SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO 1 TO FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL
BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
GOLDSTATE CORPORATION
(Name of Small Business Issuer in its charter)
State of Nevada
(State or other jurisdiction of incorporation or organization)
88-0354425
(I.R.S. Employer Identification No.)
3305 Spring Mountain Road, Suite 60
Las Vegas, Nevada 89102
(Address of Principal Executive Offices)
(888) 228-5526
(Issuer's telephone number)
Securities to be registered pursuant to Section 12(b) of the Act: NONE
Securities to be registered pursuant to Section 12(g) of the Act: COMMON STOCK,
$.0003 PAR VALUE
FORM 10-SB/A Goldstate Corporation
<PAGE>
TABLE OF CONTENTS
PART I Page
Glossary
Item 1. Description of Business. . . . . . . . . . . . . . . . . . . . . . 3
Item 2. Management's Discussion and Analysis or Plan of Operation. . . . . 17
Item 3. Description of Property. . . . . . . . . . . . . . . . . . . . . . 21
Item 4. Security Ownership of Certain Beneficial Owners
and Management . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Item 5. Directors, Executive Officers, Promoters and Control Persons . . . 22
Item 6. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . 24
Item 7. Certain Relationships and Related Transactions . . . . . . . . . . 25
Item 8. Description of Securities. . . . . . . . . . . . . . . . . . . . . 26
PART II
Item 1. Market Price and Dividends on the Registrant's Common.
Equity and Other Shareholder Matters . . . . . . . . . . . . . . . 31
Item 2. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . 32
Item 3. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure. . . . . . . . . . . . . . . . 32
Item 4. Recent Sales of Unregistered Securities. . . . . . . . . . . . . . 33
Item 5. Indemnification of Directors and Officers. . . . . . . . . . . . . 35
Item 6. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 37
PART III
Item 1. Index to Exhibits. . . . . . . . . . . . . . . . . . . . . . . . . 37
Item 2. Description of Exhibits. . . . . . . . . . . . . . . . . . . . . . 37
FORM 10-SB/A Goldstate Corporation
<PAGE>
GLOSSARY
Chain of Custody: The complete charge and control of samples from subject
exploration site to testing facility by an independent party
Claim staking &
maintenance: - Claim staking process of locating claims and placing
monuments on the claim
- Claim maintenance fulfilling the annual requirements to
continue to hold claims per the correct regulations
Classic veins/lode: Narrow widths of valuable mineral within barren wall rocks
Core hole: A hole drilled to provide a sample of rock by means of a
diamond impregnated bit which produces a solid cylinder of
the rock being cored
Discontinuous ring: In the context used means - semi-continuous outcrops that,
if connected, would form a circle
Drill hole geology: The geology of the sub-surface as determined from drill
holes
Eruptive Center: Major volcanic center
Ferrolatite: A moderately acidic volcanic rock having a high iron
content.
Fire assay testing: The process whereby the gold and silver content of a rock is
determined by fusion of a measured quantity of crushed rock
with a flux composed primarily of lead oxide, sodium
carbonate, borax, silica, flour and other chemicals and the
precious metals collected in molten lead. The lead button is
then oxidized in the furnace to remove the lead leaving a
tiny bead of gold and silver, which is parted and weighed
Flux: In fire assay usage, flux denotes a chemical or mix of
chemicals added to a charge to promote the fusing of metals
Leach analysis: Measurement of the concentration of an element within a rock
by a chemical leach procedure that is capable of selectively
extracting the element in question.
Lode mining claim: A staked mining location not exceeding 1500 ft X 600 ft
where the character of the deposit is veins or lodes of
quartz or other rock in place bearing gold, silver,
cinnabar, lead, tin, copper, or other valuable deposits
FORM 10-SB/A Goldstate Corporation Page 1
<PAGE>
Molten crustal &
mantle derived
materials: A hybid melt formed by mixing melted crust with basic magma
derived from the mantle of the earth
Primary vs
secondary deposits: Primary deposits of valuable minerals are those
that formed by relatively deep earth processes; whereas
secondary deposits are those formed at or near the earth's
surface by the action oxidation, weathering and water
Proven/engineered
ore reserve: - Proven Reserves can be accurately estimated by
establishing the size, shape and mineral content of an ore
body by inspection and closely spaced samples, Goldstate
Corporation does not yet have reserves
- Ore Reserves refer to the tonnage and grade of an
economically and legally extractable ore body. Goldstate
Corporation does not yet have ore reserves
Quartzite: A sedimentary rock consisting mostly of silica sand grains
that have been welded together by heat and compaction
Rhyolite lava
flows: A volcanic rock containing greater than/= 65% silica
Tenor: Grade or concentration of a valuable mineral in rock,
particularly in reference to gold and silver
Unequilibrated
mineral assemblage: The occurrence of incompatible minerals in the same igneous
rock
Vent area: Location of eruptive activity
Volcanic depression/
caldera: Depression in the earth's surface caused by volcanic
explosive activity and subsequent collapse
FORM 10-SB/A Goldstate Corporation Page 2
<PAGE>
PART I
As used in this Registration Statement, the term "Company" refers to
Goldstate Corporation. The term "IGCO" refers to Intergold Corporation, a Nevada
corporation. The term "INGC" refers to International Gold Corporation, the
wholly owned subsidiary of Intergold Corporation.
Item 1. Description of Business.
Overview
Goldstate Corporation was incorporated on February 28, 1996 under the laws
of the State of Nevada, as "Image Perfect, Incorporated" to conduct a marketing
and public relations business to meet the public needs for greeting cards, gift
items and paper products. The business was terminated to pursue
telecommunication opportunities defined in Africa which presented greater fiscal
opportunities.
On December 12, 1996, an amendment to the Articles of Incorporation was
filed effecting a change in the corporate name to "Dynacom Telecommunications
Corporation" and to finance and purchase ownership interests in
telecommunication companies that installed and operated wireless
telecommunication systems in Africa, the Middle East, and countries in the
ex-Soviet Union. The business terminated when telecommunication licensing claims
by business associates in Zaire could not be substantiated and since unstable
political risks were foreseeable.
No assets were generated by either Image Perfect, Incorporated or Dynacom
Telecommunications Corporation, nor were any liabilities of the respective
business assumed by Goldstate Corporation.
On November 7, 1997, an amendment to the Articles of Incorporation was
filed effecting a change in the corporate name from Dynacom Telecommunications
Corporation to its present name, "Goldstate Corporation".
The Company's principal executive offices are located at 3305 Spring
Mountain Road, Suite 60, Las Vegas, NV 89102. Its telephone number is (888)
228-5526, its facsimile number is (800) 721-2406, its e-mail address is
[email protected], and its website is www.goldstatecorp.com.
The Company is engaged in the exploration of gold and silver in the United
States. The Company owns fifty-one percent (51%) of a future profit sharing
interest in profits to be realized from the exploration of 439 unpatented lode
mining claims located in Lincoln and Gooding Counties, in south-central Idaho
(the "Blackhawk II Property"). The Company entered into a joint venture
agreement with Intergold Corporation, a Nevada corporation ("IGCO") and its
wholly-owned private subsidiary, International Gold Corporation, a Nevada
corporation ("INGC"), pertaining to the joint exploration of gold and silver on
the Blackhawk II Property (the "Joint Venture Agreement"). Pursuant to the terms
of the Joint Venture Agreement, the Company is currently conducting work
programs involving exploration of the mining claims on the Blackhawk II Property
in the minimum annual amount of $250,000 for each calendar year, which commenced
January 1, 1998 and will continue through the year 2000. The Company is
responsible solely for payment of such $250,000 obligation, and will also
contribute all future capital required in the further exploration of the
Blackhawk II Property. Under the terms of the Joint Venture Agreement, neither
IGCO nor INGC are responsible for payment of any costs or other fiscal
obligations associated with the Blackhawk II Property.
An unpatented mining claim is a parcel of federal land with respect to
which there has been asserted a right of possession under the General Mining Law
of 1872 for purposes of developing and extracting the minerals discovered on
such property. Although title under a valid unpatented mining claim is not
"legal title" in the usual sense of that term, the possessory title has been
recognized by the Supreme Court of the United States as a valid property right.
Only when a mining claim is patented is there an affirmative government grant
pursuant to which legal title vests according to usual concepts of real property
ownership. See "Item 1. Description of Business - Government Regulation".
FORM 10-SB/A Goldstate Corporation Page 3
<PAGE>
As of the date of this Registration Statement, the Company is in the
exploratory stage and has not discovered any reserves on the Blackhawk II
Property. Moreover, the Company has not made any physical improvements nor
conducted any mining operations on the Blackhawk Property. The Company is in the
exploration stage and has not, as of the date of this Registration Statement,
generated revenues from operations.
Business Strategy
The Blackhawk II Property is comprised of 439 contiguous unpatented lode
mining claims in Lincoln and Gooding Counties, Idaho, comprising approximately
14 square miles. The Blackhawk II Property is accessible from Highway 75 by a
gravel side road (Thorn Creek Reservoir Road), then turning left at the Y in the
road, and travelling approximately 7 miles. All roads to the Blackhawk II
Property are ungated. This site is approximately 9 miles west of Highway 75 and
roughly 38 miles north of Twin Falls, a small city of approximately 28,000
people. The Blackhawk II Property is in the same proximity to certain unpatented
lode mining claims staked by IGCO's subsidiary, International Gold Corporation
("INGC") (the "Blackhawk Property") that have been the subject of extensive
assay and drilling programs conducted by INGC.
IGCO's wholly-owned subsidiary, INGC, held possessory title to the
unpatented lode mining claims on the Blackhawk II Property, which is public land
under the jurisdiction of the Shoshone District Office of the Bureau of Land
Management ("BLM"). INGC transferred the 439 unpatented lode mining claims
located on the Blackhawk II Property to the Company via a quit claim on June 16,
1999. All such mining claims are subject to regulation under the Federal Land
Policy and Management Act of 1976 (the "Act"), and surface management is vested
with the BLM for such mining claims. In general, the effect of the Act provides
that such mining claims would be conclusively deemed void and forfeited in the
event IGCO, INGC or the Company failed to timely pay the Federal annual mining
claim maintenance fees for each assessment year. Annual Federal mining claim
maintenance fees are approximately $43,900 and annual county fees are
approximately $1,300. Pursuant to the terms of the Joint Venture Agreement, the
Company is responsible solely for payment of such fees.
Management of the Company intends to continue its efforts to explore,
develop and detail the mineralized zones on the Blackhawk II Property, and
define its specific metallurgical and recovery methods as required.
Surface Work and Analysis
The Blackhawk II Property lies within the Magic Reservoir eruptive center a
volcanic depression (or caldera) that has been filled with rhyolite lava flows
which are dated at between five to six million years before present and known as
Moonstone Rhyolite. This eruptive center occupies an area of approximately one
hundred square miles. This broad region indicates that rhyolite lavas would have
issued from multiple vents given the short distance that viscous rhyolite lava
can flow before cooling to an immobile mass. Accordingly, management believes
that certain rhyolite vent areas may be the locus for possible mineralization in
this volcanic formation.
FORM 10-SB/A Goldstate Corporation Page 4
<PAGE>
Moreover, the Moonstone Rhyolite is similar chemically to Square Mountain
Basalt (technically, a ferrolatite), that lies in a discontinuous ring external
to the Moonstone Rhyolite. Both the ferrolatite and the Moonstone Rhyolite
contain abundant partially digested fragments of crustal rocks (quartzite and
granite) that range in size from less than one centimeter up to one meter and,
in addition, both rock types are characterized by an unequilibrated mineral
assemblage that may have been generated by mixing of molten crustal and
mantle-derived materials.
Mapping. The Company will begin geological survey by an initial mapping of
the area for exploration. Such a map will note surface features and the various
types of surface rock, as well as estimations of the depth of rock formations
and structural features. The Company intends to engage the services of its
geologist, who specializes in the mapping field of work. As of the date of this
Registration Statement, the Company has not entered into any contractual
agreements with the geologist regarding performance of such services. See "Item
1. Description of Business - Employees and Consultants".
Management currently intends to make preliminary investigations for
property exploration on the claimed areas in the following areas:
o Claims Maintenance
o Regional Exploration of the Property
o Metallurgical Process Testing for Gold and Silver Extraction
o Preliminary Drill Testing
o Mapping of Surface Geology and Survey
Management believes that a substantial portion of funding required for
preliminary property exploration investigation will be made pursuant to a series
of private placement offerings commencing after October 7, 1999.
Initial Stage of Exploration Plan. Exploration of the Blackhawk II Property
will benefit and gain from the experience of metallurgical work, assay testing
and drilling conducted on INGC's mining claims on the Blackhawk Property. The
Company is currently addressing possible work programs involving assay testing,
drilling, metallurgical recovery, and preliminary financial and economic
research and development.
An assay test is an analysis of rock samples conducted to determine the
amount of valuable material they contain. The average assay of an ore deposit,
referred to as the tenor or grade of the ore, is ordinarily expressed as a
percentage or in units of weight per ton. When ores contain more than one
commercially important chemical element, each element is assayed to determine
the total value of the ore. Moreover, when the tenor of an ore deposit decreases
regularly or irregularly into worthless rock, numerous closely spaced assays may
be needed to distinguish ore from undesirable impurities or waste that has no
potential value.
FORM 10-SB/A Goldstate Corporation Page 5
<PAGE>
The width of the ore zone may be as important as its tenor and, hence,
tenors may be expressed in "percent meters". Although the size, tenor, shape,
depth and other geological characteristics of the deposit are important,
nongeological factors are also equally important in the economic definition of
ore. Nongeological factors include prices, geography, climate, availability of
transportation, labor contracts, and governmental policies (especially those
dealing with environmental considerations, property rights and taxation). See
"Risk Factors" below.
Management is currently addressing the commencement of a drilling program
on the Blackhawk II Property. If such drilling is warranted, management intends
to engage the services of a qualified assay laboratory to carry out fire assay
testing and chemical leach analysis of core samples to be derived from such
drilling.
Management of INGC has retained AuRIC to Metallurgical Laboratories, LLC of
Salt Lake City, Utah ("AuRIC") carry out fire assay testing and chemical leach
analysis of the core samples derived from drilling on the Blackhawk Property.
AuRIC has developed a fire assay procedure that has been validated in a November
30, 1998 report by Dames & Moore ("Dames & Moore") entitled "Verification of
Validity of Developed Analytical Procedures - The Blackhawk Project", and a
subsequent report dated January 6, 1999 entitled "Determination of Repeatability
of the Verified Developed Analytical Procedures For the Blackhawk Project".
AuRIC has conducted this fire assay procedure on core samples of holes drilled
on the Blackhawk Property. Moreover, Dames & Moore has issued two subsequent
reports titled "Reconnaissance Site Visit and Surface Sampling" dated January
21, 1999 and "Verification of Validity of Developed Extraction Methods for the
Blackhawk Project" dated April 7, 1999. All of the above mentioned reports
produced by Dames & Moore were commissioned by either AuRIC or INGC, and relate
to INGC's Blackhawk Property, and not the Company's Blackhawk II Property.
Through AuRIC, the services of Dames & Moore were engaged by INGC to
provide validation audits of each step of the assay process. INGC has also
engaged Dames & Moore independently to undertake a wide variety of services,
including development geology, chain of custody work, assay data management,
permit consulting, project control management.
Dames & Moore is an internationally recognized engineering and consulting
firm and has performed over 85,000 projects for companies worldwide. Management
believes that they have a broad understanding of mining industry priorities and
regulatory concerns. In November of 1998, according to independent testing
conducted by Dames & Moore, Dames & Moore validated AuRIC's fire assay and
parallel chemical leach procedures as a method to verify the existence of
mineralization. The positive outcome of the testing program conducted by Dames &
Moore on the Blackhawk Property formed the subject of the November 1998 Dames &
Moore independent report, providing verification of mineralization in the actual
testing.
FORM 10-SB/A Goldstate Corporation Page 6
<PAGE>
The Dames & Moore reports described above refer only to the fire assay
testing and chemical leach anaylsis conducted on the Blackhawk Property. As of
the date of this Registration Statement, no such assay testing has been
conducted on the Blackhawk II Property. The exploration of the Blackhawk II
Property, however, will benefit and gain from the experience of such
metallurgical work, assay testing and drilling conducted on INGC's mining claims
on the Blackhawk Property. Management is currently addressing its requirement
for the provision of services with AuRIC, other assay labs, and independent
engineering consultants regarding work programs involving assay testing,
drilling, metallurgical recovery and preliminary financial and economic research
and development. See "Item 1. Description of Business - Employees and
Consultants".
From inception (February 28, 1996) to December 31, 1998, the Company has
spent approximately $780,000 (66%) of total operating expenses on management and
administrative costs relating to the exploration of the Blackhawk II Property
and public company related administration and finance. The Company has incurred
approximately $143,905 on expenses paid to the BLM and for staking costs
incurred by and reimbursed to INGC. From January 1, 1999 to the date of this
Registration Statement, the Company has spent approximately $600,000 (93%) of
total operating expenses on management and administrative costs relating to the
exploration of the Blackhawk II Property and public company related
administration and finance.
As of the date of this Registration Statement, the Company has not
conducted any mining operations on the Blackhawk II Property, nor has the
Company made any physical improvements on the Blackhawk II Property, surface or
subsurface.
Estimation of Mineralized Zone.
The Blackhawk II Property is without known reserves, and the proposed
program for the Blackhawk II Property is exploratory in nature. In the event the
Blackhawk II Property proves to host gold-silver mineralization, management of
the Company will then address preliminary estimates of the mineralized zone.
This would include a "second stage", which would quantify the magnitude of the
mineralized zone by conducting extensive drilling, assay testing,
geostatistical, metallurgical recovery, and financial and economic research and
development stages.
A twelve-month work plan is proposed for the Blackhawk II Property with an
initial budget of approximately $1,000,000, which includes the Company's
obligation of $250,000 under the Joint Venture Agreement, of which substantially
all is subject to financing. Management has designed this budget to fund the
project on the Blackhawk II Property through preliminary exploration stage. The
budget, subject to funding will cover the following major areas of activity:
o Claim Maintenance
o Regional Exploratory Drilling ans Assay of the Blackhawk II Property
o Preliminary Environmental Study
o Preliminary Consulting Reports
o Site survey and Geological Mapping
o Preliminary Metallurgical Study
o Geological Study
o Administration and Management
During fiscal years 1996, 1997 and 1998, the Company has not generated any
revenues from operations. The Company's financial operations and movement into
an operating basis are contingent on the successful exploration of the mining
claims and the continuing ability to generate capital financing.
FORM 10-SB/A Goldstate Corporation Page 7
<PAGE>
Joint Venture Agreement
The Company owns fifty-one percent (51%) of a future profit sharing
interest in profits to be realized from the development of the 439 unpatented
lode mining claims on the Blackhawk II Property. On December 11, 1997, the
Company entered into a joint venture agreement with IGCO and its wholly-owned
subsidiary, INGC, pertaining to the joint exploration of gold and silver on the
Blackhawk II Property (the "Joint Venture Agreement"). The Joint Venture
Agreement was entered into primarily to utilize, maximize and enhance the
complementary exploratory technologies of the Company and IGCO. Subsequent to
the Joint Venture Agreement, INGC transferred title to the mining claims located
on the Blackhawk II Property via quitclaim deed to the Company. Under the terms
of the Joint Venture Agreement, the Company paid $100,000 and issued 1,000,000
shares of its restricted shares of Common Stock to IGCO in exchange for the
purchase of a future profit sharing interest in profits. In accordance with the
terms of the Joint Venture Agreement, the Company is currently conducting work
programs involving exploration of the mining claims on the Blackhawk II Property
in the minimum annual amount of $250,000 for each calendar year, which commenced
January 1, 1998 and will continue through the year 2000. The Company is
responsible solely for the payment of such annual obligations. The terms of the
Joint Venture Agreement further provide that the Company will be the operating
partner and will be responsible solely for all project funding. The Company will
receive eighty percent (80%) of all net profits realized from the joint venture
until its invested capital is repaid, and IGCO and INGC will receive twenty
percent (20%) of all net profits. After the invested capital of the Company has
been repatriated, the Company will then receive fifty-one percent (51%) of the
net profits realized from the joint venture and IGCO and INGC will retain
forty-nine percent (49%) of the net profits realized from the joint venture. The
parties have agreed that the Company will contribute all future capital
requirements for further exploration and mining operation costs of the claims on
the Blackhawk II Property. Under the terms of the Joint Venture Agreement,
neither IGCO nor INGC are responsible for payment of any costs of obligations
associated with the Blackhawk II Property. See "Item 7. Certain Relationships
and Related Transactions".
