UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Fiscal year ended December 31, 1999
Commission file number 0-26531
PATAGONIA GOLD CORPORATION
(Exact name of small business issuer as specified in its charter)
Florida 65-0401897
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
1505 - 1060 ALBERNI STREET, VANCOUVER B.C. CANADA V6E 4K2
(Address of principal executive offices)
Registrant's telephone number, including area code 604-687-4432
Securities registered under Section 12(b) of the Securities Exchange Act of
1934: None
Securities registered pursuant to Section 12 (g) of the Securities Exchange Act
of 1934:
Title of each class Name of each exchange on
which registered
- ----------------------- ------------------------
Common stock, par value $0.001 per share NASD OTC Bulletin Board
- ---------------------------------------- ------------------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Security Exchange Act of
1934 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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-B is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part 111 of this Form 10-KSB or any
amendment to this Form 10-KSB. [ X ]
Revenue for the fiscal year ended December 31, 1999 was $Nil
The aggregate market value of the Registrant's voting common Stock held by
non-affiliates was $19,387,500 as of March 24, 2000. There were 13,000,000
shares of the registrant's Common Stock outstanding as of March 24, 2000.
Documents incorporated by reference herein: None
Transitional Small Business disclosure format (check one); YES [_] NO [ X ]
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PATAGONIA GOLD CORPORATION
This annual report contains statements that plan for or anticipate the
future and are not historical facts. In this Report these forward looking
statements are generally identified by words such as "anticipate", "plan",
"believe", "expect", "estimate", and the like. Because forward-looking
statements involve future risks and uncertainties, these are factors that could
cause actual results to differ materially from the estimated results. These
risks and uncertainties are detailed in Item 1. "Business", Item 2.
"Properties", Item 6. "Management's Discussion and Analysis of Financial
Condition and Results of Operations" Item 7 "Financial Statements", Item 12
"Certain Relationships and Related Transactions".
The Private Securities Litigation Reform Act of 1995, which provides a
"safe harbor" for such statements, may not apply to this Report.
ITEM 1. BUSINESS
(A) GENERAL
Patagonia Gold Corporation (the "Company" or "Patagonia") was incorporated
under the laws of the State of Florida on March 31, 1993, under the name "Cayman
Purchasing & Supply, Inc." The Company was inactive until it redirected its
business efforts in mid 1997 following a change of management, which occurred on
June 25, 1997, to the acquisition, exploration and, if warranted, the
development of mineral resource properties. The Company changed its name to
Patagonia Gold Corporation on October 13, 1997 to more fully reflect its
business activities.
Since its redirection, the Company's activities have been limited primarily
to the acquisition of rights to certain mineral properties and the
implementation of preliminary exploration programs on these properties in which
it has acquired an interest. See "Item 2. Description of Property."
The Company is engaged in the location, acquisition, exploration and, if
warranted, development of mineral resource properties. All of the mineral
properties in which the Company has an interest or a right to acquire an
interest in are currently in the exploration stage. None of the properties have
a known body of Mineral Reserves. The Company's primary objective is to explore
for gold, silver, base metals and industrial minerals and, if warranted, to
develop those existing mineral properties. Its secondary objective is to locate,
evaluate, and acquire other mineral properties, and to finance their exploration
and development either through equity financing, by way of joint venture or
option agreements or through a combination of both.
Currently, the Company's activities are centered in Argentina and Guatemala
During 1999, the Company conducted initial exploration programs for gold
mineralization on its properties in Argentina and Guatemala.
In Guatemala, the Company entered into a joint venture agreement with
Aurora Gold Corporation in October 1999 to conduct initial mineral exploration
on the San Diego Exploration Reconnaissance Licence. The licence was granted to
Aurora Gold Corporation in September 1999. Initial exploration work begun in
1999 will continue into 2000.
None of the Company's properties contain any known Mineral Reserves.
The Company's common stock is traded on the NASD's OTC Bulletin Board.
The Company has not declared or paid dividends on its shares since
incorporation and does not anticipate doing so in the near future.
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The Company's offices are located at 1505 - 1060 Alberni Street, Vancouver,
British Columbia, Canada, V6E 4K2.
(B) SIGNIFICANT DEVELOPMENTS IN FISCAL 1999 AND SUBSEQUENT EVENTS
In June 1999 the Company voluntarily filed Form 10-SB with the Securities
and Exchange Commission ("SEC") in the United States to register its common
stock. The SEC requested the Company change its accounting policy with respect
to the capitalization of exploration costs to comply with the Commission's
interpretation of the accounting for exploration costs in the mining industry.
The Company amended its policy concerning mineral exploration costs to record as
an expense in the period incurred, costs relating to the Company's exploration
activities. Previously the costs were capitalized until the properties were
determined to be impaired based on the evaluation of management. The change in
accounting policy was adopted prospectively. The Company's 1999 financial
statements reflect the decrease in assets and the increase in net loss by
$297,000 or $0.02 per share for the effect of the change. The change in
accounting for mineral exploration costs means that exploration costs will be
charged to income until such time that proven reserves are established. From
that time forward, the Company will capitalize all costs to the extent that
future cash flow from the reserves equals or exceeds the costs deferred. The
Company will not capitalize, at that time, costs previously written off, as
there is no supporting guidance in accounting principles.
In October 1999 the Company entered into a joint venture with Aurora Gold
Corporation for preliminary exploration of the San Diego reconnaissance license,
which covers 800 square kilometers. An exploration program funded by Patagonia
Gold Corporation commenced on the most prospective areas during the last quarter
of 1999 and will continue in 2000.
(C) EXPLORATION AND DEVELOPMENT
The Company conducts exploration activities from its headquarters in
Vancouver, Canada. The Company controls mineral exploration concessions in
Argentina and Guatemala. The Company's strategy is to concentrate its
investigations into:
(1) Existing operations where an infrastructure already exists;
(2) Properties presently being developed and/or in advanced stages of
exploration which have potential for additional discoveries; and
(3) Grass-roots exploration opportunities.
The Company is currently concentrating its exploration activities in
Argentina and Guatemala. The Company is also examining other exploration
properties in Cote D' Ivorie, Liberia, Mexico and Morocco.
Exploration expenses on the San Diego Reconnaissance Concession in
Guatemala totalled $23,117 during fiscal 1999 (1998 - $0) in addition to the
$9,250 (1998 - $0) in mineral property acquisition costs.
Exploration expenses in Argentina totalled $21,890 during fiscal 1999 (1998
- - $12,250).
All of the Company's properties are in the exploration stages only and are
without a known body of Mineral Reserves. Development of the properties will
follow only if satisfactory exploration results are obtained. Mineral
exploration and development involves a high degree of risk and few properties
that are explored are ultimately developed into producing mines. There is no
assurance that the Company's mineral exploration and development activities will
result in any discoveries of commercially viable bodies of mineralization. The
long-term profitability of the
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Company's operations will be, in part, directly related to the cost and success
of its exploration programs, which may be affected by a number of factors.
(D) EMPLOYEES
As of January 31, 2000 there were two (2) full time employees and two (2)
part time employees.
(E) REGULATION OF MINING ACTIVITY
Patagonia's interests in its projects will be subject to various laws and
regulations concerning development, production, taxes, labor standards,
environmental protection, mine safety and other matters. In addition, new laws
or regulations governing operations and activities could have a material adverse
impact on Patagonia.
(F) FOREIGN COUNTRIES AND REGULATORY REQUIREMENTS
Mineral exploration, development and mining activities on the Company's
properties may be affected in varying degrees by political stability, and the
policies of other nations. Any changes in regulations or shifts in political
conditions are beyond the control of the Company and may adversely affect its
business. Operations may be affected by government laws and regulations or the
interpretations thereof, including those with respect to export controls,
expropriation of property, employment, land use, water use, environmental
legislation and mine safety. Operations may be also affected by political and
economic instability, confiscatory taxation, restriction on currency
conversions, imports and sources of supplies, the expropriation of private
enterprises, economic or other sanctions imposed by other nations, terrorism,
military repression, crime, and extreme fluctuations in currency exchange rates
and high inflation and make it more difficult for the Company to raise funds for
the development of its mineral interests in some countries.
(G) COMPETITION
Many companies are engaged in the exploration and development of mineral
properties. The company encounters strong competition from other mining
companies in connection with the acquisition of properties producing or capable
of producing gold, lead, zinc and industrial minerals. Many of these companies
have substantially greater technical and financial resources than Patagonia and
thus the company may be at a disadvantage with respect to some of its
competitors.
