition:

·              inability to exert influence over certain strategic decisions made in respect of joint venture operations;

·              inability of partners to meet their obligations to the joint venture or third parties; and

·              litigation between partners regarding joint venture matters.

Cyanco’s production of liquid sodium cyanide is subject to risks related to environmental liability.

The production of liquid sodium cyanide is subject to extensive federal, state and local laws, regulations, rules and ordinances relating to pollution, protection of the environment and the generation, storage, handling, transportation, treatment, disposal and remediation of hazardous substances and waste materials.  Actual or alleged violations of environmental laws or permit requirements could result in restrictions or prohibitions on plant operations, substantial civil or criminal sanctions, as well as assessment of liabilities.  The payment of related liabilities would reduce funds otherwise available and could have a material adverse effect on the Company.  Should Cyanco be unable to fund fully the cost of remedying an environmental problem, Cyanco might be required to suspend operations or enter into interim compliance measures pending completion of the required remedy, which could have a material adverse effect on the operations and business of the Company.

The business of Cyanco would be adversely affected by the loss of services or infrastructure near its production site.

Production of liquid sodium cyanide depends, to one degree or another, on adequate infrastructure.  Reliable roads, railroad lines, bridges, power sources, and water supply are important determinants which affect capital and operating costs.  A lack of such infrastructure or unusual or infrequent weather phenomena, sabotage, terrorism, government, or other

14




interference in the maintenance or provision of such infrastructure could adversely affect Cyanco’s operations, financial condition, and results of operations.

Shortage of supplies could adversely affect Cyanco’s ability to operate.

Cyanco is dependent on various supplies and equipment to carry out its chemical production.  Cyanco may not be able to control its receipt of necessary supplies or equipment.  The shortage of such supplies, equipment and parts could have a material adverse effect on the Company’s ability to carry out its operations and therefore limit or increase the cost of production.

Cyanco requires the issuance and renewal of licenses and permits in order to conduct its operations, and failure to receive these licenses may result in delays in development or cessation of certain operations.

The operations of Cyanco require licenses and permits from various governmental authorities, and the process for obtaining licenses and permits from governmental authorities often takes an extended period of time and is subject to numerous delays and uncertainties.  Such licenses and permits are subject to change in various circumstances.  Cyanco may be unable to timely obtain or maintain in the future all necessary licenses and permits that may be required to continue operations that economically justify the cost.

A substantial or extended decline in gold prices would have a material adverse effect on the Company.

The profitability of Cyanco’s operations and ultimately the earnings of the Company are significantly affected by changes in the market price of gold.  Demand for liquid sodium cyanide is affected by the level of gold exploration and development, which is in turn affected by the price of gold.  Gold prices fluctuate on a daily basis and are affected by numerous factors beyond the control of the Company.  The supply and demand for gold, the level of interest rates, the rate of inflation, investment decisions by large holders of gold, including governmental entities, and changes in exchange rates can all cause significant fluctuations in gold prices.  Such external economic factors are in turn influenced by changes in international investment patterns and monetary systems and political developments.  The price of gold has fluctuated widely and future serious price declines could cause continued commercial production to be impractical.  Depending on the price of gold, cash flow from mining operations may not be sufficient to cover costs of production and capital expenditures, which may cause gold mining companies to suspend or terminate operations.  In such event, demand for Cyanco’s product would decrease.

Local, state and federal governments have begun a regulatory process that could lead to new regulations impacting the security of chemical plant locations and the transportation of hazardous chemicals.

Growing public and political attention has been placed on protecting critical infrastructure, including the chemical industry, from security threats.  Terrorist attacks and natural disasters have increased concern regarding the security of chemical production and distribution.  In addition, local, state and federal governments have begun a regulatory process that could lead to new regulations impacting the security of chemical plant locations and the transportation of hazardous chemicals, which could result in higher operating costs and interruptions in normal business operations at Cyanco.

Cyanco’s insurance may not cover the risks to which its business is exposed.

Cyanco’s business is subject to a number of risks and hazards generally, including adverse environmental conditions, industrial accidents, changes in the regulatory environment and natural phenomena such as inclement weather conditions, floods and earthquakes.  Such occurrences could result in damage to production facilities, personal injury or death, environmental damage to Cyanco’s properties or the properties of others, delays in production, monetary losses and legal liability.  Available insurance does not cover all the potential risks associated with a chemical company’s operations.  Cyanco may also be unable to maintain insurance to cover insurable risks at economically feasible premiums, and insurance coverage may not be available in the future or may not be adequate to cover any resulting loss.  As a result, Cyanco might become subject to liability for pollution or other hazards for which it is uninsured or for which it elects not to insure because of premium costs or other reasons.  Losses from these events may cause Cyanco to incur significant costs that could have a material adverse effect upon the Company’s financial condition and results of operations.

The business of Cyanco is dependent on good labor and employment relations.