Costs and Effects of Compliance with Environmental Laws
At the appropriate point in the exploration process, and the development
process if warranted, it is anticipated that a qualified consulting company will
be retained to perform environmental studies, reports, required governmental
submissions, and provide environmental cost estimates for the future development
of the Blackhawk II Property in order to ensure that the Company complies with
all environmental laws.
FORM 10-SB/A Goldstate Corporation Page 8
<PAGE>
Work contemplated by management to be conducted by a qualified consulting
company relating to environmental compliance is "in the permitting function"
where certain tasks may be undertaken. "In the permitting function" refers to
preliminary investigations by management that would ultimately lead to the
achievement of future required permits which includes a "BLM Notice of
Operations". The BLM Notice of Operations will be required if the Company's
preliminary exploration is worthy of further development. If the Notice of
Operations is ultimately required, it would state and define what the Company
wants to do on the claimed land site (i.e., pilot plan, mine operation, etc).
Stemming from a future possible BLM Notice of Operations would be assessment and
achievement of various BLM, NEPA, EPA, state, county, water, discharge
requirements and relating permits. If any of these permits are ultimately
required, the collection of preliminary environmental data through the
Preliminary Environmental Report and subsequent detailed study of environmental
data via an Environmental Impact Study will be required to study the effects on
land use, water resources, biological resources, cultural resources, hazardous
wastes, etc. Thus, the permitting function is the ultimate result of permit
related work, with the first task being the Preliminary Environmental Report,
including the other additional tasks which may be undertaken:
1. Preliminary Environmental Report, which is applicable to Environmental
Impact Statement work, may be required later in the project during
permitting under the National Environmental Policy Act. The conditions
that will make it necessary for the Company to have a Preliminary
Environmental Report prepared include, at a minimum, a definitive
interest in the estimated quality and quantity of gold and silver
content on the Blackhawk II Property determined through exploratory
drilling, assay, and metallurgical recovery research. As of the date
of this Registration Statement, the Company has not entered into any
contractual arrangements regarding performance of such services;
however, management anticipates that such services will be performed
in the future by a qualified engineering firm.
The Preliminary Environmental Report task, should it become necessary, is
to collect preliminary environmental data that will be used to help scope the
Environmental Impact Statement and permitting effort. During this task, a
qualified consulting company will collect easily assessable existing
environmental data, concentrating on five discipline areas: (i) land uses, (ii)
water resources, (iii) biological resources, e.g., wildlife and plants, (iv)
cultural resources, and (v) hazardous waste. Emphasis will be on obtaining data
from existing sources, such as Shoshone District BLM, National Wetland
Inventory, Idaho GAP (satellite imagery information), Idaho Department of Fish
and Games, Idaho State Lands Department, Idaho Natural Heritage Program, Idaho
State Historic Preservation Office (SHPO), and other agency sources. Data will
be requested to develop an environmental data base for various project uses.
If and when the requirement becomes applicable, data collection will
concentrate on those resources that are expected to help develop information for
permitting the first phase of a potential mine:
o Land Uses
Land Jurisdiction
Existing and Planned Land Uses
Linear Facilities (access, power lines, pipelines, etc.) Special Management
areas, such as wilderness study areas, areas of critical environmental
concern County Comprehensive Plan Nearby Communities
Existing aerial photographs would be used to assist in identifying existing
land uses and access. The topics below are areas to be studied with the use of
aerial photographs:
o Water Resources
Perennial and Intermittent Streams
Springs
Wetlands
Groundwater Depth and Initial Characterization
o Biological Resources
Wildlife Habitats
Threatened and Endangered Plant and Animal Species
Vegetation
Wetlands and Riparian Zones
FORM 10-SB/A Goldstate Corporation Page 9
<PAGE>
All environmental information would be subsequently mapped, and inventory
maps will be produced. The resources would then be assigned permitting or
environmental sensitivity. Permitting assignment relates to designated topics
that require the Company to take certain actions and/or meet certain conditions
in order to qualify to obtain an actual permit pursuant to applicable
jurisdictional laws in order to proceed with a possible mining operation.
Environmental sensitivity assignment relates to designated topics that require
the Company to take action to minimize the impact of possible mining operations,
but where no actual permitting jurisdictional laws are applicable.
As of the date of this Registration Statement, the Company cannot
reasonably estimate the costs and effects of compliance with environmental laws
due to the preliminary nature of the exploration of the Blackhawk II Property.
Moreover, the Company does not know if such costs will be material to its
business. The Company is currently in compliance with environmental laws for the
current state of its exploration of the Blackhawk II Property. The Company
expects that no costs relating to environmental compliance will be incurred
before December 31, 1999 (although such estimate is preliminary and requires
verification commensurate with future stages of exploration of the Blackhawk II
Property). The Company may be in a position, however, to incur such costs at
each stage of exploration. For example, the Company may incur such costs
relating to its preliminary drilling program planned for fall of 1999, such as
refilling the drill core holes and re-planting of flora in accordance with BLM
rules and regulations. Anticipation of the timing of incurring such costs in the
future is dependent on the outcome of detailed assay information pertaining to
the exploratory drilling program to be conducted in the fall of 1999. Moreover,
future costs of compliance with environmental laws are also dependent on the
nature and impact of future unknown events and the outcome of exploration not
yet conducted.
Competition
The Company is aware of direct competition by major and independent mining
companies for its planned business of exploration of gold and silver, and
assumes that potential long-term competition will develop. Such potential
competitors may have more experience and greater technical, financial and
marketing resources than the Company to, among others, (i) increase magnitude of
mineralized zones; (ii) develop new mining techniques to extract ores from
uneconomic rock, and (iii) improve geophysical techniques and geochemical
prospecting.
Moreover, in the event reserves are located on the Blackhawk II Property,
it may take several years from the initial phases of drilling until production
is possible, during which time the economic feasibility of certain methods of
production may change. In order to successfully compete with other mining
companies, the Company may be required to make substantial expenditures relating
to methods (i) establishing proven and probable reserves through drilling, (ii)
determining metallurgical processes to extract the ores, and (iii) constructing
mining and processing facilities.
Employees and Consultants
As of the date of this Registration Statement, the Company does not employ
any persons on a full-time or on a part-time basis. All services for the Company
are provided either by verbal commitment, contract, work orders or letter
agreements on an "as needed" basis. Generally, any services provided to the
Company pursuant to verbal commitments will be valued at less than $10,000 and
include staking, drill hole survey and flagging, geological, obtainment of water
for drilling, aerial photograph, volcanist work, core cutting and general labor.
The following lists and describes certain services performed for the Company.
See "Item 5. Directors, Executive Officers, Promoters and Control Persons".
FORM 10-SB/A Goldstate Corporation Page 10
<PAGE>
(i) Dr. Michael Mehrtens, the Chief Geologist for the Company, performs
general geological consulting services for the Company and invoices
the Company through MBM Consultants, Inc.
(ii) The Company and Geneva Resources, Inc. of Nevada ("Geneva") entered
into a technology sub-license agreement dated March 18, 1999 (the
"Sub-License Agreement"). Pursuant to the Sub-License Agreement, the
Company has acquired from Geneva a sub-license to utilize AuRIC's
proprietary information and related precious metals recovery processes
to carry out assay testing and chemical leach analysis of core samples
derived from any subsequent drilling on the Blackhawk II Property.
Pursuant to the terms of the Sub-License Agreement, the minimum time
period for access by the Company to such proprietary information is
forty (40) years. Thereafter, so long as the Company continues to
operate under the sub-licenses granted to it under the Sub-License
Agreement by actively engaging in the use of the precious metals
recovery process, the Company will continue to have access to such
proprietary information. As of the date of this Registration
Statement, Geneva does not perform any services on behalf of the
Company other than those duties and obligations set forth in the
Sub-License Agreement.
(iii)The Company entered into a contract dated July 1, 1999 with Investor
Communications International, Inc. ("ICI") whereby ICI will perform a
wide range of management, administrative, financial, marketing, and
public company operational services for a two-year period.
The Company is not a party to any labor contract or collective bargaining
agreement. The Company has experienced no significant labor stoppages in recent
years, and management believes that such relations are satisfactory.
Patents, Licenses, Trademarks, Concessions and Royalty Agreements
The Company has no patents, trademarks, licenses, franchises, concessions
or royalty agreements that are material to its business as a whole, other than
the Company's Sub-license Agreement with Geneva Resources, Inc. for technology.
Government Regulation
General. The Company's business operations in general are subject to
substantial governmental regulation including federal, state and local laws
concerning, but not limited to, such factors as safety, land use and
environmental protection. The Company must also comply with local, state and
federal requirements regarding exploration and drilling operations, public
safety, air quality, water pollution, reclamation, solid waste, hazardous waste
and wildlife protection, as well as laws protecting the rights of other property
owners and the public. The Company must also obtain and comply with local, state
and federal permits, including waste discharge requirements, other environmental
permits, use permits, plans of operation and other authorizations. Amendments to
current laws and regulations governing operations and activities of an
exploration, development and mining company or more stringent implementation of
such laws are actively considered at all times. See "Risk Factors"
Mining Claims. The Blackhawk II Property is located on federal lands,
managed by the Bureau of Land Management (the "BLM"). Title to mineral interests
on such land is usually less certain than is the case with privately owned
property, and activity on such land is usually subject to more stringent
controls than is the case with privately owned property. The following is a
description of mining claims on federal land and the requirements established by
law which must be met to obtain or keep a valid mining claim.
An unpatented mining claim is a parcel of federal land with respect to
which there has been asserted a right of possession under the General Mining Law
of 1872 for purposes of developing and extracting the minerals discovered on
such property. The possessory rights which represent title under any valid
unpatented mining claim do not arise by any instrument of grant from the United
States or out of any action by any officer or agency of the federal government
or any state government. Instead, the possessory title arises as a matter of law
out of the performance by the locator(s) of certain acts in compliance with the
requirements of federal and state law. Such possessory title, when validly
initiated, endures unless lost through abandonment or through a forfeiture,
which may result from failure to comply with filing and recording requirements
or a default with respect to performance.
Although title under a valid unpatented mining claim is not "legal title"
in the usual sense of that term, the possessory title has been recognized by the
Supreme Court of the United States as a valid property right. Only when a mining
claim is patented is there an affirmative government grant pursuant to which
legal title vests according to usual concepts of real property ownership.
FORM 10-SB/A Goldstate Corporation Page 11
<PAGE>
Lode claims and a class of mining claims. Lode claims relate to a primary
ore deposit located within definite boundaries including classic veins or lodes.
In order to maintain a valid unpatented mining claim, it is necessary to
pay BLM and county levies for such claims on an annual basis. Failure to pay
such levies for any year may subject the claim to possible title relocation by
third parties and argument by the federal government that the claim is invalid.
In general, in order for a mining claim to be eligible for patent, there
must be discovery of a valuable mineral deposit. The general standard for
determination of existence of a valuable mineral deposit is whether it is
economically viable to mine and extract. If such a discovery has been made, the
owners of the claim may institute patent proceedings with respect to the claim
in the BLM land office for the state in which the land is located. After the
application for patent is filed, it is subject to challenge, protest or contest
by the government or third parties on any ground tending to show that the
applicant has failed to comply with legal requirements for valid mineral entry
or to challenge by adverse claimants. Contests by the government are generally
resolved through administrative proceedings; adverse claims by other claimants
are usually resolved by judicial proceedings. If the contest or adverse claim is
sustained, the application for patent would be denied.
The Company has acquired the right to explore for minerals on unpatented
claims on the Blackhawk II Property through its joint venture agreement with
IGCO and INGC, and until such time as patent applications are filed and granted,
the claims may be subject to challenge. The challenge of unpatented mining
claims by private individuals or entities or various agencies of the federal
government is not uncommon.
Risk Factors Relating to the Business of the Company
The shares of the Company are highly speculative and involve an extremely
high degree of risk. Shareholders of the Company should consider the following
risk factors.
Lack of Substantial Operating History and Revenues. The Company is in the
exploratory stage, and has no substantial history of operations. Therefore, the
Company does not have any prior financial results upon which an assessment of
the Company's potential for success may be based. Accordingly, the success of
the Company is dependent on management's ability to continue financing the
research and exploration programs for the Blackhawk II Property in order to
quantify the magnitude of the mineralized zone, if any, and, ultimately, if
warranted, the drilling, assay, metallurgical and geostatistical studies to
define a commercially viable recovery process. The Company faces all of the
risks specifically inherent in the type of business in which the Company
engages. There can be no assurance that the Company will be able to operate
successfully or profitably.
FORM 10-SB/A Goldstate Corporation Page 12
<PAGE>
Highly Speculative Nature of Mineral Acquisition and Exploration.
Exploration for minerals is highly speculative, even when conducted on
properties which are believed to contain significant deposits of minerals.
Overall, most exploration projects undertaken do not result in the discovery of
commercially mineable deposits of ore. The financial success of the Company may
depend to a large extent upon the ability of the Company to find third parties
to successfully mine the Blackhawk II Property. The total amount required in
order to develop a mineral deposit and place it into commercial production
including, in some cases, the construction and operation of milling or refining
facilities is significantly greater than the cost of exploration. It is possible
that any reserves discovered by the Company on the Blackhawk II Property may not
exist in sufficient quantities to justify the expense of development and
production.
Uncertainty of Title to Mining Claims. The Company's unpatented lode mining
claims located on the Blackhawk II Property are on federal land. It should be
understood that there is a degree of uncertainty with respect to the validity of
any unpatented mining claim. Title problems could impair the Company's ability
to conduct mining activities and potentially negate what might otherwise
constitute encouraging results from exploration or prevent the Company from
acquiring any interest in minerals discovered as a result of its exploration.
See "Government Regulation".
Dependence on Key Personnel. The Company is in the exploratory stages with
no substantial prior operating history. The success of the Company will depend
to a significant extent upon the efforts and abilities of its officer and
contractors. Therefore, the loss of the Company's officer/director or any of its
contractors could be detrimental to the operations of the Company. The Company
has not entered into any long-term employment agreements with nor has it
purchased "key man" life insurance for its officer/director.
The Company's officer/director may engage in other businesses for his own
account. Mr. Gooding will devote such time to the affairs of the Company as he
deems necessary.
Limited Mining Industry Experience. The officer of the Company and the
administrative and managing consultant to the Company have limited experience in
mining and mineral exploration and analysis. However, such officer and the
administrative and managing consultant to the Company have considerable
experience in the development, management and finance of start-up companies.
Moreover, certain future contractors of the Company will have considerable
experience in mining and mineral exploration and analysis upon which the Company
will rely upon in the future. See "Item 1. Description of Business -
Management's Discussion and Analysis".
Dependence on Existing Contractual Relations. The Company's success may
depend on the continued existence of favorable contractual relations with IGCO,
which includes the Joint Venture Agreement dated December 11, 1997 with IGCO and
INGC. The Company's operations would be materially and adversely affected by the
failure of the Company to fulfill its obligations and duties pursuant to the
terms of the Joint Venture Agreement, which include maintenance of the work
program in the annual amount of $250,000 and contribution of all future capital
FORM 10-SB/A Goldstate Corporation Page 13
<PAGE>
requirements for the further exploration and mining operation costs of the
claims on the Blackhawk II Property. The Company is responsible solely for
payment of these obligations under the Joint Venture Agreement and there is no
assurance that the Company will continue to meet such obligations through fiscal
year ending December 31, 2000. Moreover, there is no assurance that favorable
contractual relations will continue with IGCO and, if so, that they will be in
the best interests of the Company.
Need for Additional Financing. The Company's exploration program will be
designed to determine the magnitude of the minerlized zone on the Blackhawk II
Property. If mineralization does exist in commercially mineable quantities,
substantial additional financing may be needed to fund further evaluation work
and mining processes. The Company may not have sufficient funds to cover such
expenses and, therefore, substantial additional funds will be required. The
Company will attempt to raise such funds from additional offerings of shares of
stock, however, there can be no assurance that the Company will be successful in
raising additional capital. If the Company is not successful in obtaining
additional funds, the Company may resort to cost-sharing arrangements and could
be required to give up a significant portion of its interest in the Blackhawk II
Property.
General Conflicts of Interest. The Company's officer/director may engage in
other business interests for his own account in which he may devote a certain
amount of his attention. As a result, there may be potential conflicts of
interest including, among other things, time, effort and corporate opportunity,
which may result from participation by such officer/director in potentially
competing business ventures. Such conflicts can be resolved through the exercise
by this individual of judgment consistent with his fiduciary duties to the
Company. The officer/director of the Company intends to resolve such conflicts
in the best interests of the Company. Moreover, the officer/director of the
Company will devote his time to the Company as he deems necessary.
Future Sales of Common Stock. As of the date of this Registration
Statement, the Company has 14,131,300 shares of its Common Stock issued and
outstanding. Of the 14,131,300 of the Company's current outstanding shares of
Common Stock, 12,025,050 shares are free trading and 2,106,250 shares are
restricted as that term is defined in Rule 144 promulgated under the Securities
Act of 1933, as amended (the "Securities Act"). The Securities Act and Rule 144
promulgated thereunder place certain prohibitions on the sale of such restricted
securities. Such restricted shares will not be eligible for sale in the open
market without registration except in reliance upon Rule 144 under the
Securities Act. In general, a person who has beneficially owned shares acquired
in a non-public transaction for at least one year, including persons who may be
deemed "affiliates" of the Company as that term is defined under the Securities
Act, would be entitled to sell within any three month-period a number of shares
that does not exceed the greater of 1% of the then outstanding shares or the
average weekly trading volume on all national securities exchanges and through
NASDAQ during the four calendar weeks preceding such sale, provided that certain
current public information is then available. If a substantial number of the
shares owned by the existing shareholders were sold pursuant to Rule 144 or a
registered offering, the market price of the Company's Common Stock could be
adversely affected.
FORM 10-SB/A Goldstate Corporation Page 14
<PAGE>
Volatility of Stock Price. The markets for equity securities have been
volatile and the price of the Company's Common Stock could be subject to wide
fluctuations in response to quarter to quarter variations in operating results,
news announcements, trading volume, sales of Common Stock by officers, directors
and principal shareholders of the Company, general trends, changes in the supply
and demand for the Company's shares, the price of gold or silver, and other
factors.
Broker-Dealer Sales of the Company's Shares. It is likely that the common
shares of the Company will be defined as "penny stocks" under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") until the Company's common
shares are quoted on the NASDAQ system operated by the National Association of
Securities Dealers, Inc. or listed on a national securities exchange. The
Exchange Act and such penny stock rules and regulations promulgated thereunder
generally impose additional sales practice and disclosure requirements upon
broker-dealers who sell the Company's Common Stock to persons other than
"accredited investors" (generally, defined as institutions with assets in excess
of $5,000,000 or individuals with net worth in excess of $1,000,000 or an annual
income exceeding $200,000 ($300,000 jointly with a spouse)) or in transactions
not recommended by the broker-dealer.
For transactions covered by the penny stock rules, the broker-dealer must
make a suitability determination for each purchaser and receive the purchaser's
written agreement prior to the sale. In addition, the broker-dealer must make
certain mandated disclosures in penny stock transactions, including the actual
sale or purchase price and actual bid and offer quotations, the compensation to
be received by the broker-dealer and certain associated persons, and deliver
certain disclosures required by the Securities and Exchange Commission.
Consequently, the penny stock rules may affect the willingness of broker-dealers
to make a market in or trade the common shares of the Company and thus may also
affect the ability of shareholders of the Company's Common Stock to resell those
shares in the public markets.
General Risks of the Mining Industry
Nature of Mineral Exploration and Development. The business of exploring
for and developing mineral deposits is highly speculative and involves greater
risks than many other businesses. Mineral properties, including those which may
have encouraging exploratory results, may not lend themselves to engineering,
geological or other recognized appraisal procedure, or mining. The Company's
operations will be subject to all of the operating hazards and risks normally
incident to exploring or developing mineral properties, such as encountering
unusual or unexpected geologic faults or conditions, periodic interruptions due
to inclement weather conditions and environmental constraints. The Company
intends to carry liability insurance covering certain of the Company's
activities and properties. However, there can be no assurance that such
insurance will protect the Company from significant loss or liability. In the
event the Company should sustain an uninsured loss or liability, its ability to
operate may be materially adversely affected.
FORM 10-SB/A Goldstate Corporation Page 15
<PAGE>
Governmental Regulation. The Company's business operations in general are
subject to substantial government regulation including federal, state and local
laws concerning, but not limited to, such factors as safety, land use and
environmental protection. The Company must also comply with local, state and
federal requirements regarding exploration and drilling operations, public
safety, air quality, water pollution, reclamation, solid waste, hazardous waste
and wildlife protection, as well as laws protecting the rights of other property
owners and the public. Although the Company intends to fully comply with all
such laws, regulations and requirements, failure to do so would have a
materially adverse effect on the Company including substantial penalties, fees
and expenses, and could result in significant delays in the Company's operations
or a potential shutdown of some of the operations. The Company must also obtain
and comply with federal, state and local permits, including waste discharge
requirements, other environmental permits, use permits, plans of operation and
other authorizations. Amendments to current laws and requirements governing
operations and activities of exploration, development and mining companies or
more stringent implementation of such laws are actively considered from time to
time and could have a material adverse impact on the Company. There can be no
assurance that future changes in existing law or new legislation will not limit
or adversely impact the Company's business operations.