The marketing of minerals is affected by numerous factors, many of which
are beyond the control of the company. Such factors include the price of the
mineral in the marketplace, imports of minerals from other nations, the
availability of adequate refining and processing facilities, the price of fuel,
electricity, labor, supplies and reagents and the market price of competitive
minerals. In addition, sale prices for many commodities are determined by world
market forces or are subject to rapid and significant fluctuations that may not
necessarily be related to supply or demand or competitive conditions that in the
past have affected such prices. Significant price movements in mineral prices
over short periods of time may be affected by numerous factors beyond the
control of the Company, including international economic and political trends,
expectations of inflation, currency exchange fluctuations (specifically, the
U.S. dollar relative to other currencies), interest rates and global or regional
consumption patterns, speculative activities and increased production due to
improved mining and production methods. The effect of these factors on the price
of minerals and, therefore, the economic viability of any of the Company's
projects cannot accurately be predicted. As the Company is in the development
stage, the above factors have had no material impact on operations or income.
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(H) ENVIRONMENTAL REGULATIONS
All phases of the Company's operations in Argentina and Guatemala are
subject to environmental regulations. Environmental legislation in all countries
is evolving in a manner which will require stricter standards and enforcement,
increased fines and penalties for non-compliance, more stringent environmental
assessments of proposed projects and a heightened degree of responsibility for
companies and their officers, directors and employees. Although the Company
believes it is in compliance with all applicable environmental legislation,
there is no assurance that future changes in environmental regulation, if any,
will not adversely affect the Company's operations.
(I) MINING RISKS AND INSURANCE
Mineral exploration involves many risks, which even a combination of
experience, knowledge and careful evaluation may not be able to overcome.
Operations in which the Company has a direct or indirect interest will be
subject to all type of hazards and risks or unexpected formations, cave-ins,
pollution, all of which could result in work stoppages, damages to property, and
possible environmental damages. The Company does not have general liability
insurance covering its operations and does not presently intend to obtain
liability insurance as to such hazards and liabilities. Payment of any
liabilities therefore could have a materially adverse effect upon the Company's
financial condition.
ITEM 2. DESCRIPTION OF PROPERTY
All of the Company's properties are in the preliminary exploration stage
and do not contain any known body of ore.
The Company's exploration activities are presently in Argentina and
Guatemala. In addition to Argentina and Guatemala, primary regions under
investigation by the Company include Cote D' Ivoire, Liberia, Mexico and
Morocco.
During 1998 and 1999 the Company applied for and later dropped mineral
exploration permits in the Cote D' Ivorie and Liberia. The Company also
evaluated mineral properties in Argentina, Guatemala, Mexico and Morocco for
potential acquisition.
(A) ARGENTINA
The Company holds 100% interest in seven mineral exploration
concessions in Argentina of which two are cateos and the remaining five are
mineral discovery concessions.
In Argentina, a cateo is a parcel of land to which an exclusive
prospecting right has been granted to an individual or a corporation. The
mineral rights in Argentina belong to the state. The government grants
these rights to applicants on a first come first serve basis. Applications
for cateos (concessions) can typically take a number of years for approval
with the bureaucratic process there. The application process, however, is
rigidly controlled such that the applicant has all the risks and rewards
associated with legal ownership. During application stage, the applicant is
permitted to explore the property and can transfer, assign or sell the
application to other parties. Once the application/right has been granted
by the Argentina government, the mineral exploration concession
license/permit gives the Company an exclusive right over all mineral
discoveries made within the areas concerned. Exploration rights are
temporary. The title owner has a maximum of 1100 days (almost three years)
to make discoveries. Portions of the area must be gradually discarded so
that at the end of the 1100 days the whole area becomes free and can be
petitioned by another
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individual or company. The 1100-day term has not yet commenced. A change in
the mining regulations of the La Rioja Provincial government requires all
exploration concessions ("Cateos) to be re-oriented along north-south
east-west grid lines. Patagonia's original cateos were placed along
geographical lines other than those, to best cover areas of geological
interest. New cateo boundaries have been submitted to the Rioja Provincial
government and the company is awaiting formal approval (which has been
assured by the provincial government) prior to the commencement of the
1100-day term. The commencement date is expected in the near future but no
specific date has been supplied by the Rioja Provincial government.
In Argentina, a Mineral Discovery license/permit is granted by the
Argentina government under the following circumstances. An explorer that
finds indications of the presence of a deposit may apply for an
area/concession double the size of the maximum permitted. The "indications
of the presence of a deposit" to support the application for the "mineral
discovery license" is a legal concept of the Argentina Mining Law. It does
not necessarily mean that an economically significant ore body has been
discovered. It just means that the explorers have found sufficient
indications in the ground to justify the continuation of the work after the
end of the 1100 days, transforming the temporary exploration permit into a
permanent mining right. The application for a maximum area/concession
depends on the type of mineral found and the regulations in force in each
province. Upon receipt of the application, the local authority checks the
fulfillment of all corporate and legal conditions of the application and
registers an exclusive zone of up to 3,000 or 6,000 hectares (a "Hectare"
is a surface measurement of the metric system, equivalent to 2.471 acres).
The text of the registration is published three times on three consecutive
days in a local newspaper to give an opportunity to other prospectors to
claim a better or prior right to the same area or to portions of the area.
Quite often there are overlaps, so that the original diagram of the
exclusive zone suffers amendments. The discoverer must reduce the exclusive
zone to the actual size of the area that he intends to own. This depends on
the exact location and distribution of the deposit in the ground. As the
exclusive zone has double the size of the maximum permitted, the reduction
will result in at least half the size. Once reduced, the applicant must
stake the claim by putting poles in its angles. This is called the
"Mensura" (measurement) and must be done by land surveyors.
During Fiscal 1999, the Company continued its preliminary field
assessment and sampling programs on the five exploration license areas
("ELAs" - "cateos"), Carmela IV, Carmela VI, Carmela VII, Carmela VIII and
Carmela IX, held in the Province of La Rioja, Department of Rosario Vera
Penaloza, District of Chepes. Each cateo consisted of 10,000 hectares for a
total of 50,000 hectares. The exploration permits for the mineral
exploration concessions were originally acquired by the Company in July
1997. Based on an analysis of geophysical data compiled from existing
airborne geophysical surveys (magnetometer and radiometric surveys) carried
out jointly by the Argentinean and Australian surveys and ground work
completed by the Servicio Geologico Minero Argentino ("SEGMAR") the Company
gradually reduced the size of the five cateos and reapplied for the most
prospective areas of the cateos under the following exploration/mineral
discovery permits.
During 1998 and 1999 the Company conducted preliminary field
assessments of the properties. This included reconnaissance, mapping and
sampling of individual outcrops. No significant anomalous values have been
returned to date, however, the area hosts quartz veins and structural
features similar to precious and base metal mineralized bodies found
throughout the general area. Recent sampling has returned significant gold
and silver values from quartz veining and quartz stockwork material on
ground immediately to the south of the company's concessions. The Sierra de
las Minas area continues to be the focus of successful exploration and
drilling of similar quartz vein bodies by such companies as Golden Peaks
Resources in joint partnership with Mitsubishi Materials Corp.
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The Company currently holds the following exploration/mineral
discovery permits:
Piloncho 1
Type of concession: Cateo (exploration permit)
Number of hectares: 9,975
Location of claims: Province of La Rioja, Department of Rosario Vera
Penaloza, District of Chepes.
Current status: Application filed with the government
Piloncho 2
Type of concession: Cateo (exploration permit)
Number of hectares: 9,450
Location of claims: Province of La Rioja, Department of Rosario Vera
Penaloza, District of Chepes.
Current status: Application filed with the government
Piloncho 20
Type of concession: Mineral Discovery
Number of hectares: 3,500
Location of claims: Province of La Rioja, Department of Rosario Vera
Penaloza, District of Chepes.
Current status: Application filed with the government
Piloncho 21
Type of concession: Mineral Discovery
Number of hectares: 3,500
Location of claims: Province of La Rioja, Department of Rosario Vera
Penaloza, District of Chepes.
Current status: Application filed with the government
Carmelita 16
Type of concession: Mineral Discovery
Number of hectares: 3,000
Location of claims: Province of La Rioja, Department of Rosario Vera
Penaloza, District of Chepes.
Current status: Application filed with the government
Carmelita 17
Type of concession: Mineral Discovery
Number of hectares: 2,000
Location of claims: Province of La Rioja, Department of Rosario Vera
Penaloza, District of Chepes.
Current status: Application filed with the government
Carmelita 18
Type of concession: Mineral Discovery
Number of hectares: 2,000
Location of claims: Province of La Rioja, Department of Rosario Vera
Penaloza, District of Chepes.