Production at Cyanco’s facilities is dependent upon the efforts of employees of Cyanco.  Relationships between Cyanco and its employees may be impacted by changes in labor relations which may be introduced by, among others,

15




employee groups, unions, and the relevant governmental authorities in whose jurisdictions Cyanco carries on business.  Adverse changes in such legislation or in the relationship between Cyanco and its employees may have a material adverse effect on Cyanco’s business, and the results of operations and financial condition of the Company.

Future changes to tax accruals or the final resolution of tax audits may adversely affect the results of operations in applicable periods.

Certain of the Company’s United States and Canadian income tax returns are currently under audit.  The ultimate outcome of these audits and the impact of the final audit results on the consolidated financial statements of the Company cannot be determined at this time.  The Company has accrued estimated amounts and has amounts on deposit for the potential outcome of these audits, but there can be no assurance that such costs will not ultimately exceed the current estimate.  The Company reviews the accrued amounts at each balance sheet date.  Any increase in the accrual or the final resolution of the amount due in excess of the accrual would reduce income in the period such determination is made.  Similarly, any decrease in the accrual or final determination that the amount due is less than the accrual would increase income in the period such determination is made.  Consequently, the Company’s results of operations for any particular period may be affected by these adjustments, unrelated to the results of the current business operations of the Company for that period, which may affect the price for the Company’s common shares in the trading market.

Changes in the market price of Company common shares may be unrelated to its results of operations and could have an adverse impact on the Company.

The Company’s common shares are listed on the National Association of Securities Dealers Automated Quotation system (“Nasdaq”).  The price of the Company’s common shares is likely to be significantly affected by short-term changes in the market price of gold or in its financial condition or results of operations as reflected in its quarterly earnings reports.  A drop in trading volume and general market interest in the securities of the Company may adversely affect an investor’s ability to liquidate an investment and consequently an investor’s interest in acquiring a significant stake in the Company.  A failure of the Company to meet the reporting and other obligations under U.S. securities laws or imposed by Nasdaq could result in a delisting of Company common shares.  A substantial decline in the price of Company common shares that persists for a significant period of time could cause Company common shares to be delisted from the Nasdaq, further reducing market liquidity.  As a result of any of these factors, the market price of the common shares at any given point in time may not accurately reflect the Company’s long-term value.  Securities class action litigation often has been brought against companies following periods of volatility in the market price of their securities.  The Company may in the future be the target of similar litigation, which could result in substantial costs and damages and divert management’s attention and resources.

The Company has paid dividends in the past but future dividends are not guaranteed.

The Company has paid dividends in recent history and anticipates that it will continue to do so in the future.  However, continued payment of dividends is subject to the discretion of the Company’s board of directors, after taking into account many factors, including the Company’s operating results, financial condition, and current and anticipated cash needs.  There is no guarantee that the Company will continue to pay dividends in the future.

The loss of key executives could adversely affect the Company.

The Company has a small executive management team.  In the event that the services of an executive were no longer available, the Company and its business could be adversely affected.  The Company carries key-man life insurance with respect to its chief executive officer.

The Company may be subject to litigation in the future.

Legal proceedings that could be brought against the Company or Cyanco in the future, for example, litigation based on its business activities, environmental laws, volatility in its stock price, or failure of its disclosure obligations, could have a material adverse effect on the Company’s financial condition or prospects.

Item 1B.  Unresolved Staff Comments

This item is not applicable to the Company as it is not an accelerated filer.

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Item 2.  Changes in Securities, Use of Proceeds and Issuer Repurchase of Equity Securities

In November 2001, the Company’s Board of Directors authorized a stock repurchase plan that provides for the purchase of up to 500,000 shares of the Company’s currently issued and outstanding shares of common stock.  Purchases under the stock repurchase plan may be made from time to time at various prices in the open market, through block trades or otherwise.  These purchases may be made or suspended by the Company from time to time, without prior notice, based on market conditions or other factors.  During the three-month period ended March 31, 2007, the Company did not purchase any shares of its common stock under the repurchase plan.

Item 6.  Exhibits

Exhibit 31.1 – Certification of principal executive officer pursuant to Rule 13a -14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 31.2 – Certification of principal financial officer pursuant to Rule 13a -14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 32.1 – Certification of principal executive officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes – Oxley Act of 2002

Exhibit 32.2 – Certification of principal financial officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes – Oxley Act of 2002

Exhibit 99.1 – Press Release Dated May 08, 2007

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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

NEVADA CHEMICALS, INC.

 

 

 

(Registrant) 

 

 

 

 

 

 

 

May 08, 2007

 

/s/ John T. Day

 

(Date)

 

John T. Day, President (principal

 

 

executive officer)

 

 

 

 

 

 

May 08, 2007

 

/s/ Kevin L. Davis

 

(Date)

 

Kevin L. Davis,

 

 

Chief Financial Officer (principal
financial and accounting officer)

 

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