Environmental Hazards and Controls. Compliance with environmental quality
requirements imposed by federal, state and local governmental authorities may
necessitate significant expenditures or may delay or interrupt the exploration
and development of Blackhawk II Property. There can be no assurance that
environmental standards imposed by any governmental authority will not be
changed or become more stringent, thereby possible materially and adversely
affecting the activities of the Company. Failure by the Company to comply with
such restrictions could delay or preclude the Company operations which are in
violation of such restrictions. Although the Company intends to conduct its
operations in an environmentally acceptable manner, the Company could be found
liable for damages if its operations result in pollution or other damages. The
Company will be required to restore all lands on which its conducts exploration
activities to essentially their condition prior to such activities.
Payment of Taxes and Annual Obligations. The Company may be obligated to
pay annual taxes and annual county and BLM fees on the Blackhawk II Property.
Such fixed obligations must be met by the Company or the Company will lose its
interests in such mining claims. The Company may need additional revenues from
operations or financing to meet these obligations or possible forfeiture of
claimed lands could result.
Availability of Water. Water is usually required in all phases of the
exploration and development of mineral properties. It is used in certain
activities in which the Company is or maybe involved, such as exploratory
drilling and testing. The Company anticipates that sufficient water for
exploratory purposes will be available from private sources near the Blackhawk
II Property. However, there can be no assurance that sufficient water will
continue to be available or that necessary water rights will be granted by
regulatory authorities or obtained from private sources. All water disposal or
FORM 10-SB/A Goldstate Corporation Page 16
<PAGE>
discharge, if any, will be subject to regulation pursuant to federal, state and
local water quality standards. If sufficient water is not available or if the
cost of complying with water quality regulations is too high, large scale
exploration and development of the Blackhawk II Property may become economically
unfeasible and adversely affect the value of such properties.
Dependence on Precious Metals Mining Industry. The Company's operations may
be dependent upon the levels of activity in precious metal exploration and
development industries. Such activity levels are affected by trends in the
precious metal industry and precious metal prices. Historically, prices for
precious metals have been volatile and are subject to wide fluctuations in
response to changes in the supply of and demand for precious metals, market
uncertainty and a variety of political, economic and other factors beyond the
control of the Company. The Company cannot predict future price movements with
any certainty. Any prolonged reduction in precious metal prices, however, may
depress the level of exploration, development and production activity and result
in a material adverse affect on the Company's operations.
Fluctuation in and Regulation of Prices for Precious Metals. If gold or
silver are recoverable on the Blackhawk II Property, the success of the Company
will depend to a degree on the price which may be realized upon the sale of such
metals. The prices of gold and silver, as well as other precious metals, have
been quite volatile. For example, at the time the United States government began
allowing its citizens to hold gold in 1970, the price of gold was $35.00 per
Troy ounce. The price has been as high as $875.00 per ounce and as low as
$125.00 per ounce since that date. In 1998, the price of gold per ounce by the
London afternoon fix ranged from $273.40 to $313.15 per ounce, and averaged
$294.09 that year. Among other factors affecting the price of gold are (i) the
supply of and demand for gold, (ii) world economic conditions, (iii) the
confidence or lack of confidence in various mediums of exchange (including the
dollar), and (iv) governmental regulation. Although the price of gold and silver
have fluctuated substantially over the years, the costs of exploration and
development have also increased. It can be expected that such costs will
continue to rise in accordance with inflationary trends, while there is no
assurance that gold and silver prices will rise proportionately or remain at
current levels.
Item 2. Management's Discussion and Analysis or Plan of Operation.
Results of Operation
For Fiscal Year Ended December 31, 1998 compared with Fiscal Year Ended December
31, 1997
The Company's net losses for fiscal year ended 1998 were approximately
$439,473 compared to a net loss of approximately $942,938 for fiscal year ended
1007. During both fiscal years 1998 and 1997, the Company recorded no income.
During fiscal year 1998, the Company recorded operating expenses of
$410,256 compared to $904,176 of operating expenses recorded during fiscal year
1997. Property exploration expenses decreased approximately $56,095 during
fiscal year 1998 compared to fiscal year 1997. The decrease in property
exploration expenses was due to payment of $43,905 to the BLM for claims
maintenance fees during fiscal year 1998 compared to payments of $100,000 for
reimbursement to IGCO of staking and exploration costs pursuant to the terms of
the Joint Venture Agreement.
Administrative expenses decreased approximately $437,825 during fiscal year
1998 compared to fiscal year 1997 primarily relating to a decrease in overhead
and administrative expenses and no payment for expenses such as consultant fees,
office rental, wages and salaries, telephone and fax, and travel. Approximately
$300,000 was incurred as overhead and administrative expenses during fiscal year
1998, and $553,200 was paid to Tri Star Financial Services, Inc. ("Tri Star")
for previous amounts owing and current services rendered including, but not
limited to, financial, administrative, gold and silver metals exploration
management. The consulting services and management agreement with Tri Star
commenced on January 1, 1998 and terminated on June 30, 1999.
FORM 10-SB/A Goldstate Corporation Page 17
<PAGE>
Quarter Ended March 31, 1999 compared to March 31, 1998
For the three-month period ended March 31, 1999, the Company recorded a net
loss of $950,884 compared to a net loss of $96,083 in the corresponding period
of 1998. During the three-month period ended March 31, 1999 and March 31, 1998,
the Company recorded no income.
During the three-month period ended March 31, 1999, the Company recorded
operating expenses of $939,158 compared to $86,387 of operating expenses
recorded in the same period for 1998. The Company incurred property exploration
expenses during the first quarter of 1999 of $666,852 relating to expensing the
amounts paid pursuant to the Sub License Agreement as research and development
and administrative expenses increased approximately $185,919 in the three-month
period ended in 1999 compared to 1998. This increase was due primarily to an
increase in overhead and administrative expenses resulting from the increasing
scale and scope of the overall activity. Approximately $267,900 was incurred as
overhead and administrative expenses during the first quarter of 1999, and
$431,000 was paid to Tri Star for previous amounts owing and current services
rendered including, but not limited to, financial, administrative, gold and
silver metals exploration management. The consulting services and management
agreement with Tri Star commenced on January 1, 1998 and terminated on June 30,
1999. The Company has entered into a similar agreement with Investor
Communications International, Inc. ("ICI") for a period of two years, which
commenced July 1, 1999, for such services.
Quarter Ended June 30, 1999 compared to June 30, 1998
For the three-month period ended June 30, 1999, the Company recorded a net
loss of $374,942 compared to $88,759 in the corresponding period of 1998. During
the three-month period ended June 30, 1999 and June 30, 1998, the Company
recorded no income.
During the three-month period ended June 30, 1999, the Company recorded
operating expenses of $362,465 compared to $84,772 of operating expenses
recorded in the same period for 1998. The Company did not incur any property
exploration expenses during the second quarter of either 1999 or 1998. However,
administrative expenses increased approximately $277,693 in the second quarter
ended June 30, 1999 compared to second quarter ended June 30, 1998. This
increase was due primarily to an increase in overhead and administrative
expenses resulting from the increasing scale and scope of the overall
exploration and business activity. Of the $332,100 incurred as overhead and
administrative expenses incurred during the second quarter of 1999,
approximately $487,000 was paid to Tri Star for previous amounts owing and
current services rendered including, but not limited to, financial,
administrative, gold and silver metals exploration management.
Liquidity and Capital Resources
For fiscal year ended December 31, 1998
As of December 31, 1998, the Company's current assets were $171,147 and its
current liabilities were $557,515. As of December 31, 1998, the current
liabilities exceeded current assets by $386,368. As of December 31, 1997, the
Company's current assets were $1,186 and its current liabilities were $578,081.
As of December 31, 1997, the current liabilities exceeded current assets by
$576,895.
The increase in current assets in fiscal year 1998 was due primarily to the
valuation of its interest in the mining claims pursuant to the Joint Venture
Agreement of $170,000. The decrease in current liabilities in fiscal year 1998
was due primarily to repayment by the Company of advances to certain companies
in the approximate amount of $202,019.
FORM 10-SB/A Goldstate Corporation Page 18
<PAGE>
Stockholders' equity (deficit) increased from ($576,895) for fiscal year
ended 1997 to ($386,368) for fiscal year ended 1998. To provide capital, the
Company sold stock in private placement offerings or issued stock in exchange
for debts of the Company. The issuances of stock resulted in an increase of
approximately $1,695,000 in the capital of the Company since inception. See
"Part II. Item 4. Recent Sales of Unregistered Securities".
Quarter Ended March 31, 1999
As of the three-month period ended March 31, 1999, the Company's total
assets were $209,739. This slight increase in assets from fiscal year ended
December 31, 1998 was due primarily to an increase in cash and cash equivalents.
As of the three-month period ended March 31, 1999, the Company's total
liabilities were $978,483. This overall increase from fiscal year ended December
31, 1998 is due primarily to the promissory notes issued by the Company to AuRIC
in the amount of $250,000 and to Geneva in the amount of $250,000, pursuant to
the terms and conditions of the Sublicense Agreement.
Stockholders' Equity (deficit) decreased from ($386,368) for fiscal year
ended December 31, 1998 to ($768,744) for the three-month period ended March 31,
1999.
Quarter Ended June 30, 1999
As of the three-month period ended June 30, 1999, the Company's total
assets were $170,181. This decrease in assets from fiscal year ended December
31, 1998 was due primarily to a decrease in cash and cash equivalents. As of the
three-month period ended June 30, 1999, the Company's total liabilities were
$913,867. This overall increase from fiscal year ended December 31, 1998 is due
primarily to the promissory notes issued by the Company to AuRIC in the amount
of $250,000 and to Geneva in the amount of $250,000 pursuant to the terms and
conditions of the Sublicense Agreement.
Based upon the twelve-month work plan proposed by management for the
Blackhawk II Property discussed above in "Description of Business - Estimation
of Mineralized Zone", it is anticipated that such a work plan would require
approximately $1,000,000 of additional financing, designed to fund the work plan
through preliminary exploration phase. Such financing would cover the following
major areas in the approximate amounts as follows: $42,200 for land maintenance,
$292,840 for exploration of the property, $15,000 for preliminary environmental
studies, $150,000 for engineering and consulting studies, and $500,000 in
administration and management.
A significant and estimated commitment for the Company for fiscal year 1999
pertaining to contractual arrangements and work orders is an amount not greater
than $480,000 to ICI. The Company is charged a monthly fee by ICI for
performance of services rendered on an ongoing basis commensurate with the needs
and requirements of the Company for that particular month, including services
related to exploration, administrative, public company operations, and
maintenance.
Management believes that no other material commitments for capital
expenditures will be incurred by the Company over the next twelve-month period.
It is anticipated that any expenditures to be incurred by the Company will be
operational, including preliminary drilling and assay, metallurgical research
and payment of annual maintenance claims fees to the BLM. Management anticipates
that a substantial portion of the initial budget of $1,000,000 for the
twelve-month work plan, which includes such expenditures, will be funded
pursuant to a series of private placement offerings under Regulation D, Rule
506, commencing after October 8, 1999.
FORM 10-SB/A Goldstate Corporation Page 19
<PAGE>
The Company entered into three promissory notes due to determination by the
Company that certain investor subscriptions for common stock pursuant to private
placement offerings were not properly accepted by the Company. The original
intent between the parties was that the investors would enter into promissory
notes convertible at a later point in time as a source of funding. Such shares
of common stock were mistakenly issued by the Company instead of the intended
promissory notes. The promissory notes were issued to reflect the prior original
intention of the parties. The first promissory note dated July 31, 1997 is (i)
in the principal amount of $70,000, (ii) bears interest at the rate of eight
percent (8%) per annum, (iii) payable on demand, and (iv) convertible at the
option of the holder after October 8, 1999 into 350,000 shares of common stock
of the Company. The second promissory note dated February 3, 1998 is (i) in the
principal amount of $5,000, (ii) bears interest at the rate of eight percent
(8%) per annum, (iii) payable on demand, and (iv) convertible at the option of
the holder after October 8, 1999 into 25,000 shares of common stock of the
Company. The third promissory note dated March 5, 1998 is (i) in the principal
amount of $100,000, (ii) bears interest at the rate of eight percent (8%) per
annum, (iii) payable on demand, and (iv) convertible at the option of the holder
after October 8, 1999 into 500,000 shares of common stock of the Company.
From the date of this Registration Statement, management believes that the
Company can satisfy its cash requirements for approximately the next three
months based on its ability to obtain advances from certain investors including,
but not limited to, ICI, Mr. Brent Pierce and Rising Sun Capital Corp. From the
net proceeds received pursuant to the Private Placement Memorandum dated March
17, 1999, management utilized a substantial portion of the funding for (i)
management and administration expenses relating to development programs for
metallurgical technology and planning for the Blackhawk II Property; (ii)
repayment of advances to companies which provided past management services, and
(iii) general working capital.
The Company has been deemed a "going concern" by its independent auditors,
Johnson, Holscher & Co., P.C. as noted in the financial statements attached
hereto. There is substantial doubt, however, that the Company will be able to
retain its status as a "going concern", that is assumption of the continuity of
operations of the Company in the absence of evidence to the contrary. Management
believes that it can maintain its status as a "going concern" based on its
ability to raise funds pursuant to future private placement offerings and to
obtain advances and minimizing operating expenses by not duplicating expenses or
incurring needless expenses.
The Company does not own any plant and/or equipment. Management does not
anticipate any purchases of plant and/or significant equipment, nor does it
expect any significant changes in the number of its employees. Future
exploration of the Blackhawk II Property will primarily be conducted pursuant to
work orders and/or contractual arrangements with the Company's geologist and
AuRIC. The Company will be primarily dependent upon its contractors for use of
equipment necessary for the exploration of gold and silver. Any equipment
purchases by the Company will be based on results of preliminary drilling and
assay, and other elements of exploration development including logistics,
estimated extraction procedures, availability of labor, and price of gold. As of
the date of this Registration Statement, the Company has not entered into any
such contractual arrangements.
The Company is in the exploratory stages with no substantial prior
operating history. The success of the Company will depend to a significant
extent upon the efforts and abilities of its officers and contractors. Certain
future contractors of the Company will have considerable experience in mining
and mineral exploration and analysis. For the current level of exploration, the
Company's requirements for mining experience are limited to geological work,
surface sampling, exploratory drilling, site survey, metallurgical research,
geological mapping, and other preliminary exploratory investigation. The Company
plans to obtain the services of qualified personnel and contractors to provide
the above services. It is the Company's position to utilize independent,
professional, industry accredited agents, to the largest extent possible, to
provide independent accreditation of exploratory data generated. The Company's
management at the current date believes that they have the ability to obtain and
provide the appropriate sources of mining experience commensurate with each
phase of the exploration to be conducted.
Certain other officers of the Company have limited experience in the mining
industry; however, such officer have considerable experience in the development,
management and finance of start-up companies.
FORM 10-SB/A Goldstate Corporation Page 20
<PAGE>
Many existing computer programs use only two digits to identify a year in
the date field. These programs were designed without considering the impact of
the upcoming change in the century. If not corrected, these computer
applications and systems could fail or create erroneous results by, at, or after
the year 2000. Based on the Company's investigations to date, management does
not anticipate that the Company or Geneva will incur material operating expenses
or be required to incur material costs to be year 2000 compliant. Moreover,
management believes that the Company's and Geneva's systems are fully year 2000
compliant. There can be no assurance, however, that potential systems
interruptions or the cost necessary to update software would not have some
effect on the Company's business, results or operations. In addition, in the
event that Geneva does not successfully and timely achieve year 2000 compliance,
the Company's business or operations may be affected. Management of the Company
believes, however, that any such potential systems interruptions or costs
incurred to update software will not be material.
Item 3. Description of Property.
Except as described above, the Company does not own any other real estate
or other properties. Management believes that the Company's offices are adequate
for its reasonable foreseeable needs. The Company does not intend to acquire any
properties at the current date.
Item 4. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth the name and address, as of the date of this
Registration Statement, and the approximate number of shares of Common Stock of
the Company owned of record or beneficially by each person who owned of record,
or was known by the Company to own beneficially, more than five percent (5%) of
the Company's Common Stock, and the name and shareholdings of each officer and
director, and all officers and directors as a group.
- --------------------------------------------------------------------------------
Title of Class Name and Address Amount and Nature (1) Percent
of Beneficial Owner of Class of Class
- --------------------------------------------------------------------------------
Common Stock (2) Delta Financial Resources (3) 705,000 5%
P.O. Box 2097
George Town, Grand Cayman
Cayman Islands, BWI
Common Stock (2) Intergold Corporation (3) 1,000,000 7%
5000 Birch Street, Suite 4000
Newport Beach, CA 92660
Common Stock AuRIC Metallurgical Laboratories (3) 1,000,000 7%
3260 West Directors Row
Salt Lake City, Utah 84104
Common Stock All officers and directors -0- 0%
as a group (1 person)
- --------------------------------------------------------------------------------
(1) Does not assume the exercise of options pursuant to the terms of the
Non-Qualified Stock Option Plan to purchase an aggregate of 1,500,000
shares of restricted Common Stock at $.15 per share by certain officers,
directors or significant contractors of the Company, none of whom currently
are or after exercise of their respective options would be beneficial
owners or owners of record of more than five percent (5%) of Common Stock.
See "Executive Compensation - Non Qualified Stock Option Plan".
(2) These are restricted shares of Common Stock.
(3) Owner of record.
FORM 10-SB/A Goldstate Corporation Page 21
<PAGE>
Item 5. Directors, Executive Officers, Promoters and Control Persons.
The directors, executive officers and significant contractors to the
Company are as follows:
Name Age Position with the Company
- ---- --- -------------------------
Harold Gooding 36 Director and the President,
Secretary/Treasurer
Michael Mehrtens, Ph.D. 63 Project Management Consultant
HAROLD GOODING has been a Director and the President, Secretary/Treasurer
of the Company since September 16, 1997. From April 1992 to August of 1994, Mr.
Gooding worked in sales in the water treatment industry with Osmonics, located
in Minnetonka, Minnesota. Osmonics is a diversified multi company entity that
caters to various facets of the water treatment industry. As sales manager, Mr.
Gooding was responsible for the sale of large scale water treatment systems for
industrial applications requiring consistent water quality such as the beverage
bottling industry. From April 1994 to August of 1995, Mr. Gooding was the sales
manager for the northeast region for Ultra Pure Water Systems (U.S.A.), Inc.,
located in Massachusetts. From August 1995 until summer of 1998, Mr. Gooding was
employed as an international sales manager with Cambridge Applied Systems based
out of Medford, Massachusetts, where he was responsible for the manufacture and
sale of the viscosity system. From mid 1998 to current, Mr. Gooding has provided
the role of international sales manager to Photofabrication Engineering, Inc.
FORM 10-SB/A Goldstate Corporation Page 22
<PAGE>
where he is responsible for the sales and distribution of precision metal
products to the aerospace and micro electronic industry. Mr. Gooding is also a
director of IGCO and has previously held the position of president and a
director of Vega-Atlantic Corporation, an OTC Bulletin Board public company that
was formerly marketing point of entry water treatment appliances for commercial
and residential use before changing business focus and direction to gold
exploration and development.
MICHAEL B. MEHRTENS, Ph.D is the Project Management Consultant for the
Company. Dr. Mehrtens also serves as Chief Geologist for IGCO and as Project
Manager of the Blackhawk Gold Project. He is a Consulting Geologist whose
professional experience in the mining industry commenced in Southern Africa in
1957 as a geologist with Anglo American Corporation and later with Rio Tinto
Group in the United Kingdom, Canada and the United States. During this
twenty-one year period, Dr. Mehrtens gained mining, exploration and management
experience with the two largest multinational mining corporations. Between 1974
and 1979, Dr. Mehrtens served as head of U.S. exploration for Rio Algom, a
division of Rio Tinto Zinc. Since 1990, Dr. Mehrtens has been president of MBM
Consultants, Inc., a firm through which he does consulting work.
Dr. Mehrtens was also the President and a director of IGCO from October 5,
1997 to September 15, 1998. Dr. Mehrtens was also the President, Secretary,
Treasurer, and director to IGCO's wholly owned subsidiary, International Gold
Corporation, from July 24, 1997 to September 15, 1998.