Current status: Application filed with the government
The concessions are located in Sierra de Chepes in the extreme south
end of the Province of La Rioja, 1,000 Kilometres Northwest of Buenos
Aires, in the departments of Rosario Vera Penaloza and San Martin,
immediately north of the town of Chepes. The concessions are readily
accessible by paved road from the city of La Rioja situated
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approximately 200 kilometres to the north. Provincial Highway 79 traverses
the entire eastern boundary of the concessions in a north-south direction
and Provincial Highway 29 parallels the western boundary. A number of dirt
roads and trails from the major highways provide convenient access to may
parts of the concessions.
The Sierra de Chepes is composed principally of plutonic rocks
resulting from a number of phases of magmatic activity in the area. Late
Proterozoic tonalite and granodiorite (The Chepes Formation) with
migmatitic and porphyroblastic facies are predominant rock types with the
concessions in the Sierra de Chepes.
The basement complex throughout the Sierra de Chepes and Sierra de las
Minas consisting of a varied assemblage of metavolcanics, migmatites,
tonalites and granodiorites with some mafic phases is cut by a series of
north-south trending mylonite zones. A complex system of rectilinear faults
and fractures intersects these mylonite zones and may be genetically or
structurally related to the gold-bearing quartz veins and shear zones in
the area.
During the next 24 months the company intends to conduct further
geological, geochemical and geophysical work on the Argentina properties.
(B) GUATEMALA, CENTRAL AMERICA
In Guatemala, the Company's rights are working interests in a mineral
reconnaissance license. In Guatemala a mineral exploration concession license
confers on the titleholder the exclusive right to locate, study, analyze and
evaluate the deposits that have been granted, within the licenses' territorial
limits and to unlimited depth in the subsoil. The mineral reconnaissance license
confers to the titleholder the exclusive rights to identify and locate possible
areas for exploration, within the license's territorial limits and to unlimited
depth in the subsoil.
The Company's concession is located within the South Volcanic Belt in
Guatemala, which is considered to be the geological setting with the greatest
mineral potential in the country. The Volcanic Province is represented by a
Quaternary chain of active volcanoes to the south and Tertiary igneous rocks to
the north. In the Tertiary area, ignimbrites and rhyolites crop out, as well as
acidic tuffs and several intrusives. Gold-silver deposits are expected to be
found in granites and in quartz veins within the tuffs. The epithermal type of
precious and basic metallic deposits and the presence of lithofilic elements are
associated with the geology of this area. In the eastern part of the volcanic
province, the most common mineralogy is pyrite and arsenopyrite with
chalcopyrite, covelite and native gold as associated minerals, and it is related
to epithermal processes associated with intrusive igneous bodies. Important
deposits of copper-lead-zinc-silver, gold-silver and lead-zinc mineralization
occur in veins located in fractures within Tertiary volcanic rocks, typical
features of epithermal deposits filling fissures that originated from tensional
stresses. The mineralization consists mainly of zinc sulfides, lead-silver and
copper with calcite and quartz as gangue minerals. Other deposits of economic
importance are formed by a series of iron oxide bodies. It is important to note
that most of this province has not yet been explored and evaluated, but it is
one of the more important zones of interest due to its favorable geological
environment for mineralization.
In October 1999 the Company entered into a joint venture agreement with
Aurora Gold Corporation ("Aurora") to carry out preliminary exploration within
the San Diego license area. The San Diego mineral reconnaissance license was
granted to Aurora Gold Corporation in September 1999. Under the terms of the
joint venture Patagonia can earn a fifty percent (50%) interest in the San Diego
mineral reconnaissance licence upon (a) payment of $9,250 (paid) Guatemala
government fee for the acquisition of the San Diego mineral exploration
reconnaissance licence and (b) the payment of $18,617 (paid) for a Phase 1
exploration program.
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San Diego - Mineral Reconnaissance License
San Diego is a mineral reconnaissance concession located in the Zacapa and
Chiquimula departments in eastern Guatemala, some 150 kilometers east of
Guatemala City. As a mineral reconnaissance concession, it covers a larger
area than a mineral exploration concession, specifically 800 square
kilometers. The main feature of the mineral reconnaissance concession is
the fact that it completely surrounds the El Pato gold and silver mineral
reserve, an exploration project funded by the United Nations which
identified a Mineral Resource estimated to contain some 200,000 ounces of
gold. Geologically, because of its size this mineral reconnaissance
concession contains several geological settings. Most important is the
presence of the Motagua Fault to the North and the Chiguimula Pluton
(intrusive) on the eastern half of the concession.
Following archival and other research, Aurora Gold Corporation, as operator
for the joint venture with Patagonia, commenced work on prospective areas
within the reconnaissance concession in November 1999. The work consists of
sampling of outcrops, soils and stream sediments and mapping, the results
of which are expected during the first quarter of 2000. The aim of the
preliminary exploration work is to identify a number of highly prospective
areas for which applications for mineral exploration licenses will be made,
and subsequently undertake more comprehensive work.
Exploration expenditures on the San Diego Reconnaissance Concession
totalled $23,117 during fiscal 1999 (1998 - $0) in addition to the $9,250 (1998
- - $0) in mineral property acquisition costs.
ITEM 3. LEGAL PROCEEDINGS
The company is not party to any litigation, and has no knowledge of any
pending or threatened litigation against it.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
(a) The Common Stock of the Company has been quoted on the OTC Bulletin
Board since May 1, 1997. The following table sets forth the high and
low bid prices for the Common Stock for the calendar quarters
indicated as reported by the OTC bulletin Board for the last two
years. These prices represent quotations between dealers without
adjustment for retail markup, markdown or commission and may not
represent actual transactions.
---------------------------------------------------------------------------
First Quarter Second Quarter Third Quarter Fourth Quarter
---------------------------------------------------------------------------
1999 - High $2.125 $2.000 $2.750 $2.531
---------------------------------------------------------------------------
1999 - Low 1.3750 1.625 2.000 1.750
---------------------------------------------------------------------------
1998 - High 2.6875 2.500 2.125 2.125
---------------------------------------------------------------------------
1998 - Low 1.812 1.500 0.750 1.437
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(b) As of March 24, 2000, there were 25 holders of record of the Common
Stock.
(c) There were no Common Stock cash dividends paid in 1999, 1998 or 1997.
The amount and frequency of cash dividends are significantly
influenced by metal prices, operating results and the Company's cash
requirements.
The Registrant has not issued any securities in 1999 with or without
registration under the Securities Act of 1933, as amended (the "Act").
ITEM 6. MANAGEMENT'S' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
(A) GENERAL
The Company is a mineral exploration company based in Vancouver, Canada
engaged in the exploration of base, precious metals and industrial minerals
worldwide. The Company was incorporated under the laws of the State of Florida
on March 31, 1993, under the name "Cayman Purchasing & Supply, Inc.".
The Company conducts exploration activities from it headquarters in
Vancouver, Canada. The Company controls mineral exploration concessions, in
Argentina and Guatemala. In addition to Argentina and Guatemala, primary regions
under investigation by the Company include Cote D' Ivoire, Liberia, Mexico and
Morocco.The Company's strategy is to concentrate its investigations into:
(1) Existing operations where an infrastructure already exists;
(2) Properties presently being developed and/or in advanced stages of
exploration which have potential for additional discoveries; and
(3) Grass-roots exploration opportunities.
The Company is currently concentrating its exploration activities in
Argentina and Guatemala. All of the Company's properties are in the preliminary
exploration stage without any presently known Mineral Reserves.
The Company had no revenues during fiscal 1999, 1998 and 1997. Income
during fiscal 1999 1998 and 1997 was the result of interest earned on funds
raised, as the Company has no mineral properties in production. Funds raised in
fiscal 1999, 1998 and 1997 were used for exploration of the Company's properties
and general administration.
In June 1999 the Company voluntarily filed Form 10-SB with the Securities
and Exchange Commission ("SEC") in the United States to register its common
stock.
During the next 12 months the Company needs to raise additional funds
through equity offerings and/or debt borrowing to meet its
administrative/general operating expenses, to conduct work on its exploration
properties. The Company intends to move forward in the current low gold price
environment by selectively developing its existing assets and to further develop
the Company through the possible acquisition or joint venturing of additional
mineral properties either in the exploration or development stage. Additional
employees will be hired on a consulting basis as required by the exploration
projects.
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(B) FINANCING
In Fiscal 1999, the Company raised $0 (1998 - $0, 1997 - $1,540,000)
through the issuance of 0 (1998 - 0, 1997 - 9,000,000) common shares at prices
ranging $0 (1998 - $0, 1997 - $0.10 to $1.00) per share.