At the present time, no family relationship exists among any of the named
directors and executive officers. No arrangement or understanding exists between
any such director or officer and any other persons pursuant to which any
director or executive officer was elected as a director or executive officer of
the Company. The directors of the Company serve until their successors take
office or until their death, resignation or removal. The executive officers
serve at the pleasure of the Board of Directors of the Company.
As of the date of this Registration Statement, no director or executive
officer of the Company is or has been involved in any legal proceeding
concerning (i) any bankruptcy petition filed by or against any business of which
such person was a general partner or executive officer either at the time of the
bankruptcy or within two years prior to that time; (ii) any conviction in a
criminal proceeding or being subject to a pending criminal proceeding (excluding
traffic violations and other minor offenses) within the past five years; (iii)
being subject to any order, judgment or decree permanently or temporarily
enjoining, barring, suspending or otherwise limiting involvement in any type of
business, securities or banking activity; or (iv) being found by a court, the
Securities and Exchange Commission or the Commodity Futures Trading Commission
to have violated a federal or state securities or commodities law (and the
judgment has not been reversed, suspended or vacated).
FORM 10-SB/A Goldstate Corporation Page 23
<PAGE>
Item 6. Executive Compensation.
As of the date of this Registration Statement, directors of the Company
accrue $500 per month in directors' fees for their roles as directors. Mr.
Gooding accrued $6,000 during fiscal year 1998 as compensation for his role as
director of the Company. Dr. Mehrtens, the Company's Project Management
Consultant, has engaged in an informal consulting arrangement with the Company
pursuant to which he invoices the Company through MBM Consultants, Inc. ("MBM")
for consulting services performed. Officers and directors of the Company are
reimbursed for any out-of-pocket expenses incurred by them on behalf of the
Company.
As of fiscal year end December 31, 1997, the Company has accrued since
inception approximately $12,000 and paid $0 to its officers and directors as
executive compensation. As of fiscal year end December 31, 1997, the Company has
accrued approximately $480,000 and paid approximately $160,000 to Tri Star
Financial Services, Inc. ("Tri Star"), for managerial and administrative
services rendered.
As of fiscal year end December 31, 1998, the Company accrued approximately
$6,000 and paid $0 to its officer and director as executive compensation. As of
fiscal year end December 31, 1998, the Company accrued approximately $300,000
and paid approximately $550,000 to Tri Star for managerial and administrative
services rendered and for previous services rendered that were unpaid in 1997.
See "Summary Compensation Table".
Pursuant to the consulting services and management agreement with Tri Star,
which was dated January 1, 1998 and terminated June 30, 1999, and ICI dated July
1, 1999, respectively, services rendered or to be rendered pursuant to the terms
and provisions of the respective agreements are (i) financial, such as business
planning, capital and operating budgeting, bookkeeping, financial statement
services, auditor liason, banking, record keeping and documentation, database
records, (ii) gold and silver exploration management, such as administration of
metallurgical development, metallurgical liaison, BLM liaison, engineering
company liaison, drilling administration, geologist liaison, mapping, survey and
catalogue, geostatistical liason, environmental research, geological reports
compilation, (iii) administration, such as legal liaison, corporate minutebook
maintenance, and record keeping, corporate secretarial services, printing and
production, office and general duties, international business relations,
corporate information distribution and public relations, and media liaison.
Mr. Harold Gooding, as an officer and director of the Company, is
reimbursed for any out-of-pocket expenses incurred by him on behalf of the
Company. Executive compensation is subject to change concurrent with Company
requirements. Mr. Harold Gooding is not a director or officer of either Tri Star
or ICI, nor does the Company own of record capital stock of either Tri Star or
ICI. Neither Tri Star nor ICI own of record any capital stock of the Company.
Summary Compensation Table
Annual Compensation Awards Payouts
--------------------- ---------- -------
$ $ $ $ # $ $
Name and Position Salary Bonus Other RSA Options LTIP Other
- ----------------- ------ ----- ----- --- ------- ---- -----
Brian Harris 1997 0 0 0 0 0 0 0
Pres./Director
Ronald Lambrecht 1997 0 0 0 0 0 0 0
Secy./Director
Harold Gooding 1997 0 0 0 0 0 0 0
Pres./Director 1998 0 0 0 0 0 0 0
FORM 10-SB/A Goldstate Corporation Page 24
<PAGE>
Non-Qualified Stock Option Plan
On March 1, 1999, the Board of Directors of the Company adopted the
Non-Qualified Stock Option Plan (the "SOP") which initially provided for the
grant of options to purchase an aggregate of 1,500,000 shares of Common Stock at
$.15 per share. The purpose of the SOP is to make options available to
directors, management and significant contractors of the Company in order to
encourage them to secure an increase on reasonable terms of their stock
ownership in the Company and to remain in the employ of the Company, and to
provide them compensation for past services provided.
The SOP is administered by the Board of Directors which determines the
persons to be granted options under the SOP, the number of shares subject to
each option, the exercise price of each option and the option period, and the
expiration date, if any, of such options. The exercise of an option may be less
than fair market value of the underlying shares of Common Stock. No options
granted under the SOP will be transferable by the optionee other than by that
provided by the Option Grant Agreements or will or the laws of descent and
distribution and each option will be exercisable, during the lifetime of the
optionee, only by such optionee.
The exercise price of an option granted pursuant to the SOP may be paid in
cash, by the surrender of options, in Common Stock, in other property, including
the optionee's promissory note, or by a combination of the above.
As of the date of this Registration Statement, options have been granted in
the aggregate of 1,000,000 shares to the following individuals. All options
granted are exercisable by the respective individual from the date of grant
through the date of expiration.
- --------------------------------------------------------------------------------
Number of Date of Grant Exercise Price Date of
Shares Granted Expiration
- --------------------------------------------------------------------------------
Gino Cicci 200,000 15-Jun-99 $0.15 March 1, 2019
Grant Atkins 300,000 15-Mar-99 $0.15 March 1, 2019
Brent Pierce 300,000 15-Mar-99 $0.15 March 1, 2019
Harold Gooding 100,000 15-Mar-99 $0.15 March 1, 2019
Marcus Johnson 100,000 15-Mar-99 $0.19 March 1, 2019
TOTAL 1,000,000
- --------------------------------------------------------------------------------
No share options have been exercised as at the date of this Registration
Statement.
Item 7. Certain Relationships and Related Transactions.
On December 11, 1997, the Company, IGCO and its wholly-owned subsidiary,
INGC, entered into a joint venture agreement pertaining to the joint exploration
of gold and silver on the Blackhawk II Property (the "Joint Venture Agreement").
Pursuant to the terms of the Joint Venture Agreement, the Company paid $100,000
FORM 10-SB/A Goldstate Corporation Page 25
<PAGE>
and issued 1,000,000 shares of its restricted common stock to IGCO in exchange
for the purchase of a future profit sharing interest. The terms of the Joint
Venture Agreement further provide that the Company will be the operating partner
and be responsible solely for providing funding for all exploration expenses to
be incurred on the Blackhawk II Property. In accordance with the terms of the
Joint Venture Agreement, the Company will receive eighty percent (80%) of the
net profits realized from the joint venture until its invested capital is
repaid, and IGCO and INGC will receive twenty percent (20%) of the net profits
realized from the joint venture. After the invested capital by the Company has
been repatriated, the Company will then receive fifty-one percent (51%) of the
net profits realized from the joint venture and IGCO and INGC will retain
forty-nine percent (49%) of the net profits realized from the joint venture. The
Company has also agreed to contribute all future capital requirements for the
further exploration and mining operation costs of the claims on the Blackhawk II
Property.
The above described transaction was conducted pursuant to arms-length
negotiations and is on terms as fair as those that would have been obtainable
from independent third parties. The board of directors of the Company has not
adopted or approved any policy regarding future transactions with related third
parties.
The officer/director of the Company is engaged in other businesses, either
individually or through partnerships and corporations in which he may have an
interest, hold an office or serve on the boards of directors. The director of
the Company, Mr. Harold Gooding, has other business interests to which he may
devote a major or significant portion of his time. Certain conflicts of
interest, therefore, may arise between the Company and its director. Such
conflicts can be resolved through the exercise by Mr. Gooding of judgment
consistent with his fiduciary duties to the Company. The officer/director of the
Company intends to resolve such conflicts in the best interests of the Company.
Moreover, the officer/director will devote his time to the affairs of the
Company as he deems necessary.
Item 8. Description of Securities.
The Company is authorized to issue 75,000,000 shares of $.0003 par value
Common Stock and 25,000,000 shares of $.001 par value Preferred Stock.
Common Stock
Holders of shares of Common Stock are entitled to one vote per share on all
matters submitted to a vote of the stockholders of the Company. Except as may be
required by law, holders of shares of Common Stock will not vote separately as a
class, but will vote together with the holders of outstanding shares of other
classes or capital stock. There is no right to cumulate votes for the election
of directors. A majority of the issued and outstanding Common Stock constitutes
a quorum at any meeting of stockholders and the vote by the holders of a
majority of the outstanding shares is required to effect certain fundamental
corporate changes such as liquidation, merger or an amendment to the Articles of
Incorporation.
FORM 10-SB/A Goldstate Corporation Page 26
<PAGE>
Holders of shares of Common Stock are entitled to receive dividends if, as
and when, declared by the Board of Directors out of funds legally available
therefore, after payment of dividends required to be paid on outstanding shares
of Preferred Stock. The Company's agreement with its bank lender may prohibit
payment of Common Stock dividends without the consent of the lender. Upon
liquidation of the Company, holders of shares of Common Stock are entitled to
share ratably in all assets of the Company remaining after payment of
liabilities, subject to the liquidation preference rights of any outstanding
shares of Preferred Stock. Holders of shares of Common Stock have no conversion,
redemption or preemptive rights. The rights of the holders of Common Stock will
be subject to, and may be adversely affected by, the rights of the holders of
Preferred Stock. The outstanding shares of Common Stock are fully paid and
nonassessable. The shares of Common Stock issued upon conversion of Preferred
Stock, Preferred Stock Dividends, or exercise of Warrants and payment therefore,
will be validly issued, fully paid and nonassessable.
Preferred Stock
Under the Company's Articles of Incorporation, as amended (the "Articles"),
the Board of Directors has the power, without further action by the holders of
the Common Stock, to designate the relative rights and preferences of the
Company's Preferred Stock, when and if issued. Such rights and preferences could
include preferences as to liquidation, redemption and conversion rights, voting
rights, dividends or other preferences, any of which may be dilutive of the
interest of the holders of the Common Stock. The issuance of the Preferred Stock
may have the effect of delaying or preventing a change in control of the Company
and may have an adverse effect on the rights of the holders of Common Stock.
As of the date of this Registration Statement, a total of 2,000,000 shares
of the authorized Preferred Stock have been designated as Series A Cumulative
Convertible Preferred Stock; however, no shares of the Series A Cumulative
Convertible Preferred Stock have been issued. Additional classes of Preferred
Stock may be designated and issued from time to time in one or more series with
such designations, voting powers or other preferences and relative rights or
qualifications as are determined by resolution of the Board of Directors of the
Company.
Series A Preferred Stock
The Series A Preferred Stock has been authorized by the Board of Directors
of the Company. So long as any Series A Preferred Stock is outstanding, the
Company is prohibited from issuing any series of stock having rights senior to
the Series A Preferred Stock ("Senior Stock") without the approval of the
holders of 66 2/3% of the outstanding Series A Preferred Stock. Additionally, so
long as any Series A Preferred Stock is outstanding, the Company may not,
without the approval of the holders of at least 50% of the outstanding Series A
FORM 10-SB/A Goldstate Corporation Page 27
<PAGE>
Preferred Stock, issue any series of stock ranking on parity with the Series A
Preferred Stock ("Parity Stock") as to dividend or liquidation rights, or having
a right to vote on matters as to which the Series A Preferred Stock is not
entitled to vote, or if the Company's stockholder equity is less than the total
liquidation preferences of all outstanding Series A Preferred Stock.
Dividends. Holders of shares of Series A Preferred Stock will be entitled
to receive when, as, and if declared by the Board of Directors out of funds at
the time legally available therefore, cash dividends at an annual rate of 20%
and no more, payable annually in arrears, commencing January 1, 1999. Dividends
will accrue and be cumulative from the date of first issuance of the Series A
Preferred Stock and will be payable to holders of record as they appear on the
stockbooks of the Company on such record dates as are fixed by the Board of
Directors.
Unless a class or series of Senior Stock or Parity Stock is authorized as
described above, the Series A Preferred Stock will be senior as to dividends to
any series or class of the Company's stock hereafter issued, and if at any time
the Company has failed to pay or declare and set apart for payment accrued and
unpaid dividends on the Series A Preferred Stock, the Company may not pay any
other dividends. The Series A Preferred Stock will have priority as to dividends
over the Common Stock and any series or class of the Company's stock hereafter
issued, and no dividend (other than dividends payable solely in Common Stock or
any other series or class of the Company's stock hereafter issued that ranks
junior as to dividends to the Series A Preferred Stock) may be declared, paid or
set apart for payment on, and no purchase, redemption or other acquisition may
be made by the Company of any Common Stock or other stock unless all accrued and
unpaid dividends on the Series A Preferred Stock have been paid or declared and
set apart for payment, or contemporaneously pays or declares and sets apart for
payment, all accrued and unpaid dividends for all prior periods on the Series A
Preferred Stock; and the Company may not pay dividends on the Preferred Stock
unless it has paid or declared and set apart for payment, or contemporaneously
pays or declares and sets apart for payment, all accrued and unpaid dividends
for all prior periods on any outstanding Parity Stock. Whenever all accrued
dividends are not paid in full on the Preferred Stock or any Parity Stock, all
dividends declared on the Preferred Stock and any such Parity Stock will be
declared or made pro rata so that the amount of dividends declared per share on
the Preferred Stock and any such Parity Stock will bear the same ratio amount of
dividends declared per share on the Preferred Stock, and any such Parity Stock
will bear the same ratio that accrued and unpaid dividends per share on the
Preferred Stock and such Parity Stock bear to each other.
The amount of dividends payable for the initial dividend period and any
period shorter than a full dividend period will be computed on the basis of a
360 day year. No interest will be payable in respect of any dividend payment on
the Series A Preferred Stock which may be in arrears.
Liquidation Rights. In the event of any liquidation, dissolution or winding
up of the Company, holders of shares of Series A Preferred Stock are entitled to
receive the liquidation preference of $.50 per share, plus an amount equal to
FORM 10-SB/A Goldstate Corporation Page 28
<PAGE>
any accrued and unpaid dividends to the payment date, and no more, before any
payment or distribution is made to the holders of Common Stock, or any series or
class of the Company's stock hereafter issued that ranks junior as to
liquidation rights to the Series A Preferred Stock. The holders of Preferred
Stock and any Parity Stock hereafter issued that rank on a parity as to
liquidation rights with the Series A Preferred Stock will be entitled to share
ratably, in accordance with the respective preferential amounts payable on such
stock, in any distribution which is not sufficient to pay in full the aggregate
of the amounts payable thereon. After payment in full of the liquidation
preference of the shares of Series A Preferred Stock, the holders of such shares
will not be entitled to any further participation in any distribution of assets
by the Company. Neither a consolidation, merger or other business combination of
the Company with or into another corporation or other entity nor a sale or
transfer of all or part of the Company's assets for cash, securities or other
property will be considered a liquidation, dissolution or winding up of the
Company.
Voting Rights. The holders of the Series A Preferred Stock will have no
voting rights except as described below or as required by law. In exercising any
such vote, each outstanding share of Series A Preferred Stock will be entitled
to one vote, excluding shares held by the Company or any entity controlled by
the Company, which shares will have no voting rights.
So long as any Series A Preferred Stock is outstanding, the Company will
not, without the affirmative vote of the holders of at least 66 2/3% of all
outstanding shares of Series A Preferred Stock, voting separately as a class,
(i) amend, alter or repeal any provision of the Articles or by Bylaws of the
Company so as to adversely affect the relative rights, preferences,
qualifications, limitations or restriction of the Series A Preferred Stock, (ii)
authorize or issue, or increase the authorized amount of, any additional class
or series of stock, or any security convertible into stock of such class or
series, ranking senior to the Series A Preferred Stock as to dividends or upon
liquidation, dissolution or winding up of the Company, or (iii) effect any
reclassification of the Series A Preferred Stock.
So long as any Series A Preferred Stock is outstanding, the Company will
not, without the affirmative vote of the holders of at least 50% of all
outstanding shares of Series A Preferred Stock, voting separately as a class,
(i) authorize, issue or increase the authorized amount of any additional class
or series of stock, or any security convertible into stock of such class or
series, ranking on parity with the Series A Preferred Stock as to dividends or
liquidation and having superior voting rights, or (ii) incur indebtedness or
authorize or issue, or increase the authorized amount of, any additional class
or series of stock, or any security convertible into stock of such class or
series, ranking on parity with the Series A Preferred Stock as to dividend or
liquidation rights if, immediately following such event, Adjusted Stockholder's
Equity is less than the aggregate liquidation preferences of all Series A
Preferred Stock and stock ranking senior to or on parity with the Series A
Preferred Stock as to liquidation. Adjusted Stockholder's Equity is the
Company's stockholder's equity as shown on its most recent balance sheet,
increased by (a) any amount of any liability or other reduction in stockholder's
equity attributable to the Series A Preferred Stock and each series of stock
FORM 10-SB/A Goldstate Corporation Page 29
<PAGE>
senior to or on parity with the Series A Preferred Stock as to liquidation, and
(b) the net proceeds of any equity financing since the date of the balance
sheet, reduced by any reduction in stockholder's equity resulting from certain
dispositions of assets since the date of the balance sheet.
Redemption. The Series A Preferred Stock is redeemable at any time after
April 6, 2001 for cash, in whole or in part, at the option of the Company, at
$.50 per share plus any accrued and unpaid dividends, whether or not declared.
If fewer than all of the outstanding shares of Series A Preferred Stock are
to be redeemed, the Company will select those to be redeemed pro rata or by lot
or in such other manner as the board of Directors may determine. There is no
mandatory redemption in sinking fund obligation with respect to the Series A
Preferred Stock. In the event that the Company has failed to pay accrued
dividends on the Series A Preferred Stock, it may not redeem any of the then
outstanding shares of the Series A Preferred Stock until all such accrued and
unpaid dividends and (except with respect to shares to be redeemed) the then
current dividends have been paid in full.
Notice of redemption will be mailed at least thirty (30) days but not more
than sixty (60) days before the redemption date to each holder of record of
shares of Series A Preferred Stock to be redeemed at the holder's address shown
on the stock transfer books of the Company. After the redemption date, unless
there shall have been a default in payment of the redemption price, dividends
will cease to accrue on the shares of Series A Preferred Stock called for
redemption and all rights of the holders of such shares will terminate, except
the right to receive the redemption price without interest.
Conversion Rights of Series A Preferred Stock
Optional Conversion. At any time after the initial issuance of the Series A
Preferred Stock and prior to the redemption thereof, the holder of any shares of
Series A Preferred Stock will have the right, at the holder's option, to convert
any or all such shares into restricted Common Stock on a one for one basis and
all accrued and unpaid dividends thereon into shares of Common Stock at a rate
of $.50 per share. If the Series A Preferred Stock has been called for
redemption, the conversion right will terminate at the close of business on the
last business day prior to the date fixed for redemption (unless the Company
defaults in the payment of the redemption price). Fractional shares of Common
Stock will be rounded to the nearest full share upon conversion.
In case of any reclassification of the Common Stock, any consolidation of
the Company with, or merger of the Company into, any other person, any merger of
any person into the Company (other than a merger that does not result in any
reclassification, conversion, exchange or cancellation of outstanding shares of
Common Stock), any sale or transfer of all or substantially all of the assets of
the Company or any compulsory share exchange whereby the Common Stock is
converted into other securities, cash or other properties, then provisions will
be made that the holder of such share of Series A Preferred Stock then
outstanding will have the right thereafter, during the period such share of
FORM 10-SB/A Goldstate Corporation Page 30
<PAGE>
Series A Preferred Stock shall be convertible, to convert such share into the
kind and amount of securities, cash or other property receivable upon such
reclassification, consolidation, merger, sale, transfer or share exchange by a
holder of the number of shares of Common Stock into which such share of Series A
Preferred Stock might have been converted immediately prior to such
reclassification, consolidation, merger, sale transfer or share exchange.
Other Provisions. The shares of Series A Preferred Stock, when issued as
described herein, will be duly and validly issued, fully paid and nonassessable.
PART II
Item 1. Market for Common Equity and Related Stockholder Matters
The Company's Common Stock is traded only in the United States on the
over-the-counter Bulletin Board, under the trading symbol, GDSA.
The table set forth below presents the range, on a quarterly basis, of high
and low closing bid prices per share of Common Stock as reported for the last
two fiscal years. The quotations represent prices between dealers and do not
include retail markup, markdown or commissions and may not necessarily represent
actual transactions.
Common Stock
- --------------------------------------------
Quarter Ended High Low
- --------------------------------------------
Fiscal Year 1998
March 31, 1998 $0.69 $0.25
June 30, 1998 $0.70 $0.35
September 30, 1998 $0.38 $0.15
December 31, 1998 $0.23 $0.14
Fiscal Year 1997
March 31, 1997 $2.85 $1.31
June 30, 1997 $1.37 $0.37
September 30, 1997 $0.49 $0.21
December 31, 1997 $0.72 $0.23
- --------------------------------------------
The 14,131,300 shares of Common Stock outstanding as of the date of this
Registration Statement were held by approximately 23 holders of record
worldwide, including 10 holders of record in the United States.
FORM 10-SB/A Goldstate Corporation Page 31
<PAGE>
The Board of Directors has never authorized or declared the payment of any
dividends on the Company's Common Stock and does not anticipate the declaration
or payment of cash dividends in the foreseeable future. The Company intends to
retain future earnings, if any, to finance the exploration and development of
its business. Future dividend policies will be subject to the discretion of the
Board of Directors and will be contingent upon, among other things, future
earnings, the Company's financial condition, capital requirements, general
business conditions, level of debt, restrictions with respect to payment of
dividends with respect to Series A Preferred Stock, and other relevant factors.
Transfer Agent
The transfer agent and registrar for the Common Stock is First American
Stock Transfer, 610 East Bell Road, Suite 2-155 PMB, Phoenix, Arizona
85022-2393, telephone number (602) 485-1346.
Item 2. Legal Proceedings.
Management is not aware of any legal proceedings contemplated by any
governmental authority or other party involving the Company or its properties.
No director, officer or affiliate of the Company is (i) a party adverse to the
Company in any legal proceedings, or (ii) has an adverse interest to the Company
in any legal proceedings. Management is not aware of any other legal proceedings
pending or that have been threatened against the Company or its properties.
Item 3. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Since the inception of the Company (February 28, 1996) to December 31,
1996, the Company had a former accountant. Since January 1, 1997 and to date,
the Company's current principal independent accountant has not resigned or
declined to stand for re-election or were dismissed. The Company's former
principal independent accountant declined to stand for re-election after the
Company's formative year as his policy for providing accounting services did not
extend to include the Company's growing scale of transactions. Such decision to
change accountants was approved by the Board of Directors. There were no
disagreements with the former accountant which were not resolved on any matter
concerning accounting principles or practices, financial statement disclosure,
or auditing scope or procedure.
Moreover, neither the Company's current principal independent accountant
nor its former principal independent accountant have provided an adverse opinion
or disclaimer of opinion to the Company's financial statements, nor modified
their respective opinion as to uncertainty, audit scope or accounting
principles.
The Company's principal independent accountant from February 28, 1996 to
December 31, 1996 was DAVID E. COFFEY, Certified Public Accountant, of 3651
Lindell Road, Suite H, Las Vegas, NV 89103. The Company's principal independent
accountant from January 1, 1997 to the current date is Johnson, Holscher &
Company, P.C. of 5975 Greenwood Plaza Blvd., Suite 140, Greenwood Village, CO
80111.
FORM 10-SB/A Goldstate Corporation Page 32
<PAGE>
Item 4. Recent Sales of Unregistered Securities.
To provide capital, the Company has sold stock in private placement
offerings or issued stock in exchange for debts of the Company, or pursuant to
contractual agreements as follows:
(i) On December 11, 1997, the Company entered into a joint venture
agreement with IGCO and its wholly owned subsidiary, INGC, whereby the
Company issued 1,000,000 shares of its restricted Common Stock to
IGCO. The issuance of the Common Stock described herein was made in
connection with a joint venture agreement in profits not involving a
public offering to a single corporate investor, and is exempt from
registration pursuant to Section 4 (2) of the Securities Act of 1933,
as amended (the "1933 Act") The certificate representing issuance of
such shares of Common Stock to IGCO has a legend indicating that the
shares of Common Stock cannot be resold without registration under the
1933 Securities Act of in compliance with an available exemption from
registration. No underwriter was involved in the transaction, and no
commissions or other remuneration were paid in connection with the
offer and sale of the securities.
(ii) On February 4, 1998, the Company completed an offering in which it
raised $525,000 under Rule 504 of Regulation D pursuant to which it
sold 2,625,000 shares of Common Stock at $.20 per share. The Company
issued shares of Common Stock to 10 investors. Nine of the investors
were accredited investors as that term is defined under Regulation D.
The investors executed subscription agreements and acknowledged that
the securities to be issued have not been registered under the 1933
Securities Act, that the investors understood the economic risk of an
investment in the securities, and that the investors had the
opportunity to ask questions of and receive answers from the Company's
management concerning any and all matters related to the acquisition
of securities. No underwriter was involved in the transaction, and no
commissions or other remuneration were paid in connection with the
offer and sale of the securities.
(iii)On March 30, 1998, the Company completed an offering in which it
raised $290,000 under Rule 504 of the Regulation D pursuant to which
it sold 1,450,000 shares of Common Stock at $.20 per share. The
Company issued shares of Common Stock to 10 investors. Eight of the
investors were accredited investors as that term is defined under
Regulation D. The investors executed subscription agreements and
acknowledged that the securities to be issued have not been registered
under the 1933 Securities Act, that the investors understood the
FORM 10-SB/A Goldstate Corporation Page 33
<PAGE>
economic risk of an investment in the securities, and that the
investors had the opportunity to ask questions of and receive answers
from the Company's management concerning any and all matters related
to the acquisition of securities. No underwriter was involved in the
transaction, and no commissions or other remuneration were paid in
connection with the offer and sale of the securities.
(iv) On January 15, 1999, the Company entered into a settlement agreement
with a creditor whereby the Company agreed to issue 42,500 shares of
its Common Stock at $.20 per share pursuant to Section 4(2) of the
1933 Securities Act. Under the terms of the settlement agreement, the
creditor agreed to accept the 42,500 shares of Common Stock as payment
for the approximate $8,509.00 debt owed to such creditor. The Company
issued the shares in reliance upon the exemption from registration
provided by Section 4(2) of the 1933 Securities Act. The creditor
represented to the Company that he acquired the shares for his own
account, and not with a view to distribution, and that the Company
made available to him all material information concerning the Company.
(v) On March 18, 1999, the Company entered into a technology sub-license
agreement with Geneva Resources, Inc. ("Geneva"), whereby the Company
issued 1,000,000 shares of its restricted Common Stock to AuRIC
Metallurgical Laboratories and a convertible promissory note to Geneva
Resources, Inc. dated March 18, 1999 in the amount of $100,000 that is
convertible into 500,000 shares of the Company's restricted Common
Stock at the option of Geneva at the rate of $0.20 per share. Pursuant
to the terms of the convertible promissory note, Geneva may elect to
convert the promissory note after October 8, 1999. There are no
conditions that will prevent or trigger the conversion of the
promissory note by Geneva into shares of Common Stock nor is there any
expiration date. The issuance of the Common Stock described herein was
made in connection with the technology sub-license agreement not
involving a public offering to corporate investors, and is exempt from
registration pursuant to Section 4(2) of the 1933 Securities Act. The
certificates representing issuances of such shares of Common Stock by
the Company to AuRIC have a legend indicating that the shares of
Common Stock cannot be resold without registration under the 1933
Securities Act or in compliance with an available exemption from
registration. No underwriter was involved in the transaction, and no
commissions or other remuneration were paid in connection with the
offer and sale of the Common Stock.
(vi) On April 6, 1999, the Company completed an offering in which it raised
$870,000 under Rule 504 of Regulation D pursuant to which it sold
4,350,000 shares of Common Stock at $.20 per share. The Company issued
shares of Common Stock to 9 investors. All of the investors were
accredited investors as that term is defined under Regulation D. The
investors executed subscription agreements and acknowledged that the
securities to be issued have not been registered under the 1933
Securities Act, that the investors understood the economic risk of an
investment in the securities, and that the investors had the
opportunity to ask questions of and receive answers from the Company's
management concerning any and all matters related to the acquisition
of securities. No underwriter was involved in the transaction, and no
commissions or other remuneration were paid in connection with the
offer and sale of the securities.
FORM 10-SB/A Goldstate Corporation Page 34
<PAGE>
As of the date of this Registration Statement, the Company has 14,131,300
shares of its Common Stock issued and outstanding. Of the 14,131,300 of the
Company's current outstanding shares of Common Stock, 12,025,050 shares are free
trading. At such time, the holders may offer and sell these shares of Common
Stock at such times and in such amounts as they may respectively determine in
their sole discretion.
The holders of free trading Common Stock in the capital of the Company may
offer these shares of Common Stock through market transactions at prices
prevailing in the OTC market or at negotiated prices which may be fixed or
variable and which may differ substantially from OTC prices. The holders have
not advised the Company that they anticipate paying any consideration, other
than the usual and customary broker's commission, in connection with the sales
of these free trading shares of Common Stock. The holders are acting
independently of the Company making such decisions with respect to the timing,
manner and size of each sale.
Of the 14,131,300 of the Company's current outstanding shares of Common
Stock, 2,106,250 shares are "restricted shares" as that term is defined in the
Securities Act of 1933 and the rules and regulations thereunder. To be eligible
for sale in the public market, the holders must comply with Rule 144. In
general, Rule 144 allows a person holding restricted shares for a period of at
least one year to sell within any three month period that number of shares which
does not exceed the greater of 1% of the Company's then outstanding shares or
the average weekly trading volume of the shares during the four calendar weeks
preceding such sale. Rule 144 also permits, under certain circumstances, sale of
shares by a person who is not an affiliate of the Company and who has satisfied
a two year holding period without any volume limitations, manner of sale
provisions or current information requirements. As defined in Rule 144, an
affiliate of an issuer is a person who, directly or indirectly, through one or
more intermediaries, controls or is controlled by, or is under common control
with, such issuer, and generally includes members of the Board of Directors.
Sales pursuant to Rule 144 or otherwise, if in sufficient volume, could have a
depressive effect on the market price of the Company's securities. Moreover, the
possibility of such sales may have a depressive effect on market prices.
To date, no sales of restricted shares of Common Stock have been made.
Item 5. Indemnification of Officers and Directors.
Section 78.751 of Chapter 78 of the Nevada Revised Statutes contains
provisions for indemnification of the officers and directors of the Company. The
Bylaws require the Company to indemnify such persons to the full extent
permitted by Nevada law. The Bylaws with certain exceptions, eliminate any
personal liability of a director to the Company or its shareholders for monetary
damages to the Company or its shareholders for gross negligence or lack of care
FORM 10-SB/A Goldstate Corporation Page 35
<PAGE>
in carrying out the director's fiduciary duties as such. Nevada law permits such
indemnification if a director or officer acts in good faith in a manner
reasonably believed to be in, or not opposed to, the best interests of the
Company. A director or officer must be indemnified as to any matter in which he
successfully defends himself.
The officers and directors of the Company are accountable to the
shareholders of the Company as fiduciaries, which means such officers and
directors are required to exercise good faith and integrity in handling the
Company's affairs.
A shareholder may be able to institute legal action on behalf of himself
and all other similarly situated shareholders to recover damages where the
Company has failed or refused to observe the law. Shareholders may, subject to
applicable rules of civil procedure, be able to bring a class action or
derivative suit to enforce their rights, including rights under certain federal
and state securities laws and regulations. Shareholders who have suffered losses
in connection with the purchase or sale of their interest in the Company due to
a breach of a fiduciary duty by an officer or director of the Company in
connection with such sale or purchase including, but not limited to, the
misapplication by any such officer or director of the proceeds from the sale of
any securities, may be able to recover such losses from the Company.
The Company and its affiliates may not be liable to its shareholders for
errors in judgment or other acts or omissions not amounting to intentional
misconduct, fraud or a knowing violation of the law, since provisions have been
made in the Articles of Incorporation and By-laws limiting such liability. The
Articles of Incorporation and By-laws also provide for indemnification of the
officers and directors of the Company in most cases for any liability suffered
by them or arising out of their activities as officers and directors of the
Company if they were not engaged in intentional misconduct, fraud or a knowing
violation of the law. Therefore, purchasers of these securities may have a more
limited right of action than they would have except for this limitation in the
Articles of Incorporation and By-laws. In the opinion of the Securities and
Exchange Commission, indemnification for liabilities arising under the
Securities Act of 1933 is contrary to public policy and, therefore,
unenforceable.
The Company may also purchase and maintain insurance on behalf of directors
and officers insuring against any liability asserted against such person
incurred in the capacity of director or officer or arising out of such status,
whether or not the Company would have the power to indemnify such person.
The Company will not acquire assets from its current management or any
entity in which such management has a five percent (5%) or greater equity
interest unless the Company has first received an independent opinion as to the
fairness of the terms of the acquisition. In negotiating the terms of the
acquisition of the assets, management may be influenced by the possibility of
future personal benefit from unrelated business dealings with such persons or
entities. Management believes that any such conflict will be resolved in favor
of the Company and its shareholders. The officers and directors are required to
exercise good faith and integrity in handling the Company's affairs. Management
of the Company has agreed to abide by this fiduciary duty.
FORM 10-SB/A Goldstate Corporation Page 36
<PAGE>
Item 6. Financial Statements.
Reference is made to Part III, Item 1 and 2 - Index to and Description of
Exhibits for a list of all financial statements filed as part of this
Registration Statement on Form 10-SB.
PART III
Item 1 & 2. Index to and Description of Exhibits.
(a) The following Financial Statements are filed as a part of this
Registration Statement:
1. Independent Auditors' Report dated July 6, 1999.
2. Balance Sheets for fiscal year ended December 31, 1998 and December
31, 1997.
3. Statements of Operation for fiscal year ended December 31, 1998,
December 31, 1997 and from inception (February 28, 1996) to December
31, 1998.
4. Statements of Cash Flow for fiscal year ended December 31, 1998,
December 31, 1997 and from inception (February 28, 1996) to December
31, 1998.
5. Statements of Stockholders' Equity (Deficit) for year ended December
31, 1996, fiscal year ended December 31, 1997 and fiscal year ended
December 31, 1998.
6. Notes to Financial Statements for December 31, 1998 and 1997.
7. Balance Sheet for quarter ended March 31, 1999.
8. Statements of Operation for quarter ended March 31, 1999.
9. Statement of Cash Flow for quarter ended March 31, 1999.
10. Notes to Financial Statements for quarter ended March 31, 1999.
(b) The following Exhibits are filed as part of this Registration
Statement:
- --------------------------------------------------------------------------------
Exhibit No. Description
- --------------------------------------------------------------------------------
2 Not applicable.
3 Articles of Incorporation for the Company
By-laws of the Company
FORM 10-SB/A Goldstate Corporation Page 37
<PAGE>
- --------------------------------------------------------------------------------
Exhibit No. Description
- --------------------------------------------------------------------------------
4 Not Applicable
9 Not Applicable
10.1 Joint Venture Agreement between the Company, IGCO and INGC, dated
December 11, 1997
10.2 Technology Sub-License Agreement between Geneva Resources, Inc.
and the Company dated March 18, 1999
10.3 Consulting Services and Management Agreement between Investor
Communications International, Inc. and the Company dated July 1,
1999
11 Not Applicable
16 Letter on Change in Certifying Accountant
21 Not Applicable
24 Not Applicable
- --------------------------------------------------------------------------------
The following additional Exhibits are filed as part of this Registration
Statement:
- --------------------------------------------------------------------------------
Exhibit No. Description
- --------------------------------------------------------------------------------
99.1 BLM Claims Listing
- --------------------------------------------------------------------------------
FORM 10-SB/A Goldstate Corporation Page 38
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
GOLDSTATE CORPORATION,
a Nevada corporation
By: /s/ Harold S. Gooding
-----------------------------
Harold S. Gooding , President
DATE: September 20, 1999
FORM 10-SB/A Goldstate Corporation Page 39
<PAGE>
GOLDSTATE CORPORATION
FINANCIAL STATEMENTS
December 31, 1998 and 1997
TABLE OF CONTENTS
-----------------
Page
----
Independent Auditors' Report F-1
Balance Sheets F-2
Statements of Operations F-3
Statements of Cash Flows F-4
Statement of Stockholders' Equity F-5
Notes to Financial Statements F-6 - F-11
<PAGE>
Johnson, Holscher & Company, P.C.
Certified Public Accountants
Stockholders and Board of Directors
Goldstate Corporation
INDEPENDENT AUDITORS' REPORT
----------------------------
We have audited the balance sheets of Goldstate Corporation (the Company), as of
December 31, 1998 and 1997, and the related consolidated statements of
operations, stockholders' equity (deficit) and cash flows for the years ended
December 31, 1998 and 1997 and for the period from inception (February 28, 1996)
to 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 generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about 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 and the reports of other auditors provide a reasonable
basis for our opinion. The financial statements of Goldstate Corporation as of
December 31, 1996 and the period from inception (February 28, 1996) to December
31, 1996, were audited by other auditors whose report dated May 22, 1997,
expressed an unqualified opinion on those statements.
In our opinion, based on our audit and the reports of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Goldstate Corporation as of
December 31, 1998 and 1997, and the results of its operations and its cash flows
for the years ended December 31, 1998 and 1997, and for the period from
inception (February 28, 1996) to December 31, 1998, in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has not generated revenues from operations,
which raises substantial doubt about its ability to continue as a going concern.
The Company has established a plan to continue operations through additional
stock offerings as outlined in Note 1. The financial statements do not include
any adjustments that might result if management's plan is unsuccessful.
Greenwood Village, Colorado
July 6, 1999
F-1
<PAGE>
<TABLE>
<CAPTION>
GOLDSTATE CORPORATION
(An Exploration Stage Company)
Balance Sheets
December 31, December 31,
1998 1997
---- ----
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 877 $ 916
Interest in unpatented mining claims 170,000 0
Goodwill 270 270
----------- -----------
Total Assets $ 171,147 $ 1,186
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
CURRENT LIABILITIES
Accounts payable - trade $ 58,509 $ 17,274
Advances payable 238,026 440,045
Directors fees payable 18,000 12,000
Notes payable 175,000 70,000
Accrued interest payable 67,980 38,762
----------- -----------
Total Liabilities 557,515 578,081
----------- -----------
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value; authorized 25,000,000 shares;
issued and outstanding 0 shares at December 31, 1998 and
December 31, 1997 0 0
Common stock $.0003 par value; authorized 75,000,000 shares;
issued and outstanding 8,738,800 and 5,438,000 at December 31,
1998 and 1997 respectively 2,926 1,936
Paid - in capital 997,281 368,271
Accumulated deficit through development stage (1,386,575) (947,102)
----------- -----------
Total Stockholders' Equity (386,368) (576,895)
----------- -----------
Total Liabilities and Stockholders' Equity $ 171,147 $ 1,186
=========== ===========
The accompanying notes are an integral
part of the financial statements.
F-2
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GOLDSTATE CORPORATION
(An Exploration Stage Company)
Statements of Operations
Inception
Year Ended December 31, (February 28,1997
-------------------------- to
1998 1997 December 31, 1998)
---- ---- ------------------
REVENUES
<S> <C> <C> <C>
Other income $ 0 $ 0 $ 1,026
----------- ----------- -----------
Total Revenues 0 0 1,026
----------- ----------- -----------
OPERATING EXPENSES
PROPERTY EXPLORATION EXPENSES
Claims maintenance fees and staking costs 43,905 100,000 143,905
----------- ----------- -----------
ADMINISTRATIVE EXPENSES
Overhead and Administration 300,000 480,000 780,000
Legal and accounting 50,237 37,612 91,890
Directors fees 6,000 12,000 18,000
Internet design and access 3,461 1,711 5,172
Printing and stationary 1,798 2,462 4,260
Transfer agent 1,568 545 2,113
News wire services 1,150 2,850 4,000
Courier and postage 966 8,662 9,628
Reports/information/subscripitions 925 32,405 33,330
Bank charges 151 133 367
Office supplies 95 5,449 6,010
Consultants 0 88,190 88,190
Office rent 0 42,033 42,033
Telephone and fax 0 35,556 35,556
Wages and salaries 0 22,444 22,444
Travel 0 16,731 16,731
Auto 0 7,259 7,259
Promotion 0 7,165 7,165
Miscellaneous 0 810 1,410
Computer supplies 0 159 159
----------- ----------- -----------
Total Administrative Expenses 366,351 804,176 1,175,717
----------- ----------- -----------
Total Operating Expenses 410,256 904,176 1,319,622
----------- ----------- -----------
Income (Loss) from Operations (410,256) (904,176) (1,318,596)
OTHER INCOME (EXPENSES)
Interest Income 1 0 1
Interest Expense (29,218) (38,762) (67,980)
----------- ----------- -----------
Net (Loss) $ (439,473) $ (942,938) $(1,386,575)
=========== =========== ===========
Earnings (Loss) per Share - Basic $ (0.053) $ (0.183) $ (0.207)
=========== =========== ===========
Weighted Average Number of
Common Shares Outstanding 8,248,663 5,164,869 6,698,736
=========== =========== ===========
The accompanying notes are an integral
part of the financial statements.