(C) FINANCIAL INFORMATION
(a) Twelve Months Ended December 31, 1999 (Fiscal 1999) versus Twelve
Months Ended December 31, 1998
For the year ended December 31, 1999 the Company recorded a loss of
$460,883, or $0.03 per share, compared to a loss of $135,708 ($0.01
per share) in 1998 and a loss of $28,577 ($0.00 per share) in 1997.
Professional fees - accounting and legal - For the year ended December
31, 1999 the Company recorded professional fees of $38,553, compared
to $24,078 in 1998. The 1999 increase in fees was the result of costs
associated with filing of the Company's Form 10-SB.
Exploration expenditures - For the year ended December 31, 1999 the
Company recorded exploration expenses of $32,236 compared to $94,295
in 1998. The reduction in expenditures was due to reduced spending on
project research and evaluation.
Write down of mineral property costs - In June 1999 the Company filed
its registration statement on form 10-SB with the Securities and
Exchange Commission ("SEC") of the United States. The SEC requested
the Company change its accounting policy with respect to the
capitalization of exploration costs to comply with the Commission's
interpretation of the accounting for exploration costs in the mining
industry. The Company amended its policy concerning mineral
exploration costs to record as an expense in the period incurred,
costs relating to the Company's exploration activities. Previously the
costs were capitalized until the properties were determined to be
impaired based on the evaluation of management. The change in
accounting policy was adopted prospectively. The Company's 1999
financial statements reflect the decrease in assets and the increase
in net loss by $297,000 or $0.02 per share for the effect of the
change. The change in accounting for mineral exploration costs means
that exploration costs will be charged to income until such time that
proven reserves are established. From that time forward, the Company
will capitalize all costs to the extent that future cash flow from the
reserves equals or exceeds the costs deferred. The Company will not
capitalize, at that time, costs previously written off, as there is no
supporting guidance in accounting principles.
(b) Twelve Months Ended December 31, 1998 (Fiscal 1998) versus twelve
Months ended December 31, 1997 (Fiscal 1997):
For the year ended December 31, 1998 the Company recorded a loss of
$135,708, or $0.01 per share, compared to a loss of $28,577 ($0.00 per
share) in 1997.
General and administrative expenses - For the year ended December 31,
1998 the Company recorded general and administrative expenses of
$19,158, compared to $5,338 in 1997. The increase in 1998 costs was
due to the company having limited operations in 1997.
11
<PAGE>
Professional fees - accounting and legal - For the year ended December
31, 1998 the Company recorded professional fees of $24,078, compared
to $8,368 in 1997. The increase in 1998 costs was due to the company
having limited operations in 1997.
Salaries and consulting fees - For the year ended December 31, 1998
the Company recorded salaries and consulting fees of $33,053 compared
to $0 in 1997. The increase in 1998 costs was due to the company
having limited operations in 1997.
Exploration expenditures - For the year ended December 31, 1998 the
Company recorded exploration expenses of $94,295 compared to $24,755
in 1997. The increase in expenditures was due to increased spending on
project research and evaluation.
(D) FINANCIAL CONDITION AND LIQUIDITY
At December 31, 1999, the Company had cash of $22,913 (1998 - $73,651) and
working capital deficiency of $88,966 (1998 working capital - $57,798)
respectively. Total liabilities as of December 31, 1999 were $111,879 as
compared to $15,853 on December 31, 1998, an increase of $96,026. During 1999
financing activities consisted of the following, proceeds from notes and
advances payable $76,879 (1998 - $0). In Fiscal 1999 investing activities
consisted of additions to mineral properties $9,250 (1998 - $0), purchases of
available-for-sale securities $352,485 (1998 - $1,603,921) and proceeds from the
sale of available-for-sale securities $359,804 (1998 - $528,649). The Company
recorded a loss of $18,837 (1998 - gain $16,962) on the sale of
available-for-sale securities. For the year ended December 31, 1999 the Company
recorded a loss from operations of $163,883 and after a $297,000 write down in
the carrying value of its mining interests, a net loss of $460,883, or $0.03 per
share compared to a loss of $135,708 ($0.01 per share) in 1998 and a loss of
$28,577 ($0.00 per share) in 1997.
The Company does not have sufficient working capital to (i) pay its
administrative and general operating expenses through December 31, 2000 and (ii)
to conduct its preliminary exploration programs. Without cash flow from
operations, it may need to obtain additional funds (presumably through equity
offerings and/or debt borrowing) in order, if warranted, to implement additional
exploration programs on its properties. Failure to obtain such additional
financing may result in a reduction of the Company's interest in certain
properties or an actual foreclosure of its interest. The Company has no
agreements or understandings with any person as to such additional financing.
None of the Company's properties has commenced commercial production and
the Company has no history of earnings or cash flow from its operations. While
the Company may attempt to generate additional working capital through the
operation, development, sale or possible joint venture development of its
properties, there is no assurance that any such activity will generate funds
that will be available for operations.
The Company has not declared or paid dividends on its shares since
incorporation and does not anticipate doing so in the foreseeable future.
(E) YEAR 2000 ISSUES.
The "Year 2000 problem", as it has come to be known, refers to the fact
that many computer programs use only the last two digits to refer to a year, and
therefore recognize a year that begins with "20" as instead beginning with "19".
For example, the year 2000 would be read as being the year 1900. If not
corrected, this problem could cause many computer applications to fail or create
erroneous results.
12
<PAGE>
The Company has modified and tested all the critical applications of its
information technology ("IT"), the result of which is that all such critical
applications are now Year 2000 compliant. The Company believes that virtually
all of the non-critical applications of its IT are Year 2000 compliant. The
Company is using independent consultants to oversee the Year 2000 project as
well, as to perform certain remediation efforts. In addition, progress on the
Year 2000 project is also monitored by senior management, and reported to the
Board of Directors. The total amount of the payments made to date and to be made
hereafter to such independent consultant are not expected to be material. New
equipment and software was installed during the third and fourth quarters of
1999. Based on the Company's analysis to date, the Company believes that its
material non-IT systems are either Year 2000 compliant, or do not need to be
made Year 2000 compliant in order to continue to function in substantially the
same manner in the Year 2000. The Company's Year 2000 compliance work has not
caused, nor does the Company expect that it will cause, a deferral on the part
of the Company of any material IT or non-IT projects.
However, there can be no assurance that any of the Company's vendors or
others, with whom it transacts business, will be Year 2000 compliant prior to
such date. The company is unable to predict the ultimate effect that the Year
2000 problem may have upon the Company, in that there is no way to predict the
impact that the problem will have nation-wide or world-wide and how the Company
will in turn be affected, and, in addition, the company cannot predict the
number and nature of its vendors and customers who will fail to become Year 2000
compliant prior to January 1, 2000. Significant Year 2000 difficulties on the
part of vendors or customers could have a material adverse impact upon the
Company. The Company intends to monitor the progress of its vendors and
customers in becoming Year 2000 compliant. The Company has formulated a
contingency plan to deal with the potential non-compliance of vendors and
customers.
As of March 24, 2000 the Company has not experienced any year 2000 problems
nor has any of the Company's vendors or others with whom it transacts business.
(F) NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. SFAS 133 requires
companies to recognize all derivative contracts as either assets or liabilities
on the balance sheet and to measure them at fair value. If certain conditions
are met, a derivative may be specifically designated as a hedge, the objective
of which is to match the timing of gain or loss recognition on the hedging
derivative with the recognition (i) the changes in the fair value of the hedged
asset or the liability that are attributable to the hedged risk or (ii) the
earnings effect of the hedged forecasted transaction. For a derivative not
designated as a hedging instrument, the gain or loss is recognized in income in
the period of change. SFAS No. 133 is effective for all fiscal quarters of
fiscal years beginning after June 15, 2000.
Historically, the Company has not entered into derivatives contracts either
to hedge existing risks or for speculative purposes. Accordingly, the Company
does not expect adoption of the new standards on January 1, 2001 to affect its
financial statements.
ITEM 7. FINANCIAL STATEMENTS
See ITEM 13 of this Report for information with respect to the financial
statements filed as a part hereof, including financial statements filed pursuant
to the requirements of this ITEM 7.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
In February 2000, Patagonia Gold Corporation ("Patagonia") dismissed its
prior certifying accountants, BDO Dunwoody LLP ("BDO Dunwoody") and retained as
its new certifying
13
<PAGE>
accountants Moore Stephens Ellis Foster Ltd. BDO Dunwoody's LLP report on
Patagonia's financial statements during the most recent fiscal year contained no
adverse opinion or a disclaimer of opinion, and was not qualified as to
uncertainty, audit scope or accounting principles. The decision to change
accountants was approved by Patagonia's Board of Directors.