F-3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GOLDSTATE CORPORATION
(An Exploration Stage Company)
Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
Inception
Year Ended December 31, (February 28,1997
-------------------------- to
1998 1997 December 31, 1998)
---- ---- ------------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net (loss) $ (439,473) $ (942,938) $(1,386,575)
Adjustments to reconcile net (loss) to cash flows
used by operating activities
Amortization and depreciation 0 0 90
Changes in Assets and Liabilities
Other assets 0 0 0
Accounts payable 41,235 17,274 58,509
Director fees payable 6,000 12,000 18,000
Deposits and inventory 0 337 0
----------- ----------- -----------
Net Cash Flows Used for Operating Activities (392,238) (913,327) (1,309,976)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Equipment (purchases) dispositions 0 308 (90)
Organization costs 0 0 (270)
----------- ----------- -----------
Net Cash Flows Provided (Used) for Investing Activities 0 308 (360)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Sale (redemption) of common stock 690 (1,102) 2,926
Additional paid-in capital 459,310 366,102 834,454
Offering costs 0 0 (7,173)
Advances received 496,181 440,045 936,226
Advances repaid (698,200) 0 (698,200)
Accrued interest payable 29,218 38,762 67,980
Proceeds from notes payable 105,000 70,000 175,000
----------- ----------- -----------
Net Cash Flows Provided by Financing Activities 392,199 913,807 1,311,213
----------- ----------- -----------
Net increase in cash (39) 788 877
Cash and cash equivalents - Beginning of period 916 128 0
----------- ----------- -----------
Cash and cash equivalents - End of period $ 877 $ 916 $ 877
=========== =========== ===========
Schedule of Non-Cash Investing and Financing Activities:
- --------------------------------------------------------
On January 21, 1998, Goldstate Corporation exchanged 1,000,000 shares of stock for a profit sharing
interest in 439 unpatented lode mining claims. The discounted value of this exchange was $170,000.
The Company accrued interest on notes and advances payable of $29,218 and $38,762 for the years ended
December 31, 1998 and 1997 respectively. The Company has not paid any interest.
The accompanying notes are an integral
part of the financial statements.
F-4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GOLDSTATE CORPORATION
(An Exploration Stage Company)
Statements of Stockholders' Equity
Deficit
Accumulated
Common Stock During
-------------------------- Paid - in Development
Shares Amount Capital Stage Total
------ ------ ------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, February 28, 1996 0 $ 0 $ 0 $ 0 $ 0
Issuance of common stock for cash
($.001 par per share, total of $.004 per share) 3,038,000 3,038 9,342 0 12,380
Less offering costs 0 0 (7,173) 0 (7,173)
Stock Split 6,076,000 0 0 0 0
Net income (loss), February 28, 1996
(inception) to December 31, 1996 0 0 0 (4,164) (4,164)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1996 (Unaudited) 9,114,000 3,038 2,169 (4,164) 1,043
Shares redeemed (5,500,200) (1,650) 1,650 0 0
Issuance of common stock SEC Reg D-504 for cash
($.0003 par per share, total of $.20 per share) 1,825,000 548 364,452 0 365,000
Net loss, Year ended December 31, 1997 0 0 0 (942,938) (942,938)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1997 5,438,800 1,936 368,271 (947,102) (576,895)
Issuance of common stock pursuant to profit sharing
agreement ($.0003 par per share, total of $.17 per share) 1,000,000 300 169,700 0 170,000
Issuance of common stock SEC Reg D-504 for cash
($.0003 par per share, total of $.20 per share) 2,300,000 690 459,310 0 460,000
Net Loss, Year ended December 31, 1998 0 0 0 (439,473) (439,473)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1998 8,738,800 $ 2,926 $ 997,281 $(1,386,575) $ (386,368)
=========== =========== =========== =========== ===========
The accompanying notes are an integral
part of the financial statements.
F-5
</TABLE>
<PAGE>
GOLDSTATE CORPORATION
Notes to Financial Statements
December 31, 1998 and 1997
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Goldstate Corporation (the Company) was incorporated on February 28, 1996
under the laws of the State of Nevada. The Company is an exploration stage
company.
The Company's principal operations are the exploration and development of
439 unpatented lode-mining claims in the State of Idaho pursuant to a
profit sharing agreement as discussed in Note 4.
Basis of Accounting
-------------------
The Company utilizes the accrual basis of accounting. Financial statements
have been prepared using generally accepted accounting principles.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
Research, Development and Exploration Costs
-------------------------------------------
Research, development and exploration costs are expensed as incurred.
Cash Equivalents
----------------
For purposes of the Statement of Cash Flows, cash equivalents are defined
as investments with original maturities of three months or less.
Going Concern and Continued Operations
--------------------------------------
At December 31, 1998 and 1997, the Company has not generated revenues from
operations. The Company's successful financial operations and movement into
an operating basis are solely contingent on the development of the lode
mining claims and related profit sharing agreement. The Company expects to
fund ongoing operations for the next twelve months through the common stock
offering described in Note 8, which has provided an additional $870,000 of
funding, and subsequent offerings to commence after October 7, 1999.
Earnings Per Share
------------------
As of December 31, 1998, there were convertible stock issues or warrants
outstanding that would generate a per share dilution, therefore the Company
has only disclosed basic earnings per share information on the Statement of
Operations.
F-6
<PAGE>
GOLDSTATE CORPORATION
Notes to Financial Statements
December 31, 1998 and 1997
NOTE 2: ADVANCES AND NOTES PAYABLE
Advances are comprised of the following:
Advances
--------
The Company at December 31, 1998 had advances, payable on demand, bearing
10% simple interest, to the following affiliated company:
Tri-Star Financial Services, Inc. $ 238,026
==========
Notes Payable
-------------
The Company entered into three note agreements during 1997 and 1998. All
three notes are related to the defective common stock subscriptions
described in Note 9.
The Company has entered into two promissory notes with Brent Pierce. The
first note, dated July 31, 1997, is for $70,000. The second note is dated
February 3, 1998 and is for $5,000. The notes bear an 8% interest rate and
are due on demand. The notes are convertible at the option of the holder
after October 7, 1999 into 350,000 and 25,000 shares of common stock,
respectively.
The third note, dated March 5, 1998, is to Rising Sun Capital Corporation
and is for $100,000. The note also bears interest at 8% and is due on
demand. The note is also convertible at the option of the holder after
October 7, 1999 into 500,000 shares of common stock.
NOTE 3: STOCKHOLDERS' EQUITY
Common Stock
------------
Pursuant to a July 30, 1997 Offering Memorandum, the Company issued under
SEC Rule 504 of Regulation D, 2,625,000 shares of common stock at $.0003
par value for $525,000 during 1997 and 1998. Pursuant to a March 3, 1998
Offering Memorandum, the Company has issued 1,500,000 shares of common
stock at $.0003 par value for $300,000 during 1998. The Company has also
issued 1,000,000 common shares to Intergold Corporation pursuant to a
profit sharing agreement as detailed in Notes 1 and 4.
F-7
<PAGE>
GOLDSTATE CORPORATION
Notes to Financial Statements
December 31, 1998 and 1997
Preferred Stock
---------------
Pursuant to a Board resolution, the Corporation has authorized the creation
of preferred stock and related rights. The Company also filed a
"Certificate of Designation of Series A Preferred Stock" with the Nevada
Secretary of State on May 8, 1998. The Company has not issued any shares of
preferred stock as of December 31, 1997 or 1998.
NOTE 4: PROFIT SHARING AGREEMENT
On December 11, 1997, Intergold Corporation and its subsidiary entered into
a profit sharing agreement with the Company. Under terms of the agreement,
Intergold received 1,000,000 restricted shares of common stock in the
Company in exchange for the sale of a future profit sharing interest. The
Company will be responsible to provide all funding and will be the
operating partner. The Company will initially retain 80% of the profits
resulting from the agreement. After the Company is repaid all of its
invested capital, the profit distribution will be 51% to the Company and
49% to Intergold Corporation. There are 439 unpatented lode-mining claims
that form the subject of this arrangement known as Blackhawk II. These
claims were transferred from Intergold Corporation to the Company via quit
claim deed on June 10, 1999. As of December 31, 1998 there were no jointly
controlled assets pursuant to the agreement and no profits had been
generated.
As the lode mining claims are developed, the equity method will be utilized
to account for the joint venture agreement with Intergold Corporation. The
Company will have majority accounting control over the development of the
claims.
The sole director and officer of Goldstate Corporation is also a director
of Intergold Corporation.
NOTE 5: INVESTMENTS
Pursuant to the agreement discussed in Note 4, the Company now owns a
profit sharing interest in 439 unpatented lode-mining claims. As the
1,000,000 shares of common stock cannot be marketed for a period of twelve
months from the date of issuance, the Company has valued the profit sharing
interest at 50% of the trading value as of the date of issuance, $170,000.
F-8
<PAGE>
GOLDSTATE CORPORATION
Notes to Financial Statements
December 31, 1998 and 1997
NOTE 6: INCOME TAXES
The Company incurred an operating loss for the year ended December 31, 1998
and 1997 of $410,255, and $804,176, respectively. The Company had adopted
FASB No. 109 for reporting purposes.
As of December 31, 1998 and 1997, the Company had net operating loss carry
forwards of $1,218,595 and $808,340, respectively, which expire between the
years 2006 - 2012. The deferred tax assets resulting from these carry
forwards were as follows:
1998 1997
---- ----
Deferred Tax Asset $ 414,322 $ 274,836
Less Valuation of Net Assets (414,322) (274,836)
--------- ---------
Balance at End of Year $ -0- $ -0-
========= =========
NOTE 7: MANAGEMENT SERVICES AGREEMENT
The Company has entered into a management services agreement with Tri Star
Financial Services, Inc ("Tri Star") to provide management of the
day-to-day operations of the Company. The management services agreement
required a monthly payment not to exceed $25,000 for services rendered. The
individuals comprising the management team provided by Tri Star are the
same individuals managing the operations of Intergold Corporation. The sole
director and officer of the Company is not employed by Tri Star or part of
the Tri Star management team.
NOTE 8: SUBSEQUENT EVENTS
Technology Sub-License Agreement
--------------------------------
In March of 1999, the Company entered into a definitive sub-license
agreement with Geneva Resources, Inc. ("Geneva"), to utilize assay and
metallurgical technology, know-how, and rights to technological processes
developed for the Blackhawk mineralization by Auric Metallurgical
Laboratories, Inc. ("Auric"). This sub-license is for non-exclusive use in
the Company's claim area in the State of Idaho for a period not less than
40 years. Pursuant to this agreement, the Company will issue 500,000
restricted common shares to Geneva and 1,000,000 shares to AuRIC. Pursuant
to the same agreement the Company also issued promissory notes to both
F-9
<PAGE>
GOLDSTATE CORPORATION
Notes to Financial Statements
December 31, 1998 and 1997
Geneva and AuRIC in the amount of $250,000 to each company. These are 3%
interest bearing notes and are payable upon the transfer of the technology.
Pursuant to an amendment to the above agreement, during 1999 the Company
issued a note payable for $100,000, bearing interest at 8% and payable on
demand, to Geneva in lieu of issuance of the 500,000 restricted common
shares required by the Technology Sub-License Agreement. This promissory
note is convertible into 500,000 shares of the Company's common stock at
the option of Geneva after October 7, 1999.
Employee Stock Option Plan
--------------------------
During 1999 the Company authorized an Employee Stock Option Plan. The plan
authorized the issuance of 1,500,000 options that can be exercised at $.15
per share of common stock. Options granted expire March 1, 2019. The
options are non-cancelable once granted. Shares, which may be acquired
through the plan, may be authorized but unissued shares of common stock or
issued shares of common stock held in the Company's treasury. Options
granted under the plan will not be in lieu of salary or other compensation
for services.
During 1997 and 1998, and as of December 31, 1997, and 1998, there were no
options granted, exercised, or forfeited and no options expired. During
1999 the Company granted 1,000,000 options that can be exercised at $.15
per common share. To date, none of the options have been exercised.
Management Services Agreement
-----------------------------
The Company's management service agreement with Tri Star Financial
Services, Inc. ("Tri Star") was amended for 1999 to a monthly amount not to
exceed $100,000. The contract with Tri Star ran through June 30, 1999. The
Company subsequently entered into a similar agreement with Investor
Communications, Inc. for a 24 month period beginning July 1, 1999. The not
to exceed monthly fee is $75,000. The management team provided by Investor
Communications and Tri Star is the same.
F-10
<PAGE>
GOLDSTATE CORPORATION
Notes to Financial Statements
December 31, 1998 and 1997
NOTE 9: PRIOR PERIOD RESTATEMENT
Subsequent to the release of the December 31, 1997 and 1996 financial
statements it was determined that the Company failed to properly accept
three common stock subscriptions that it had received during 1997 and 1998.
It was the Company's intent to issue promissory notes that would be
convertible at a later date into the Company's common stock. The Company
mistakenly issued the common stock related to the failed subscription
agreements instead of the intended convertible promissory notes. The
Company and the various parties involved in the failed subscriptions
desired to reflect their original intention and subsequently issued the
promissory notes. The first subscription was from Brent Pierce for 350,000
shares of common stock pursuant to the July 30, 1997 private placement
memorandum. The second subscription was also from Brent Pierce for 25,000
shares and is also related to the July 30, 1997 private placement
memorandum. The final subscription that was not properly accepted was from
Rising Sun Capital Corporation for 500,000 share of common stock. This
subscription is from a March 3, 1998 private placement memorandum. Details
of the promissory notes are outlined in Note 2.
In conjunction with the issuance of the promissory note during 1997, the
Company has restated the balance sheet as of December 31, 1997 to reflect
the promissory note of $70,000 and accrued interest of $2,387. The Company
has reversed the stock issuance and accordingly has reduced the common
stock balance by $105 and paid in capital by $69,895. The Company has also
recorded $2,387 of interest expense for 1997.
It was also determined that the Company failed to accrue interest during
1997 on the advance from Tri-Star Financial Services, Inc. as described in
Note 2. The effect of the accrual is to record accrued interest payable as
of December 31, 1997 of $38,762 related to the advance and to record
additional interest expense of $38,762 for the year ended December 31,
1997.
F-11
<PAGE>
GOLDSTATE CORPORATION
(An Exploration Stage Company)
FINANCIAL STATEMENTS
(Unaudited)
MARCH 31, 1999
TABLE OF CONTENTS
-----------------
Page
----
Balance Sheet F-13
Statements of Operations F-14
Statements of Cash Flows F-15
Notes to Financial Statements F-16 - F-22
F-12
<PAGE>
GOLDSTATE CORPORATION
(An Exploration Stage Company)
Balance Sheets
March 31,
1999
----
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 39,469
OTHER ASSETS
Interest in unpatented mining claims 170,000
Goodwill 270
-----------
Total Assets $ 209,739
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
CURRENT LIABILITIES
Accounts payable - trade $ 50,000
Advances payable 77,426
Directors fees payable 19,500
Notes payable 752,755
Accrued interest payable 78,802
-----------
Total Liabilities 978,483
-----------
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value; authorized 25,000,000 shares;
issued and outstanding 0 shares at March 31, 1999 0
Common stock $.0003 par value; authorized 75,000,000 shares;
issued and outstanding 12,131,300 at March 31, 1999 3,943
Paid - in capital 1,564,772
Accumulated deficit through development stage (2,337,459)
-----------
Total Stockholders' Equity (Deficit) (768,744)
-----------
Total Liabilities and Stockholders' Equity $ 209,739
===========
See accompanying summary of accounting
policies and notes to financial statements.
F-13
<PAGE>
<TABLE>
<CAPTION>
GOLDSTATE CORPORATION
(An Exploration Stage Company)
Statements of Operations
Inception
For the 3 Months Ended March 31, (February 28,1997
--------------------------------- to
1999 1998 March 31, 1999)
---- ---- ---------------
REVENUES
<S> <C> <C> <C>
Other income $ 0 $ 0 $ 1,026
----------- ----------- -----------
Total Revenues 0 0 1,026
----------- ----------- -----------
OPERATING EXPENSES
PROPERTY EXPLORATION EXPENSES
Research and development 666,852 0 666,852
Claims maintenance fees and staking costs 0 0 143,905
----------- ----------- -----------
Total Property Exploration Expenses 666,852 0 810,757
----------- ----------- -----------
ADMINISTRATIVE EXPENSES
Overhead and Administration 267,900 75,000 1,047,900
Legal and accounting 2,785 5,704 94,675
Directors fees 1,500 1,500 19,500
Internet design and access 0 2,742 5,172
Printing and stationary 0 0 4,260
Transfer agent 50 102 2,163
News wire services 0 0 4,000
Courier and postage 30 295 9,658
Reports/information/subscripitions 0 925 33,330
Bank charges 41 24 408
Office supplies 0 95 6,010
Consultants 0 0 88,190
Office rent 0 0 42,033
Telephone and fax 0 0 35,556
Wages and salaries 0 0 22,444
Travel 0 0 16,731
Auto 0 0 7,259
Promotion 0 0 7,165
Miscellaneous 0 0 1,410
Computer supplies 0 0 159
----------- ----------- -----------
Total Administrative Expenses 272,306 86,387 1,448,023
----------- ----------- -----------
Total Operating Expenses 939,158 86,387 2,258,780
----------- ----------- -----------
Income (Loss) from Operations (939,158) (86,387) (2,257,754)
OTHER INCOME (EXPENSES)
Interest Income 0 0 1
Interest Expense (11,726) (9,696) (79,706)
----------- ----------- -----------
Net (Loss) $ (950,884) $ (96,083) $(2,337,459)
=========== =========== ===========
Earnings (Loss) per Share - Basic $ (0.097) $ (0.013) $ (0.337)
=========== =========== ===========
Weighted Average Number of
Common Shares Outstanding 9,755,189 7,656,578 6,942,818
=========== =========== ===========
See accompanying summary of accounting
policies and notes to financial statements.
F-14
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GOLDSTATE CORPORATION
(An Exploration Stage Company)
Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
Inception
For the 3 Months Ended March 31, (February 28,1997
-------------------------------- to
1999 1998 March 31, 1999)
---- ---- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net (loss) $ (950,884) $ (96,083) $(2,337,459)
Adjustments to reconcile net (loss) to cash
used by operating activities
Amortization and depreciation 0 0 90
Changes in Assets and Liabilities
Accounts payable (8,509) (1) 50,000
Director fees payable 1,500 1,500 19,500
----------- ----------- -----------
Net Cash Flows Used for Operating Activities (957,893) (94,584) (2,267,869)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Equipment (purchases) dispositions 0 0 (90)
Organization costs 0 0 (270)
----------- ----------- -----------
Net Cash Flows Provided (Used) for Investing Activities 0 0 (360)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Sale (redemption) of common stock 1,017 989 3,943
Additional paid-in capital 667,491 459,310 1,501,945
Offering costs 0 0 (7,173)
Advances received 270,400 220,300 1,206,626
Advances repaid (431,000) (500,000) (1,129,200)
Interest recognized through discount adjustment 903 903
Notes payable issued for technology 500,000 500,000
Discount on technology notes payable for imputed interest (23,148) (23,148)
Accrued interest payable 10,822 9,697 78,802
Proceeds from notes payable 0 105,000 175,000
----------- ----------- -----------
Net Cash Flows Provided by Financing Activities 996,485 295,296 2,307,698
----------- ----------- -----------
Net increase in cash 38,592 200,712 39,469
Cash and cash equivalents - Beginning of period 877 916 0
----------- ----------- -----------
Cash and cash equivalents - End of period $ 39,469 $ 201,628 $ 39,469
=========== =========== ===========
Schedule of Non-Cash Investing and Financing Activities:
- --------------------------------------------------------
During 1998, the Company exchanged 1,000,000 restricted common shares for a profit sharing interest in 439 lode-mining claims.
The Company accrued interest on notes payable of $10,822 and $9,696 for the periods ended March 31, 1999 and 1998,
respectively. The Company has not paid any accrued interest. The Company has also recognized an additional $903 of
imputed interest during 1999.
See accompanying summary of accounting
policies and notes to financial statements.
F-15
</TABLE>
<PAGE>
GOLDSTATE CORPORATION
Notes to Unaudited Financial Statements
March 31, 1999
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Goldstate Corporation (the Company) was incorporated on February 28, 1996
under the laws of the State of Nevada. The Company is an exploration stage
company.
The Company's principal operations are the exploration and development of
439 unpatented lode-mining claims in the State of Idaho pursuant to a
profit sharing agreement as discussed in Note 4.