During the last two fiscal years and the subsequent interim period through
February 7, 2000, there were no disagreements between Patagonia and BDO Dunwoody
LLP on any matters of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements, if not resolved
to the satisfaction of BDO Dunwoody LLP, would have caused it to make a
reference to the subject matter of disagreements in connection with its report.
PART III.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS:
The following table lists the names and positions of the executive officers
and directors of the Company as of December 31, 1999 and March 24, 2000. All
executive officers and directors have been elected and appointed to serve until
their successors are elected and qualified. Additional information regarding the
business experience, length of time served in each capacity and other matters
relevant to each individual are set forth below the table.
Name Position
- ---- --------
David E. Jenkins Age 46, President and Director since June 1997.
President of Patagonia Gold Corporation and Director of
Eurasia Gold Fields, Inc. President of DataLogic
Marketing Corporation, 1989 to current. Investment
advisor for PaineWebber, Inc. and Blythe Eastman Dillon
Inc., 1983 to 1989.
Antonino G. Cacace Age 54, Director since June 1997. Engineer,
Founder and current Managing Director of Stelax
Industries in the United Kingdom. Between 1984 and 1995
he was managing director/chief executive officer of
several Companies involved in development and operation
of steel/bar rolling mills.
Cosme M. Beccar Varela Age 39, Director since June 1997. Mr. Cosme M. Beccar
Varela is a principal in the Law firm of C&C Beccar
Varela and has been employed with them since 1993.
A. Cameron Richardson Age 47, Controller since October 1997, & Secretary
since January 1999. 1981 to 1997 held accounting
positions with various Canadian resource companies.
There are no family relationships between any of the executive officers.
COMPLIANCE WITH SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE, OF
THE EXCHANGE ACT OF 1934
Section 16 (a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange commission
(the "SEC"). Officers, directors and greater than ten percent shareholders
14
<PAGE>
are required by SEC regulation to furnish the Company with copies of all Section
16 (a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons, the Company believes
that during the fiscal year ended December 31, 1999 all filings requirements
applicable to its officers, directors and greater than ten percent beneficial
owners were complied with.
ITEM 10. EXECUTIVE COMPENSATION
(A) General
The following table sets forth information concerning the compensation of
the named executive officers for each of the registrant's last three completed
fiscal year:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Annual Compensation Long-Term Compensation
----------------------------------------------------------------------------------------------
Awards Payments
-------------------------------------------------------
Securities
Other Under- All
Annual Restricted Lying other
Name And Compen- Stock Options/ LTIP Compen-
Principal Position Year Salary Bonuses Sation Award(s) SARs Payouts sation
($) ($) ($) ($) (=) ($) ($)
(a) (b) (c) (d) (e) (f) (g) (h) (i)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
David Jenkins 1999 12,000 -0- -0- None None None -0-
--------------------------------------------------------------------------------------------------------
President and 1998 -0- -0- -0- None None None -0-
--------------------------------------------------------------------------------------------------------
Director 1997 -0- -0- -0- None None None -0-
- ------------------------------------------------------------------------------------------------------------------------------------
Cameron Richardson 1999 7,727 -0- -0- None None None -0-
--------------------------------------------------------------------------------------------------------
Controller and 1998 8,577 -0- -0- None None None -0-
--------------------------------------------------------------------------------------------------------
Secretary 1997 -0- -0- -0- None None None -0-
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
None of the Company's officers or directors was party to an employment
agreement with the Company. Directors and/or officers receive expense
reimbursement for expenses reasonably incurred on behalf of the Company.
During the fiscal year ending December 31, 1999 the entire board of
directors acted as the Company's compensation committee.
(B) Options/SAR Grants Table
No options have been awarded to David Jenkins, Antonino Cacace, Cosme
M. Beccar Varela or Cameron Richardson.
(C) Aggregated Option/SAR Exercises and Fiscal Year-End Option/SAR Value Table
No options have been awarded to David Jenkins, Antonino Cacace, Cosme
M. Beccar Varela or Cameron Richardson.
(D) Long-Term Incentive Plans ("LTIP") Awards Table
The Company does not have a Long-term Incentive Plan.
15
<PAGE>
(E) Compensation of Directors
The Company does not pay a fee to its outside, non-officer directors.
The Company reimburses its directors for reasonable expenses incurred by
them in attending meetings of the Board of Directors. During fiscal 1999
non-officers directors received a total of $0 in consulting fees.
ITEM 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of March 24, 2000 by (i) each person
who is known by the Company to own beneficially more than five percent (5%) of
the Company's outstanding Common Stock; (ii) each of the Company's directors and
officers; and (iii) all directors and officers of the Company as a group. As at
March 24, 2000, there were 13,000,000 shares of Common Stock issued and
outstanding.
Name of Shares of Common
Beneficial Stock Beneficially Percentage
Owner Owned Owned
----- ----- -----
Cede & Company (1) 3,271,698 25.2%
PO Box 222 Bowling Green Station
New York, NY 10274
Carrington International Limited (1) 3,000,000 23.1%
STE 2402,
Bank of America Tower
12 Harcourt Road, Central Hong Kong
Dorothea Schnura (1) 1,000,000 7.7%
Robert Kock Street 6
67259 Bemdershein, Germany
Gregorio Becerro (1) 800,000 6.2%
Plaza Mayor 7
Salamanca, Spain
Viabilite et Establissement a.r.l. (1) 800,000 6.2%
Broadcasring House,
Rouge Bouillon St.
Channel Island
Antonino Jaramillo (1) 700,000 5.4%
Raimund F Villacerde 45
2803 Madrid Spain
Fernpark Investments Limited (1) 650,000 5.0%
PO Box N-8318
Nassau, Bahamas
16
<PAGE>
Officers and Directors
David E. Jenkins 50,000 *
1505-1060 Alberni Street
Vancouver, B.C. Canada V6E 4K2
Antonino G. Cacace 0 *
Crud-y-Gloyat
Carswell Bay
Swansea Wales, U.K.
Cosme M. Beccar Varela 25,000 *
Reconquista 657
1373 Buenos Aires, Argentina
Cameron Richardson 0 *
1505-1060 Alberni Street
Vancouver, B.C. Canada V6E 4K2
Officers and Directors (4 persons) 75,000 *
(1) To the best of the Company's knowledge, none of the above companies or
individuals are affiliated to the officers and directors of the Company.
* Less than 1%.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The proposed business of the Company raises potential conflicts of
interests between the Company and certain of its officers and directors.
Certain of the directors of the Company are directors of other mineral
resource companies and, to the extent that such other companies may participate
in ventures in which the Company may participate, the directors of the Company
may have a conflict of interest in negotiating and concluding terms regarding
the extent of such participation. In the event that such a conflict of interest
arises at a meeting of the directors of the Company, a director who has such a
conflict will abstain from voting for or against the approval of such
participation or such terms. In appropriate cases, the Company will establish a
special committee of independent directors to review a matter in which several
directors, or Management, may have a conflict. From time to time, several
companies may participate in the acquisition, exploration and development of
natural resource properties thereby allowing for their participation in larger
programs, involvement in a greater number of programs and reduction of the
financial exposure with respect to any one program. It may also occur that a
particular company will assign all or a portion of its interest in a particular
program to another of these companies due to the financial position of the
company making the assignment. In determining whether the Company will
participate in a particular program and the interest therein to be acquired by
it, the directors will primarily consider the potential benefits to the Company,
the degree of risk to which the Company may be exposed and its financial
position at that time. Other than as indicated, the Company has no other
procedures or mechanisms to deal with conflicts of interest. The Company is not
aware of the existence of any conflict of interest as described herein.
Directors and/or officers will receive expense reimbursement for expenses
reasonably incurred on behalf of the Company.
17
<PAGE>
Included in accounts payable at December 31, 1999 is $0 (1998 - $0) due to
directors and a corporation controlled by a director in respect of salaries,
consulting fees and reimbursement for operating expenses.