Basis of Accounting
-------------------
The Company utilizes the accrual basis of accounting. Financial statements
have been prepared using generally accepted accounting principles.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
Research, Development and Exploration Costs
-------------------------------------------
Research, development and exploration costs are expensed as incurred.
Cash Equivalents
----------------
For purposes of the Statement of Cash Flows, cash equivalents are defined
as investments with original maturities of three months or less.
Going Concern and Continued Operations
--------------------------------------
As of March 31, 1999, the Company had not generated revenues from
operations. The Company's successful financial operations and movement into
an operating basis are solely contingent on the development of the lode
mining claims and related profit sharing agreement. The Company expects to
fund ongoing operations for the next twelve months through a combination of
advances and the common stock offering described in Note 5, which has
provided an additional $870,000 of funding, and subsequent offerings to
commence after October 7, 1999.
Earnings Per Share
------------------
As of March 31, 1999, there were 800,000 options exercisable to purchase
common stock. As these options would have an antidilutive effect on the
presentation of loss per share, a diluted loss per share calculation is not
presented. There are no other convertible stock issues or warrants
outstanding at March 31, 1999.
F-16
<PAGE>
GOLDSTATE CORPORATION
Notes to Unaudited Financial Statements
March 31, 1999
NOTE 2: TECHNOLOGY SUBLICENSE AGREEMENT
In March of 1999, the Company entered into a definitive sub-license
agreement with Geneva Resources, Inc. ("Geneva"), to utilize assay and
metallurgical technology, know-how, and rights to technological processes
developed for the Blackhawk mineralization by Auric Metallurgical
Laboratories, Inc. ("Auric"). This sub-license is for non-exclusive use in
the Company's claim area in the State of Idaho for a period not less than
40 years. Pursuant to this agreement, the Company was to issue 500,000
restricted common shares to Geneva Resources, Inc. ("Geneva") and the
Company also issued 1,000,000 restricted common shares to AuRIC. Pursuant
to the same agreement the Company also issued promissory notes to both
Geneva and AuRIC in the amount of $250,000 to each company. These are 3%
interest bearing notes and are payable upon the transfer of the technology.
As these notes bear interest below market value, the Company has used an
imputed interest rate of 8%. The imputed value of these notes at issuance
was $238,426 to each company.
Pursuant to an amendment to the above agreement, the Company issued a
convertible promissory note to Geneva in the amount of $100,000 bearing
interest at 8% and payable on demand, in lieu of issuance of the 500,000
restricted common shares required by the Technology Sub-license Agreement.
This promissory note is convertible into 500,000 shares of the Company's
common stock at the option of Geneva after October 7, 1999.
As of March 31, 1999 the promissory notes and common stock have been issued
to the various parties, however, the related technology has not been
transferred. These promissory notes become due and payable upon the
transfer of the technology. Transfer of the technology will occur after
completion of pilot scale testing. The technology is scheduled for transfer
during 1999. The Company has expensed the amounts paid pursuant to the
agreement as research and development expense.
F-17
<PAGE>
GOLDSTATE CORPORATION
Notes to Unaudited Financial Statements
March 31, 1999
NOTE 3: INVESTMENTS
Investment in Profit Sharing Interest
-------------------------------------
On December 11, 1997, Intergold Corporation and its subsidiary entered into
a profit sharing agreement with the Company. Under terms of the agreement,
Intergold received 1,000,000 restricted shares of common stock in the
Company in exchange for the sale of a future profit sharing interest. The
Company will be responsible to provide all funding and will be the
operating partner. The Company will initially retain 80% of the profits
resulting from the agreement. After the Company is repaid all of its
invested capital, the profit distribution will be 51% to the Company and
49% to Intergold Corporation. There are 439 unpatented lode-mining claims
that form the subject of this arrangement known as Blackhawk II. These
claims were transferred from Intergold Corporation to the Company via quit
claim deed on June 10, 1999. As of December 31, 1998 there were no jointly
controlled assets pursuant to the agreement and no profits had been
generated.
The Company now owns a profit sharing interest in 439 unpatented
lode-mining claims. As the 1,000,000 shares of common stock cannot be
marketed for a period of twelve months from the date of issuance, the
Company has valued the profit sharing interest at 50% of the trading value
as of the date of issuance, $170,000.
As the lode mining claims are developed, the equity method of accounting
will be utilized to account for the joint venture agreement with Intergold
Corporation. The Company will have majority accounting control over the
development of the claims. As of March 31, 1999, no profit had been
generated by the development of the claims.
The sole director and officer of Goldstate Corporation is also a director
of Intergold Corporation.
F-18
<PAGE>
GOLDSTATE CORPORATION
Notes to Unaudited Financial Statements
March 31, 1999
NOTE 4: ADVANCES AND NOTES PAYABLE
Advances are comprised of the following:
Advances
--------
The Company at March 31, 1999 had advances, payable on demand, bearing 10%
simple interest, to the following affiliated company:
Tri-Star Financial Services, Inc. $ 77,426
=========
Notes Payable
-------------
The Company had Notes Payable at March 31, 1999 as follows:
Brent Pierce $ 75,000
Rising Sun Capital Corporation 100,000
Geneva Resources, Inc. 350,000
Discount for imputed interest on Geneva Resources, Inc. (11,123)
AuRIC Metallurgical Laboratories, LLC 250,000
Discount for imputed interest on AuRIC Labs (11,122)
---------
$ 752,755
=========
Accrued Interest Payable to March 31, 1999 from Advances and Notes Payable
was $78,800. The Company has recognized $903 of imputed interest during the
period ending March 31, 1999.
The Company has entered into two promissory notes with Brent Pierce. The
first note, dated July 31, 1997, is for $70,000. The second note is dated
February 3, 1998 and is for $5,000. The notes bear an 8% interest rate and
are due on demand. The notes are convertible at the option of the holder
into 350,000 and 25,000 shares of common stock, respectively.
The Company has also issued a $100,000 note, dated March 5, 1998, to Rising
Sun Capital Corporation. The note bears interest at 8% and is due on
demand. The note is convertible at the option of the holder after October
7, 1999 into 500,000 shares of common stock.
Note agreements executed in 1999 relate to requirements under the
Technology Sub-license agreement that the Company executed on March 18,
1999 (see Note 3).
Pursuant to the Technology Sub-license agreement, the Company issued
promissory notes to both Geneva and AuRIC in the amount of $250,000 to each
company. These are 3% interest bearing notes and are payable upon the
transfer of the technology. These notes have been discounted to bear an
imputed interest rate of 8%.
F-19
<PAGE>
GOLDSTATE CORPORATION
Notes to Unaudited Financial Statements
March 31, 1999
NOTE 4: ADVANCES AND NOTES PAYABLE (continued)
Pursuant to an amendment to the Technology Sub-License agreement, the
Company has issued a convertible promissory note to Geneva Resources, Inc.
("Geneva") in the amount of $100,000 that is convertible to 500,000
restricted common shares upon demand, and bears interest at the rate of 8%
per annum.
NOTE 5: STOCKHOLDERS' EQUITY
Common Stock
------------
Pursuant to a July 30, 1997 Offering Memorandum, the Company issued under
SEC Rule 504 of Regulation D, 2,625,000 shares of common stock at $.0003
par value for $525,000 during 1997 and 1998. Pursuant to a March 3, 1998
Offering Memorandum, the Company has issued 1,500,000 shares of common
stock at $.0003 par value for $300,000 during 1998. The Company has also
issued 1,000,000 common shares to Intergold Corporation pursuant to a
profit sharing agreement as detailed in Note 3. Pursuant an $8,509 debt
settlement agreement, the Company issued 42,500 shares of common stock on
January 15, 1999. On March 18, 1999, the company issued 1,000,000 shares of
common stock to AuRIC Metallurgical Laboratories, LLC pursuant to terms and
conditions of the Technology Sub-license Agreement executed on March 18,
1999 as detailed in Note 2. Pursuant to a March 15, 1999 Offering
Memorandum, the Company has issued 2,350,000 shares of common stock at
$.0003 par value for $470,000 to March 31, 1999. Subsequent to March 31,
1999, the Company issued 2,000,000 shares of common stock at $.0003 par
value for $400,000.
The private placement memorandum dated March 15, 1999 generated $870,000 of
additional operating funds that will be utilized primarily on management
and administration relating to development programs for metallurgical
technology and planning for the Blackhawk II Property as well as repayment
of advances to companies which provided past management services, and for
general working capital for the continued exploration and development of
the Company's Blackhawk II claims. As of April 6, 1999, the entire offering
had been subscribed.
Preferred Stock
---------------
Pursuant to a Board resolution, the Corporation has authorized the creation
of preferred stock and related rights. The Company also filed a
"Certificate of Designation of Series A Preferred Stock" with the Nevada
Secretary of State on May 8, 1998. The Company has not issued any shares of
preferred stock as of March 31, 1999.
F-20
<PAGE>
GOLDSTATE CORPORATION
Notes to Unaudited Financial Statements
March 31, 1999
NOTE 6: EMPLOYEE STOCK OPTION PLAN
On March 1, 1999 the Company authorized an Employee Stock Option Plan. The
plan authorized the issuance of 1,500,000 options that can be exercised at
$.15 per share of common stock. Options granted expire March 1, 2019. The
options are non-cancelable once granted. Shares, which may be acquired
through the plan, may be authorized but unissued shares of common stock or
issued shares of common stock held in the Company's treasury. Options
granted under the plan will not be in lieu of salary or other compensation
for services.
During the three month period ending March 31, 1999, the Board of Directors
of the Company authorized the grant of stock options to certain officers,
directors and consultants. The options granted consisted of 800,000 options
with an exercise price of $.15 per share of common stock. Selected
information regarding the options as of March 31, 1999 and 1998 are as
follows:
March 31, 1999 March 31, 1998
-------------------- -----------------
Weighted Weighted
Number Average Number Average
of Exercise of Exercise
Options Price Options Price
------- ----- ------- -----
Outstanding at Beg. of Period -0- -0- -0- -0-
Outstanding at End of Period 800,000 $.15/share -0- -0-
Exercisable at End of Period 800,000 $.15/share -0- -0-
Options Granted 800,000 $.15/share -0- -0-
Options Exercised -0- -0- -0- -0-
Options Forfeited -0- -0- -0- -0-
Options Expired -0- -0- -0- -0-
As of March 31, 1999, outstanding options have an exercise price of $.15
per share. The weighted average exercise price of all options outstanding
is $.15 per share of common stock and the weighted average remaining
contractual life is 19 years 334 days. There are 800,000 options that are
exercisable with a weighted average exercise price of $.15 per share of
common stock.
Subsequent to March 31, 1999, the Company granted an additional 200,000 in
options under the same terms detailed above.
F-21
<PAGE>
GOLDSTATE CORPORATION
Notes to Unaudited Financial Statements
March 31, 1999
NOTE 7: MANAGEMENT SERVICES AGREEMENT
The Company has entered into a management services agreement with Tri Star
Financial Services, Inc ("Tri Star") to provide management of the
day-to-day operations of the Company. The management services agreement
requires a monthly payment not to exceed $100,000 for services rendered.
This contract runs from January 1, 1999 through June 30, 1999. The
individuals comprising the management team provided by Tri Star are the
same individuals managing the operations of Intergold Corporation.
Subsequent to March 31, 1999, the Company entered into a similar management
services agreement with Investor Communications, Inc. This contract starts
July 1, 1999 and is for 24 months at a cost to not exceed $75,000 per month
for the first twelve months. The management team provided by Investor
Communications is the same group provided by Tri Star.
The sole director and officer of the Company is not an officer, director,
employee or a part of the management team provided by Tri Star or Investor
Communications, Inc.
NOTE 8: INCOME TAXES
The Company incurred an operating loss for the year ended December 31, 1998
and 1997 of $410,255, and $804,176, respectively. The Company had adopted
FASB No. 109 for reporting purposes.
As of December 31, 1998 and 1997, the Company had net operating loss carry
forwards of $1,218,595 and $808,340, respectively, which expire between the
years 2006 - 2012. The deferred tax assets resulting from these carry
forwards were as follows:
1998 1997
---- ----
Deferred Tax Asset $ 414,322 $ 274,836
Less Valuation of Net Assets (414,322) (274,836)
--------- ---------
Balance at End of Year $ -0- $ -0-
========= =========
F-22
<PAGE>
GOLDSTATE CORPORATION
(An Exploration Stage Company)
FINANCIAL STATEMENTS
(Unaudited)
JUNE 30, 1999
TABLE OF CONTENTS
-----------------
Page
----
Balance Sheet F-24
Statements of Operations F-25
Statements of Cash Flows F-26
Notes to Financial Statements F-27 - F-33
F-23
<PAGE>
GOLDSTATE CORPORATION
(An Exploration Stage Company)
Balance Sheets
June 30,
1999
----
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 181
OTHER ASSETS
Interest in unpatented mining claims 170,000
-----------
Total Assets $ 170,181
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
CURRENT LIABILITIES
Accounts payable - trade $ 54,309
Advances and accrued interest payable 79,554
Directors fees payable 21,000
Notes payable 759,004
-----------
Total Liabilities 913,867
-----------
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value; authorized 25,000,000 shares;
issued and outstanding 0 shares at June 30, 1999 0
Common stock $.0003 par value; authorized 75,000,000 shares;
issued and outstanding 14,131,300 at June 30, 1999 4,543
Paid - in capital 1,964,172
Accumulated deficit through development stage (2,712,401)
-----------
Total Stockholders' Equity (Deficit) (743,686)
-----------
Total Liabilities and Stockholders' Equity $ 170,181
===========
See accompanying summary of accounting
policies and notes to financial statements.
F-24
<PAGE>
<TABLE>
<CAPTION>
GOLDSTATE CORPORATION
(An Exploration Stage Company)
Statements of Operations
Inception
(February 28,
For the 3 Months Ended June 30, For the 6 Months Ended June 30, 1996) to
------------------------------- ------------------------------- June 30,
1999 1998 1999 1998 1999
---- ---- ---- ---- ----
REVENUES
<S> <C> <C> <C> <C> <C>
Other income $ 0 $ 0 $ 0 $ 0 $ 1,026
------------ ------------ ------------ ------------ ------------
Total Revenues 0 0 0 0 1,026
------------ ------------ ------------ ------------ ------------
OPERATING EXPENSES
PROPERTY EXPLORATION EXPENSES
Research and Development - Sublicense Agreement 0 0 666,852 0 666,852
Claims maintenance fees and staking costs 0 0 0 0 143,905
------------ ------------ ------------ ------------ ------------
Total Property Exploration Expenses 0 0 666,852 0 810,757
------------ ------------ ------------ ------------ ------------
ADMINISTRATIVE EXPENSES
Overhead and Administration 332,100 75,000 600,000 150,000 1,380,000
Legal and accounting 27,795 174 30,580 5,878 122,470
Directors fees 1,500 1,500 3,000 3,000 21,000
Internet design and access 0 719 0 3,461 5,172
Printing and stationary 0 3,741 0 3,741 4,260
Transfer agent 385 1,196 435 1,298 2,548
News wire services 100 1,805 100 1,805 4,100
Courier and postage 567 558 597 853 10,225
Reports/information/subscripitions 0 0 0 925 33,330
Bank charges 18 79 59 103 426
Office supplies 0 0 0 95 6,010
Consultants 0 0 0 0 88,190
Office rent 0 0 0 0 42,033
Telephone and fax 0 0 0 0 35,556
Wages and salaries 0 0 0 0 22,444
Travel 0 0 0 0 16,731
Auto 0 0 0 0 7,259
Promotion 0 0 0 0 7,165
Miscellaneous 0 0 0 0 1,410
Computer supplies 0 0 0 0 159
------------ ------------ ------------ ------------ ------------
Total Administrative Expenses 362,465 84,772 634,771 171,159 1,810,488
------------ ------------ ------------ ------------ ------------
Total Operating Expenses 362,465 84,772 1,301,623 171,159 2,621,245
------------ ------------ ------------ ------------ ------------
Income (Loss) from Operations (362,465) (84,772) (1,301,623) (171,159) (2,620,219)
OTHER INCOME (EXPENSES)
Interest Income 0 0 0 0 1
Interest Expense (12,477) (3,987) (24,203) (13,683) (92,183)
------------ ------------ ------------ ------------ ------------
Net (Loss) $ (374,942) $ (88,759) $ (1,325,826) $ (184,842) $ (2,712,401)
============ ============ ============ ============ ============
Earnings (Loss) Per Share - Basic $ (0.027) $ (0.010) $ (0.115) $ (0.024) $ (0.362)
============ ============ ============ ============ ============
Weighted Average Number of
Common Shares Outstanding 13,999,432 8,738,800 11,493,662 7,750,402 7,494,061
============ ============ ============ ============ ============
See accompanying summary of accounting
policies and notes to financial statements.
F-25
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GOLDSTATE CORPORATION
(An Exploration Stage Company)
Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
Inception
(February 28,
For the 3 Months Ended June 30, For the 6 Months Ended June 30, 1996) to
----------------------------- ------------------------------- June 30,
1999 1998 1999 1998 1999
---- ---- ---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C> <C> <C>
Net (loss) $ (374,942) $ (88,759) $(1,325,826) $ (184,842) $(2,712,401)
Adjustments to reconcile net (loss) to cash
used by operating activities
Amortization and depreciation 0 0 0 0 90
Changes in Assets and Liabilities
Accounts payable 4,309 1 (4,200) 0 54,309
Director fees payable 1,500 1,500 3,000 3,000 21,000
----------- ----------- ----------- ----------- -----------
Net Cash Flows Used for Operating Activities (369,133) (87,258) (1,327,026) (181,842) (2,637,002)
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Equipment (purchases) dispositions 0 0 0 (90)
Organization costs 270 0 270 0 0
----------- ----------- ----------- ----------- -----------
Net Cash Flows Provided (Used) for Investing
Activities 270 0 270 0 (90)
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Sale (redemption) of common stock 600 0 1,617 989 4,543
Additional paid-in capital 399,400 1 966,891 459,311 1,801,345
Offering costs 0 0 0 0 (7,173)
Advances received 334,100 75,000 604,500 295,300 1,540,726
Advances repaid (417,000) (192,319) (848,000) (692,319) (1,546,200)
Interest recognized through discount adjustment 6,249 7,152 7,152
Notes payable issued for technology 0 500,000 500,000
Discount on technology notes payable for imputed
interest 0 (23,148) (23,148)
Accrued interest payable 6,226 3,986 17,048 13,683 85,028
Proceeds from notes payable 0 0 100,000 105,000 275,000
----------- ----------- ----------- ----------- -----------
Net Cash Flows Provided by Financing Activities 329,575 (113,332) 1,326,060 181,964 2,637,273
----------- ----------- ----------- ----------- -----------
Net increase in cash (39,288) (200,590) (696) 122 181
Cash and cash equivalents - Beginning of period 39,469 201,628 877 916 0
----------- ----------- ----------- ----------- -----------
Cash and cash equivalents - End of period $ 181 $ 1,038 $ 181 $ 1,038 $ 181
=========== =========== =========== =========== ===========
Schedule of Non-Cash Investing and Financing Activities:
- --------------------------------------------------------
During 1998, the Company exchanged 1,000,000 restricted common shares for a profit sharing interest in 439 lode-mining claims.
The Company accrued interest on notes payable of $17,048 and $13,683 for the six month periods ended June 30, 1999 and 1998,
respectively. The Company has not paid any accrued interest. The Company has also recognized an additional $7,153 of imputed
interest during 1999.
See accompanying summary of accounting
policies and notes to financial statements.
F-26
</TABLE>
<PAGE>
GOLDSTATE CORPORATION
Notes to Unaudited Financial Statements
June 30, 1999
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Goldstate Corporation (the Company) was incorporated on February 28, 1996
under the laws of the State of Nevada. The Company is an exploration stage
company.
The Company's principal operations are the exploration and development of
439 unpatented lode-mining claims in the State of Idaho pursuant to a
profit sharing agreement as discussed in Note 4.
Basis of Accounting
-------------------
The Company utilizes the accrual basis of accounting. Financial statements
have been prepared using generally accepted accounting principles.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
Research, Development and Exploration Costs
-------------------------------------------
Research, development and exploration costs are expensed as incurred.
Cash Equivalents
----------------
For purposes of the Statement of Cash Flows, cash equivalents are defined
as investments with original maturities of three months or less.
Going Concern and Continued Operations
As of June 30, 1999, the Company had not generated revenues from
operations. The Company's successful financial operations and movement into
an operating basis are solely contingent on the development of the lode
mining claims and related profit sharing agreement. The Company expects to
fund ongoing operations for the next twelve months through a combination of
advances and the common stock offering described in Note 5, which has
provided an additional $870,000 of funding, and subsequent offerings to
commence after October 7, 1999.