The Company does not pay a fee to its outside, non-officer directors. The
Company believes that consulting fees and reimbursement for operating expenses
paid to corporations owned by directors are comparable to amounts that would
have been paid to at arms length third party providers of such services.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(1) FINANCIAL STATEMENTS - Reference is made to the Financial Statements
appearing on pages F-1, through F-19
(2) EXHIBITS
1.1 Article of Incorporation of Cayman Purchasing & Supply, Inc. *
1.2 Company By-laws for Cayman Purchasing & Supply, Inc. *
1.3 Notice of reinstatement for Cayman Purchasing & Supply, Inc. *
1.4 Amendment to the Articles of Incorporation of Cayman Purchasing
& Supply, Inc. *
1.5 Notice of filing of Amendment to the Articles of Incorporation of
Cayman Purchasing & Supply, Inc. *
1.6 Notice of filing of Amendment to the Articles of Incorporation of
Cayman Purchasing & Supply, Inc. changing its name to Patagonia
Gold Corporation *
3.1 Agreement dated July 30, 1997 between The Company and Carrington
International Limited *
4.0 Joint Venture Agreement between the Company and Aurora Gold
Corporation
21.1 Subsidiaries of the Company
27.1 Financial Data Schedule
- --------
* Previously Filed
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 thereunder duly authorized.
Date: March 24, 2000 BY: /s/ David Jenkins
-------------- --------------------------
David Jenkins
Director and President
Date: March 24, 2000 BY: /s/ Cosme M. Beccar Varela
-------------- --------------------------
Cosme M. Beccar Varela
Director
18
<PAGE>
EXHIBIT (1) THE FOLLOWING FINANCIAL STATEMENTS REQUIRED TO BE INCLUDED IN
ITEM 8 ARE LISTED BELOW
INDEX TO FINANCIAL STATEMENTS
Financial Statements Page
-------------------- ----
Report of Independent Accountants F-2 and F3
Consolidated Balance Sheets F-4
Consolidated Statements of Stockholders' Equity F-5
Consolidated Statement of Operations F-6
Consolidated Statement of Cash Flows F-7
Summary of Significant Accounting Policies F-8 to F-12
Notes to Consolidated Financial Statements F-12 to F-15
Financial Statement Schedules *
*Financial Statement Schedules have been omitted as not applicable
19
<PAGE>
PATAGONIA GOLD CORPORATION
(An exploration stage enterprise)
Consolidated Financial Statements
December 31, 1999 and 1998
(Expressed in US Dollars)
Index
Report of Independent Accountants
Consolidated Balance Sheets
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Operations
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
F1
<PAGE>
MOORE STEPHENS ELLIS FOSTER LTD.
CHARTERED ACCOUNTANTS
1650 West 1st Avenue
Vancouver, BC Canada V6J 1G1
Telephone: (604) 734-1112 Facsimile: (604) 714-5916
E-Mail: [email protected]
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
PATAGONIA GOLD CORPORATION
(An exploration stage enterprise)
We have audited the consolidated balance sheet of Patagonia Gold Corporation as
at December 31, 1999 and the consolidated statements of stockholders' equity,
operations and cash flows for the year then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform an audit
to obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provide a reasonable basis for our
opinion.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at December 31, 1999
and the results of its operations and cash flows for the year then ended in
conformity with generally accepted accounting principles in the United States.
Vancouver, Canada "MOORE STEPHENS ELLIS FOSTER LTD."
March 4, 2000 Chartered Accountants
F2
- --------------------------------------------------------------------------------
MS An independently owned and operated member of Moore Stephens North America
Inc., Members in principal cities throughout North America. Moore Stephens
North America, Inc. is a member of Moore Stephens International Limited, -
members in principal cities throughout the world
- --------------------------------------------------------------------------------
<PAGE>
================================================================================
Report of Independent Accountants
- --------------------------------------------------------------------------------
To The Board of Directors and Stockholders
Patagonia Gold Corporation
We have audited the Consolidated Balance Sheet of Patagonia Gold Corporation as
at December 31, 1998 and the Consolidated Statements of Stockholders' Equity,
Operations and Cash Flows for the year ended December 31, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform an audit
to obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at December 31, 1998
and the results of its operations and its cash flows for the year ended December
31, 1998 in conformity with accounting principles generally accepted in the
United States.
/s/ BDO Dunwoody LLP
Vancouver, Canada
May 8, 1999 Chartered Accountants
F3
<PAGE>
PATAGONIA GOLD CORPORATION
(An exploration stage enterprise)
Consolidated Balance Sheets
December 31, 1999 and 1998
(Expressed in US Dollars)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
1999 1998
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current
Cash $ 22,913 $ 73,651
Receivables 7 220
Investments (Note 3) 921,332 1,567,456
- ---------------------------------------------------------------------------------------------------------
944,252 1,641,327
Mineral property costs (Note 4) 12,250 300,000
- ---------------------------------------------------------------------------------------------------------
Total assets $ 956,502 $ 1,941,327
=========================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Current
Accounts payable and accrued liabilities $ 35,000 $ 15,853
Notes payable (Note 5) 76,879 --
- ---------------------------------------------------------------------------------------------------------
Total liabilities 111,879 15,853
- ---------------------------------------------------------------------------------------------------------
Stockholders' Equity
Share capital (Note 6)
Authorized:
50,000,000 common shares, with par value of $0.001 each
Issued:
13,000,000 common shares 13,000 13,000
Additional paid-in capital 1,827,000 1,827,000
Accumulated deficit (625,168) (164,285)
Accumulated other comprehensive income (loss),
unrealized (loss) gains on securities available for sale (370,209) 249,759
- ---------------------------------------------------------------------------------------------------------
Stockholders' equity 844,623 1,925,474
- ---------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 956,502 $ 1,941,327
=========================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
Approved by the Directors:
------------------------ -----------------------
Director Director
F4
<PAGE>
PATAGONIA GOLD CORPORATION
(An exploration stage enterprise)
Consolidated Statements of Stockholders' Equity
Years Ended December 31, 1999 and 1998
(Expressed in US Dollars)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Accumulated
Compre- Other Total
Common stock Additional hensive Compre- Stock-
---------------------- paid-in Income Accumulated hensive holders'
Shares Amount capital (loss) Deficit Income (Loss) equity
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1998 13,000,000 $13,000 $1,827,000 $ -- $(28,577) $151,673 $1,963,096
- ----------------------------------------------------------------------------------------------------------------------------------
Net loss for the year -- -- -- (135,708) (135,708) -- (135,708)
Change in unrealized gains -- -- -- 98,086 -- 98,086 98,086
- ----------------------------------------------------------------------------------------------------------------------------------
Total comprehensive gain (loss) -- -- -- (37,622) (135,708) 98,086 (37,622)
- ----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1998 13,000,000 13,000 1,827,000 (164,285) 249,759 1,925,474
- ----------------------------------------------------------------------------------------------------------------------------------
Net loss for the year -- -- -- (460,883) (460,883) -- (460,883)
Change in unrealized loss -- -- -- (619,968) -- (619,968) (619,968)
- ----------------------------------------------------------------------------------------------------------------------------------
Total comprehensive loss -- -- -- (1,080,851) (460,883) (619,968) (1,080,851)
- -----------------------------------------------------------------------===============--------------------------------------------
Balance, December 31, 1999 13,000,000 $13,000 $1,827,000 $(625,168) $(370,209) $844,623
======================================================================= ============================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F5
<PAGE>
PATAGONIA GOLD CORPORATION
(An exploration stage enterprise)
Consolidated Statement of Operations
Years Ended December 31, 1999 and 1998
(Expressed in US Dollars)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
March 31 Year Year
1993 (inception) Ended Ended
to December 31 December 31 December 31
1999 1999 1998
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
General and administrative expenses
Administrative and general $ 45,067 $ 19,974 $ 19,158
Professional fees - accounting and legal 70,404 38,553 24,078
Salaries and consulting fees 78,496 45,443 33,053
- -----------------------------------------------------------------------------------------------------------------
193,967 103,970 76,289
Exploration expenses 151,284 32,236 94,295
Writedown of mineral property costs 297,000 297,000 --
- -----------------------------------------------------------------------------------------------------------------
642,251 433,206 170,584
- -----------------------------------------------------------------------------------------------------------------
Less: Income (loss)
Interest income 33,445 889 22,257
Dividend income 2,835 -- 2,835
Realized gain (loss) on sale of investments (1,875) (18,837) 16,962
Interest expense (14,672) (9,729) (4,528)
Foreign exchange loss (2,650) -- (2,650)
- -----------------------------------------------------------------------------------------------------------------
17,083 (27,677) 34,876
- -----------------------------------------------------------------------------------------------------------------
Net loss for the period $ (625,168) $ (460,883) $ (135,708)
=================================================================================================================
Loss per share $ (0.03) $ (0.01)
==================================================================================================================
Weighted average shares outstanding 13,000,000 13,000,000
==================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F6
<PAGE>
PATAGONIA GOLD CORPORATION
(An exploration stage enterprise)
Consolidated Statement of Cash Flows
Years Ended December 31, 1999 and 1998
(Expressed in US Dollars)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
March 31 Year Year
1993 (inception) Ended Ended
to December 31 December 31 December 31
1999 1999 1998
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from (used in)
operating activities
Net loss for the period $ (625,168) $ (460,883) $ (135,708)
Adjustments to reconcile net loss to net
cash used in operating activities:
- realized loss (gain) on sale of
investments (1,875) 18,837 (16,962)
- writedown of mineral property costs 297,000 297,000 --
- -----------------------------------------------------------------------------------------------------------------
(330,043) (145,046) (152,670)
Changes in assets and liabilities:
- decrease (increase) in receivables (7) 213 1,458
- increase (decrease) in accounts payable 35,000 19,147 (1,030)
- -----------------------------------------------------------------------------------------------------------------
(295,050) (125,686) (152,242)
- -----------------------------------------------------------------------------------------------------------------
Cash flows from (used in)
investing activities
Purchase of available-for-sale securities (2,178,119) (352,485) (1,603,921)
Proceeds from sale of available-for-sale
securities 888,453 359,804 528,649
Mineral property costs (12,250) (9,250) --
- -----------------------------------------------------------------------------------------------------------------
(1,301,916) (1,931) (1,075,272)
- -----------------------------------------------------------------------------------------------------------------
Cash flows from financing activities
Proceeds from issuance of common stocks 1,540,000 -- --
Proceeds from notes payable 79,879 76,879 --
- -----------------------------------------------------------------------------------------------------------------
1,619,879 76,879 --
- -----------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash for the period 22,913 (50,738) (1,227,514)
Cash and cash equivalents,
beginning of period -- 73,651 1,301,165
- -----------------------------------------------------------------------------------------------------------------
Cash and cash equivalents,
end of period $ 22,913 $ 22,913 $ 73,651
=================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F7
<PAGE>
PATAGONIA GOLD CORPORATION
(An exploration stage enterprise)
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
(Expressed in US Dollars)
================================================================================
1. Nature of Business and Going Concern
The Company was incorporated under the laws of the State of Florida on
March 31, 1993 and is in the business of exploration and development of
mineral properties. On October 13, 1997, the Company changed its name to
Patagonia Gold Corporation.
The Company was inactive until June 30, 1997, when it entered into a share
exchange agreement with the shareholders of Patagonia Gold Mines Ltd.
("PGM"), an inactive company incorporated in 1994 under the laws of
Bermuda, whereby the Company acquired all issued and outstanding share of
PGM in exchange for 5,500,000 common shares of the Company. There were no
operations of the companies prior to June 30, 1997. At the conclusion of
the transaction, the former shareholders of PGM controlled the Company and,
thus, the transaction has been accounted for as a reverse acquisition of
the Company by PGM. Consistent with accounting principles governing the
accounting for reverse acquisitions, these consolidated financial
statements are accounted for as a continuation of the legal subsidiary.
The acquisition was recorded using the purchase method. As the net book
value of the Company at the date of the acquisition was $Nil, a nominal
value has been assigned to shares issued pursuant to the share exchange
agreement.
Also on July 30, 1997, the Company acquired mineral properties in Argentina
in exchange for the issuance of 3,000,000 common shares. The mineral
properties were valued at $300,000. During the year ended December 31,
1999, the Company determined that the carrying value of the Argentinean
mineral properties exceeded the future projected cash flows from the
mineral properties. Consequently, the mineral properties were written down
to their estimated fair value of $3,000.
The recovery of the amounts shown for interests in mineral properties is
dependent upon the discovery of economically recoverable reserves or
proceeds from the disposition thereof, confirmation of the Company's
interest in the underlying mineral claims, the ability of the Company to
obtain financing to complete development of the properties and on future
profitable operations.
2. Significant Accounting Policies
(a) Basis of Consolidation
These consolidated financial statements, prepared in accordance with
accounting principles generally accepted in the United States, include
the accounts of the Company and its wholly-owned subsidiary, Patagonia
Gold Mines Ltd., a company incorporated in 1994 under the laws of
Bermuda. Significant inter-company accounts and transactions have been
eliminated.
F8
<PAGE>
PATAGONIA GOLD CORPORATION
(An exploration stage enterprise)
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
(Expressed in US Dollars)
================================================================================
2. Significant Accounting Policies (continued)
(b) Cash and Cash Equivalents
Cash equivalents are comprised of certain highly liquid instruments
with a maturity of three months or less when purchased. There were no
cash equivalents as of December 31, 1999.
(c) Mineral Properties and Exploration Expenses
Exploration costs are charged to operations as incurred as are normal
development costs until such time that proven reserves are discovered.
From that time forward, the Company will capitalize all costs to the
extent that future cash flow from reserves equals or exceeds the costs
deferred. As at December 31, 1999 and 1998, the Company did not have
proven reserves. Cost of initial acquisition of mineral rights and
concessions are capitalized until the properties are abandoned or the
right expires.
Exploration activities conducted jointly with others are reflected at
the Company's proportionate interest in such activities.
Costs related to site restoration programs are accrued over the life
of the project.
(d) Investments
Available-for-sale securities are carried at fair market value with
unrealized holding gains and losses included in stockholders' equity.
Realized gains and losses are determined on an average cost basis when
securities are sold.
(e) Concentration of Credit Risk
The Company places its cash and cash equivalents with high credit
quality financial institutions. The Company routinely maintains
balances in a financial institution beyond the insured amount. As of
December 31, 1999 the Company had $ nil in a bank beyond insured
limits.
(f) Foreign Currency Transactions
Foreign currency accounts are translated into U.S. dollars as follows:
At the transaction date, each asset, liability, revenue and expense is
translated into U.S. dollars by the use of the exchange rate in effect
at that date. At the period end, monetary assets and liabilities are
translated into U.S. dollars by using the exchange rate in effect at
that date. The resulting foreign exchange gains and losses are
included in operations.
F9
<PAGE>
PATAGONIA GOLD CORPORATION
(An exploration stage enterprise)
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
(Expressed in US Dollars)
================================================================================
2. Significant Accounting Policies (continued)
(g) Advertising Expenses
The Company expenses advertising costs as incurred. Total advertising
costs charged to expenses for the years ended December 31, 1999 and
1998 were $Nil and $Nil, respectively.
(h) Impairment
Certain long-term assets of the Company are reviewed when changes in
circumstances require as to whether their carrying value has become
impaired, pursuant to guidance established in Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of".
Management considers assets to be impaired if the carrying value
exceeds the future projected cash flows from related operations
(undiscounted and without interest charges). If impairment is deemed
to exist, the assets will be written down to fair value.
(i) Accounting Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates and assumptions.
(j) Fair Value of Financial Instruments
The respective carrying value of certain on-balance-sheet financial
instruments approximated their fair values. These financial
instruments include cash, receivables, investments and accounts
payable and accrued liabilities. Fair values were assumed to
approximate carrying values for these financial instruments, except
where noted, since they are short term in nature and their carrying
amounts approximate fair values or they are receivable or payable on
demand. Management is of the opinion that the Company is not exposed
to significant interest, credit or currency risks arising from these
financial instruments.
F10
<PAGE>
PATAGONIA GOLD CORPORATION
(An exploration stage enterprise)
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
(Expressed in US Dollars)
================================================================================
2. Significant Accounting Policies (continued)
(k) Income Taxes
The Company has adopted Statement of Financial Accounting Standards
(SFAS") No. 109, "Accounting for Income Taxes", which requires the
Company to recognize deferred tax liabilities and assets for the
expected future tax consequences of events that have been recognized
in the Company's financial statements or tax returns using the
liability method. Under this method, deferred tax liabilities and
assets are determined based on the temporary differences between the
financial statement and tax bases of assets and liabilities using
enacted tax rates in effect in the years in which the differences are
expected to reverse.
(l) Loss Per Share
Loss per share is computed using the weighted average number of shares
outstanding during the year. Effective for the year ended December 31,
1997, the Company adopted SFAS No. 128, "Earnings Per Share".
(m) Comprehensive Income
In 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive
Income", which establishes standards for reporting and display of
comprehensive income, its components and accumulated balances. The
Company is disclosing this information on its Statement of
Stockholders' Equity. Comprehensive income comprises equity except
those resulting from investments by owners and distributions to
owners. SFAS No. 130 did not change the current accounting treatments
for components of comprehensive income.
(n) New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities".
SFAS No. 133 requires companies to recognize all derivatives contracts
as either assets or liabilities in the balance sheet and to measure
them at fair value. If certain conditions are met, a derivative may be
specifically designated as a hedge, the objective of which is to match
the timing of gain or loss recognition on the hedging derivative with
the recognition of (i) the changes in the fair value of the hedged
asset or liability that are attributable to the hedged risk or (ii)
the earnings effect of the hedged forecasted transaction. For a
derivative not designated as a hedging instrument, the gain or loss is
recognized in income in the period of change. SFAS No. 133 is
effective for all fiscal quarters of fiscal years beginning after June
15, 2000.
F11
<PAGE>
PATAGONIA GOLD CORPORATION
(An exploration stage enterprise)
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
(Expressed in US Dollars)
================================================================================
2. Significant Accounting Policies (continued)
(n) New Accounting Pronouncements (continued)
Historically, the Company has not entered into derivatives contracts
either to hedge existing risks or for speculative purposes.
Accordingly, the Company does not expect adoption of the new standards
on January 1, 2000 to affect its financial statements.
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5, "Reporting on the Costs of Start-up
Activities", ("SOP 98-5") which provides guidance on the financial
reporting of start-up costs and organization costs. It requires costs
of start-activities and organization costs to be expensed as incurred.
SOP 98-5 is effective for fiscal years beginning after December 15,
1998 with initial adoption reported as the cumulative effect of a
change in accounting principle. Adoption of this standard has no
material effect on the financial statements.
3. Investments
Investments consist of available-for-sale securities and are summarized as
follows:
<TABLE>
<CAPTION>
Gross Gross
unrealized unrealized Market
Cost gains losses value
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
December 31, 1999
Equity securities $1,291,541 $ 22,434 $ 392,643 $ 921,332
---------------------------------------------------------------------------------------
December 31, 1998
Equity securities $1,317,697 $ 375,229 $ 125,470 $1,567,456
---------------------------------------------------------------------------------------
</TABLE>
Unrealized gains totalling $7,949 (1998 - $174,043) relate to investments
held by the Company's Bermuda subsidiary and are not subject to income
tax.
F12
<PAGE>
PATAGONIA GOLD CORPORATION
(An exploration stage enterprise)
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
(Expressed in US Dollars)
================================================================================
4. Mineral Property Costs
(a) Argentina
Mineral concessions in the Province of La Rioja, Argentina, are as
follows:
o Piloncho 1, Sierra de Chepes
o Piloncho 2, Sierra de Chepes
o Piloncho 20, Sierra de Chepes
o Piloncho 21, Sierra de Chepes
o Carmelita 16, Sierra de Chepes
o Carmelita 17, Sierra de Chepes
o Carmelita 18, Sierra de Chepes
(b) Guatamala
On October 1, 1999, the Company entered into an agreement that gives
the Company the right to earn a 50% interest in the San Diego Mineral
Exploration Reconnaissance Licence by paying:
o a $9,250 acquisition fee (paid); and
o $18,617 towards the Phase I exploration program.
5. Notes Payable
Loans payable are unsecured, non-interest bearing and are due on demand.
6. Share Capital
On April 9, 1997, the Company amended its Articles of Incorporation to
provide for the authorization of 50,000,000 common shares at $0.001 par
value. Previously, the authorized capital was 200 common shares of no par
value.
Also, on April 9, 1997, the Company forward split its common stock 5,000:1,
thus increasing the number of issued and outstanding common shares from 200
shares to 1,000,000 shares. This split has been reflected retroactively in
these financial statements.
F13
<PAGE>
PATAGONIA GOLD CORPORATION
(An exploration stage enterprise)
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
(Expressed in US Dollars)
================================================================================
7. Supplemental Cash Flow Information
The non-cash transaction listed as interest paid in the amount of $Nil
(1998 - $3,567) has not been included in the Statement of Cash Flows.
8. Income Taxes
(a) The Company has estimated net losses for tax purposes to December 31,
1999, totalling approximately $614,000, which may be applied against
future taxable income. Accordingly, there is no tax expense charged to
the Statement of Operations for the years ended December 31, 1999 and
1998. The Company evaluates its valuation allowance requirements on an
annual basis based on projected future operations. When circumstances
change and this causes a change in management's judgement about the
realizability of deferred tax assets, the impact of the change on the
valuation allowance is generally reflected in current income.
The right to claim these losses is expected to expire as follows:
2008 $10,000
2012 16,000
2018 128,000
2019 460,000
----------------------------------
$614,000
==================================
(b) The tax effects of temporary differences that give rise to the
Company's deferred tax asset (liability) are as follows:
1999 1998
----------------------------------------------------------------------
Tax loss carryforwards $ 157,000 $ 52,000
Valuation allowance (157,000) (52,000)
----------------------------------------------------------------------
$ -- $ --
======================================================================
No tax effect has been recorded on the accumulated other comprehensive
income unrealized gains on securities available-for-sale due to the
existence of U.S. tax loss carryforwards.
F14
<PAGE>
PATAGONIA GOLD CORPORATION
(An exploration stage enterprise)
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
(Expressed in US Dollars)
================================================================================
9. Comparative Figures
Certain 1998 comparative figures have been reclassified to conform with the
financial statement presentation adopted for 1999.
10. Related Party Transactions
Related party transactions not disclosed elsewhere in these financial
statements for the year ended December 31, 1999, include salaries of
$12,000 (1998 - $Nil) which were paid to a director of the Company and were
charged to operations in 1999.
F15
Aurora Gold Corporation
Suite 1505 - 1060 Alberni Street,
Vancouver, B.C. Canada E 4K2
Telephone: (604) 687-4432
Facsimile: (604) 687-4709
October 1, 1999
Patagonia Gold Corporation
Suite 1505- 1060 Alberni Street,
Vancouver, B.C. Canada
V6E 4K2
Attention: David Jenkins,
Dear Sirs:
Re: Aurora Gold Corporation (the "Company")
Letter of Intent: San Diego Exploration Reconnaissance Concession Joint
Venture Guatemala, Central America
This letter is intended to document our mutual understanding prior to a
commitment of funds from Patagonia Gold Corporation and/or associated companies
for the acquisition of the San Diego mineral exploration reconnaissance licence
and the exploration of the San Diego mineral exploration reconnaissance
concession, Guatemala Central America.
Aurora Gold Corporation has been awarded exclusive title to the San Diego
mineral exploration reconnaissance licence by the government of Guatemala. The
mineral exploration reconnaissance license confers on the titleholder the
exclusive rights to identify and locate possible areas for exploration, within
the licenses territorial limits and to unlimited depth in the subsoil. The
license was awarded to Aurora Gold Corporation in September 1999.
Patagonia Gold Corporation and/or associated companies shall have the right to
earn a fifty percent (50%) interest in the San Diego mineral exploration
reconnaissance licence upon payment of the following amounts:
1. The payment of USD Nine Thousand Two Hundred and Fifty (USD 9,250)
Guatemala government fee for the acquisition of the San Diego mineral
exploration reconnaissance license and
1
<PAGE>
2. The payment of USD Eighteen Thousand Six Hundred Seventeen and 25/100
(USD 18,617.25) for a Phase 1 exploration program to be conducted
between November 1, 1999 and March 31, 2000 on the San Diego mineral
exploration reconnaissance concession. The work program shall consist
of geological reconnaissance, sampling of rock outcrops and stream
sediment sampling.
Yours truly,
Aurora Gold Corporation
/s/ Cameron Richardson October 1, 1999
- ----------------------------------
Cameron Richardson
Controller and Corporate Secretary
(Authorized Representative)
Acceptance of these terms by Patagonia Gold Corporation
For and on behalf of Patagonia Gold Corporation
/s/ David Jenkins October 1, 1999
- ----------------------------------
David Jenkins
President
Patagonia Gold Corporation
(Authorized Representative)
2
EXHIBIT 21.1 SUBSIDIARIES OF THE COMPANY
SUBSIDIARIES OF THE COMPANY
Percentage of Voting
Name Jurisdiction of Incorporation Securities Owned
- ---- ----------------------------- ----------------
Patagonia Gold Mines Bermuda 100 (a)
(a) Included in the consolidated financial statements filed herein.
20
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 22,913
<SECURITIES> 921,332
<RECEIVABLES> 7
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 944,252
<PP&E> 12,250
<DEPRECIATION> 0
<TOTAL-ASSETS> 956,502
<CURRENT-LIABILITIES> 111,879
<BONDS> 0
0
0
<COMMON> 13,000
<OTHER-SE> 831,623
<TOTAL-LIABILITY-AND-EQUITY> 956,502
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (460,883)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (460,883)
<INCOME-TAX> 0
<INCOME-CONTINUING> (460,883)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (460,883)
<EPS-BASIC> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