Earnings Per Share
As of June 30, 1999, there were 1,000,000 options exercisable to purchase
common stock. As these options would have an antidilutive effect on the
presentation of loss per share, a diluted loss per share calculation is not
presented. There are no other convertible stock issues or warrants
outstanding ay June 30, 1999.
F-27
<PAGE>
GOLDSTATE CORPORATION
Notes to Unaudited Financial Statements
June 30, 1999
NOTE 2: TECHNOLOGY SUB-LICENSE AGREEMENT
In March of 1999, the Company entered into a definitive sub-license
agreement with Geneva Resources, Inc. ("Geneva"), to utilize assay and
metallurgical technology, know-how, and rights to technological processes
developed for the Blackhawk mineralization by Auric Metallurgical
Laboratories, Inc. ("Auric"). This sub-license is for non-exclusive use in
the Company's claim area in the State of Idaho for a period not less than
40 years. Pursuant to this agreement, the Company was to issue 500,000
restricted common shares to Geneva Resources, Inc. ("Geneva") and the
Company also issued 1,000,000 restricted common shares to AuRIC. Pursuant
to the same agreement the Company also issued promissory notes to both
Geneva and AuRIC in the amount of $250,000 to each company. These are 3%
interest bearing notes and are payable upon the transfer of the technology.
As these notes bear interest below market value, the Company has used an
imputed interest rate of 8%. The imputed value of these notes at issuance
was $238,426 to each company.
Pursuant to an amendment to the above agreement, the Company issued a
convertible promissory note to Geneva in the amount of $100,000 bearing
interest at 8% and payable on demand, in lieu of issuance of the 500,000
restricted common shares required by the Technology Sub-license Agreement.
This promissory note is convertible into 500,000 shares of the Company's
common stock at the option of Geneva after October 7, 1999.
As of June 30, 1999 the promissory notes and common stock have been issued
to the various parties, however, the related technology has not been
transferred. These promissory notes become due and payable upon the
transfer of the technology. Transfer of the technology will occur after
completion of pilot scale testing. The technology is scheduled for transfer
during 1999. The Company has expensed the amounts paid pursuant to the
agreement as research and development expense.
NOTE 3: INVESTMENTS
Investment in Profit Sharing Interest
-------------------------------------
On December 11, 1997, Intergold Corporation and its subsidiary entered into
a profit sharing agreement with the Company. Under terms of the agreement,
Intergold received 1,000,000 restricted shares of common stock in the
Company in exchange for the sale of a future profit sharing interest. The
Company will be responsible to provide all funding and will be the
operating partner. The Company will initially retain 80% of the profits
resulting from the agreement. After the Company is repaid all of its
invested capital, the profit distribution will be 51% to the Company and
49% to Intergold Corporation. There are 439 unpatented lode-mining claims
that form the subject of this arrangement known as Blackhawk II. These
claims were transferred from Intergold Corporation to the Company via quit
claim deed on June 10, 1999. As of December 31, 1998 there were no jointly
controlled assets pursuant to the agreement and no profits had been
generated.
F-28
<PAGE>
GOLDSTATE CORPORATION
Notes to Unaudited Financial Statements
June 30, 1999
The Company now owns a profit sharing interest in 439 unpatented
lode-mining claims. As the 1,000,000 shares of common stock cannot be
marketed for a period of twelve months from the date of issuance, the
Company has valued the profit sharing interest at 50% of the trading value
as of the date of issuance, $170,000.
As the lode mining claims are developed, the equity method of accounting
will be utilized to account for the joint venture agreement with Intergold
Corporation. The Company will have majority accounting control over the
development of the claims. As of June 30, 1999, no profit had been
generated by the development of the claims.
The sole director and officer of Goldstate Corporation is also a director
of Intergold Corporation.
NOTE 4: ADVANCES AND NOTES PAYABLE
Advances are comprised of the following:
Advances
--------
The Company at June 30, 1999 had advances, payable on demand, bearing 10%
simple interest, to the following affiliated company:
Amerocan Marketing, Inc. $ 2,500
Tri-Star Financial Services, Inc. 26
Investor Communications International. Inc. (8,000)
-------
$(5,474)
=======
Notes Payable
-------------
The Company had Notes Payable at June 30, 1999 as follows:
Brent Pierce $ 75,000
Rising Sun Capital Corporation 100,000
Geneva Resources, Inc. 350,000
Discount for imputed interest on Geneva Resources, Inc. (7,998)
AuRIC Metallurgical Laboratories, LLC 250,000
Discount for imputed interest on AuRIC Labs (7,998)
---------
$ 759,004
=========
F-29
<PAGE>
GOLDSTATE CORPORATION
Notes to Unaudited Financial Statements
June 30, 1999
NOTE 4: ADVANCES AND NOTES PAYABLE (continued)
Accrued Interest Payable to June 30, 1999 from Advances and Notes Payable
was $85,028.
The Company has entered into two promissory notes with Brent Pierce. The
first note, dated July 31, 1997, is for $70,000. The second note is dated
February 3, 1998 and is for $5,000. The notes bear an 8% interest rate and
are due on demand. The notes are convertible at the option of the holder
into 350,000 and 25,000 shares of common stock, respectively.
The Company has also issued a $100,000 note, dated March 5, 1998, to Rising
Sun Capital Corporation. The note bears interest at 8% and is due on
demand. The note is convertible at the option of the holder into 500,000
shares of common stock.
Note agreements executed in 1999 relate to requirements under the
Technology Sub-license agreement that the Company executed on March 18,
1999 (see Note 3).
Pursuant to the Technology Sub-license agreement, the Company issued
promissory notes to both Geneva and AuRIC in the amount of $250,000 to each
company. These are 3% interest bearing notes and are payable upon the
transfer of the technology. These notes have been discounted to bear an
imputed interest rate of 8%.
Pursuant to an amendment to the Technology Sub-License agreement, the
Company has issued a convertible promissory note to Geneva Resources, Inc.
("Geneva") in the amount of $100,000 that is convertible to 500,000
restricted common shares upon demand, and bears interest at the rate of 8%
per annum.
NOTE 5: STOCKHOLDERS' EQUITY
Common Stock
------------
Pursuant to a July 30, 1997 Offering Memorandum, the Company issued under
SEC Rule 504 of Regulation D, 2,625,000 shares of common stock at $.0003
par value for $525,000 during 1997 and 1998. Pursuant to a March 3, 1998
Offering Memorandum, the Company has issued 1,500,000 shares of common
stock at $.0003 par value for $300,000 during 1998. The Company has also
issued 1,000,000 common shares to Intergold Corporation pursuant to a
profit sharing agreement as detailed in Note 3. Pursuant an $8,509 debt
settlement agreement, the Company issued 42,500 shares of common stock on
January 15, 1999. On March 18, 1999, the company issued 1,000,000 shares of
common stock to AuRIC Metallurgical Laboratories, LLC pursuant to terms and
conditions of the Technology Sub-license Agreement executed on March 18,
1999 as detailed in Note 2. Pursuant to a March 15, 1999 Offering
Memorandum, the Company has issued 4,350,000 shares of common stock at
$.0003 par value for $870,000.
The private placement memorandum dated March 15, 1999 generated $870,000 of
additional operating funds that will be utilized primarily on management
and administration relating to development programs for metallurgical
technology and planning for the Blackhawk II Property as well as repayment
of advances to companies which provided past management services, and for
general working capital for the continued exploration and development of
the Company's Blackhawk II claims. As of April 6, 1999, the entire offering
had been subscribed.
Preferred Stock
---------------
Pursuant to a Board resolution, the Corporation has authorized the creation
of preferred stock and related rights. The Company also filed a
"Certificate of Designation of Series A Preferred Stock" with the Nevada
Secretary of State on May 8, 1998. The Company has not issued any shares of
preferred stock as of June 30, 1999.
F-30
<PAGE>
GOLDSTATE CORPORATION
Notes to Unaudited Financial Statements
June 30, 1999
NOTE 6: EMPLOYEE STOCK OPTION PLAN
On March 1, 1999 the Company authorized an Employee Stock Option Plan. The
plan authorized the issuance of 1,500,000 options that can be exercised at
$.15 per share of common stock. Options granted expire March 1, 2019. The
options are non-cancelable once granted. Shares, which may be acquired
through the plan, may be authorized but unissued shares of common stock or
issued shares of common stock held in the Company's treasury. Options
granted under the plan will not be in lieu of salary or other compensation
for services.
During the six month period ending June 30, 1999, the Board of Directors of
the Company authorized the grant of stock options to certain officers,
directors and consultants. The options granted consisted of 1,000,000
options with an exercise price of $.15 per share of common stock. Selected
information regarding the options as of June 30, 1999 and 1998 are as
follows:
June 30, 1999 June 30, 1998
---------------------- ----------------
Weighted Weighted
Number Average Number Average
of Exercise of Exercise
Options Price Options Price
------- ----- ------- -----
Outstanding at Beg. of Period -0- -0- -0- -0-
Outstanding at End of Period 1,000,000 $.15/share -0- -0-
Exercisable at End of Period 1,000,000 $.15/share -0- -0-
Options Granted 1,000,000 $.15/share -0- -0-
Options Exercised -0- -0- -0- -0-
Options Forfeited -0- -0- -0- -0-
Options Expired -0- -0- -0- -0-
As of June 30, 1999, outstanding options have an exercise price of $.15 per
share. The weighted average exercise price of all options outstanding is
$.15 per share of common stock and the weighted average remaining
contractual life is 19 years 242 days. There are 1,000,000 options that are
exercisable with a weighted average exercise price of $.15 per share of
common stock.
Subsequent to March 31, 1999, the Company granted an additional 200,000 in
options under the same terms detailed above.
F-31
<PAGE>
GOLDSTATE CORPORATION
Notes to Unaudited Financial Statements
June 30, 1999
NOTE 7: MANAGEMENT SERVICES AGREEMENT
The Company has entered into a management services agreement with Tri Star
Financial Services, Inc ("Tri Star") to provide management of the
day-to-day operations of the Company. The management services agreement
requires a monthly payment not to exceed $100,000 for services rendered.
This contract runs from January 1, 1999 through June 30, 1999. The
individuals comprising the management team provided by Tri Star are the
same individuals managing the operations of Intergold Corporation.
The Company entered into a similar management services agreement with
Investor Communications, Inc. during the second quarter. This contract
starts July 1, 1999 and is for 24 months at a cost to not exceed $75,000
per month for the first twelve months. The management team provided by
Investor Communications is the same group provided by Tri Star.
The sole director and officer of the Company is not an officer, director,
employee or a part of the management team provided by Tri Star or Investor
Communications, Inc.
F-32
<PAGE>
GOLDSTATE CORPORATION
Notes to Unaudited Financial Statements
June 30, 1999
NOTE 8: INCOME TAXES
The Company incurred an operating loss for the year ended December 31, 1998
and 1997 of $410,255, and $804,176, respectively. The Company had adopted
FASB No. 109 for reporting purposes.
As of December 31, 1998 and 1997, the Company had net operating loss carry
forwards of $1,218,595 and $808,340, respectively, which expire between the
years 2006 - 2012. The deferred tax assets resulting from these carry
forwards were as follows:
1998 1997
---- ----
Deferred Tax Asset $ 414,322 $ 274,836
Less Valuation of Net Assets (414,322) (274,836)
--------- ---------
Balance at End of Year $-0- $-0-
========= =========
F-33
ARTICLES OF INCORPORATION
OF
IMAGE PERFECT INCORPORATED
KNOW ALL MEN BY THESE PRESENTS:
That we, the undersigned, have this day voluntarily associated ourselves
together for the purpose of forming a Corporation under and pursuant to the laws
of the State of Nevada, and we do hereby certify that:
ARTICLE I - NAME: The exact name of this Corporation is:
Image Perfect, Incorporated
ARTICLE II - RESIDENT AGENT:
The Resident Agent of the Corporation is Max C. Tanner, Esq., The Law
Offices of Max C. Tanner, 2950 East Flamingo Road, Suite G, Las Vegas, Nevada
89121.
ARTICLE III - DURATION: The Corporation shall have perpetual existence.
ARTICLE IV - PURPOSES: The purpose, object and nature of the business for which
this Corporation is organized are:
(a) To engage in any lawful activity;
(b) To carry on- such business as may be necessary, convenient, or
desirable to accomplish the above purposes, and to do all other things
incidental thereto which are not forbidden by law or by these Articles
of Incorporation.
ARTICLE V - POWERS: The powers of the Corporation shall be those powers granted
by 78.060 and 78.070 of the Nevada Revised Statutes under which this corporation
is formed. In addition, the Corporation shall have the following specific
powers:
(a) To elect or appoint officers and agents of the Corporation and to fix
their compensation;
<PAGE>
(b) To act as an agent for any individual, association, partnership,
corporation or other legal entity;
(c) To receive, acquire, hold, exercise rights arising out of the
ownership or possession thereof, sell, or otherwise dispose of, shares
or other interests in, or obligations of, individuals, associations,
partnerships, corporations, or governments;
(d) To receive, acquire, hold, pledge, transfer, or otherwise dispose of
shares of the corporation, but such shares may only be purchased,
directly or indirectly, out of earned surplus;
(e) To make gifts or contributions for the public welfare or for
charitable, scientific or educational purposes, and in time of war, to
make donations in aid of war activities.
ARTICLE VI - CAPITAL STOCK:
Section 1. Authorized Shares. The total number of shares which this
Corporation is authorized to issue is 25,000,000 shares of Common Stock at
$.00l par value per share.
Section 2. Voting Rights of Shareholders. Each holder of the Common Stock
shall be entitled to one vote for each share of stock standing in his name
on the books of the Corporation.
Section 3. Consideration for Shares. The Common Stock shall be issued for
such consideration, as shall be fixed from time to time by the Board of
Directors. In the absence of fraud, the judgment of the Directors as to the
value of any property for shares shall be conclusive. When shares are
issued upon payment of the consideration fixed by the Board of Directors,
such shares shall be taken to be fully paid stock and shall be
non-assessable. The Articles shall not be amended in this particular.
Section 4. pre-emptive Rights. Except as may otherwise be provided by the
Board of Directors, no holder of any shares of the stock of the
Corporation, shall have any preemptive right to purchase, subscribe for, or
otherwise acquire any shares of stock of the Corporation of any class now
or hereafter authorized, or any securities exchangeable for or convertible
into such shares, or any warrants or other instruments evidencing rights or
options to subscribe for, purchase or otherwise acquire such shares.
<PAGE>
Section 5. Stock Rights and Options. The Corporation shall have the power
to create and issue rights, warrants, or options entitling the holders
thereof to purchase from the corporation any shares of its capital stock of
any class or classes, upon such terms and conditions and at such times and
prices as the Board of Directors may provide, which terms and conditions
shall be incorporated in an instrument or instruments evidencing such
rights. In the absence of fraud, the judgment of the Directors as to the
adequacy of consideration for the issuance of such rights or options and
the sufficiency thereof shall be conclusive.
ARTICLE VII - ASSESSMENT OF STOCK: The capital stock of this Corporation, after
the amount of the subscription price has been fully paid in, shall not be
assessable for any purpose, and no stock issued as fully paid up shall ever be
assessable or assessed. The holders of such stock shall not be individually
responsible for the debts, contracts, or liabilities of the Corporation and
shall not be liable for assessments to restore impairments in the capital of the
Corporation.
ARTICLE VIII - DIRECTORS: For the management of the business, and for the
conduct of the affairs of the Corporation, and for the future definition,
limitation, and regulation of the powers of the Corporation and its directors
and shareholders, it is further provided:
Section 1. Size of Board. The members of the governing board of the
Corporation shall be styled directors. The number of directors of the
Corporation, their qualifications, terms of office, manner of election,
time and place of meeting, and powers and duties shall be such as are
prescribed by statute and in the by-laws of the Corporation. The name and
post office address of the directors constituting the first board of
directors, which shall be four (4) in number are:
NAME ADDRESS
---- -------
Steven K. Sheffield 1820 O'Sage Orange Avenue
Salt Lake City, UT 84104
Craig B. Jamieson 4680 5. Meadow View Court
Murray, UT 84107
Rigs Morata 54 Gil Payart Street
B.F. Homes I - Paranaque
Metro Manila 1700
Philippines
Marci Evans 6357 Vicuna Drive
Las Vegas, NV 89102
<PAGE>
Section 2. Powers of Board. In furtherance and not in limitation of the
powers conferred by the laws of the State of Nevada, the Board of Directors
is expressly authorized and empowered:
(a) To make, alter, amend, and repeal the By-Laws subject to the power of
the shareholders to alter or repeal the By-Laws made by the Board of
Directors.
(b) Subject to the applicable provisions of the ByLaws then in effect, to
determine, from time to time, whether and to what extent, and at what
times and places, and under what conditions and regulations, the
accounts and books of the Corporation, or any of them, shall be open
to shareholder inspection. No shareholder shall have any right to
inspect any of the accounts, books or documents of the Corporation,
except as permitted by law, unless and until authorized to do so by
resolution of the Board of Directors or of the Shareholders of the
Corporation;
(c) To issue stock of the Corporation for money, property, services
rendered, labor performed, cash advanced, acquisitions for other
corporations or for any other assets of value in accordance with the
action of the board of directors without vote or consent of the
shareholders and the judgment of the board of directors as to value
received and in return therefore shall be conclusive and said stock,
when issued, shall be fully-paid and non-assessable.
(d) To authorize and issue, without shareholder consent, obligations of
the Corporation, secured and unsecured, under such terms and
conditions as the Board, in its sole discretion, may determine, and to
pledge or mortgage, as security therefore, any real or personal
property of the Corporation, including after-acquired property;
(e) To determine whether any and, if so, what part, of the earned surplus
of the Corporation shall be paid in dividends to the shareholders, and
to direct and determine other use and disposition of any such earned
surplus;
(f) To fix, from time to time, the amount of the profits of the
Corporation to be reserved as working capital or for any other lawful
purpose;
<PAGE>
(g) To establish bonus, profit-sharing, stock option, or other types of
incentive compensation plans for the employees, including officers and
directors, of the Corporation, and to fix the amount of profits to be
shared or distributed, and to determine the persons to participate in
any such plans and the amount of their respective participations.
(h) To designate, by resolution or resolutions passed by a majority of the
whole Board, one or more committees, each consisting of two or more
directors, which, to the extent permitted by law and authorized by the
resolution or the By-Laws, shall have and may exercise the powers of
the Board;
(i) To provide for the reasonable compensation of its own members by
By-Law, and to fix the terms and conditions upon which such
compensation will be paid;
(j) In addition to the powers and authority herein before, or by statute,
expressly conferred upon it, the Board of Directors may exercise all
such powers and do all such acts and things as may be exercised or
done by the corporation, subject, nevertheless, to the provisions of
the laws of the State of Nevada, of these Articles of Incorporation,
and of the By-Laws of the Corporation.
Section 3. Interested Directors. No contract or transaction between this
Corporation and any of its directors, or between this Corporation and any
other corporation, firm, association, or other legal entity shall be
invalidated by reason of the fact that the director of the Corporation has
a direct or indirect interest, pecuniary or otherwise, in such corporation,
firm, association, or legal entity, or because the interested director was
present at the meeting of the Board of Directors which acted upon or in
reference to such contract or transaction, or because he participated in
such action, provided that: (1) the interest of each such director shall
have been disclosed to or known by the Board and a disinterested majority
of the Board shall have nonetheless ratified and approved such contract or
transaction (such interested director or directors may be counted in
determining whether a quorum is present for the meeting at which such
ratification or approval is given); or (2) the conditions of N.R.S. 78.140
are met.
ARTICLE IX - LIMITATION OF LIABILITY OF OFFICERS OR DIRECTORS: The personal
liability of a director or officer of the corporation to the corporation or the
Shareholders for damages for breach of fiduciary duty as a director or officer
shall be limited to acts or omissions which involve intentional misconduct,
fraud or a knowing violation of law.
<PAGE>
ARTICLE X - INDEMNIFICATION: Each director and each officer of the corporation
may be indemnified by the corporation as follows:
(a) The corporation may indemnify any person who was or is a party, or is
threatened to be made a party, to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the
corporation), by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement, actually and
reasonably incurred by him in connection with the action, suit or
proceeding, if he acted in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of
the corporation and with respect to any criminal action or proceeding,
had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suite or proceeding, by judgment, order,
settlement, conviction or upon a plea of nob contendere or its
equivalent, does not of itself create a presumption that the person
did not act in good faith and in a manner which he reasonably believed
to be in or not opposed to the best interests of the corporation, and
that, with respect to any criminal action or proceeding, he had
reasonable cause to believe that his conduct was unlawful.
(b) The corporation may indemnify any person who was or is a party, or is
threatened to be made a party, to any threatened, pending or completed
action or suit by or in the right of the corporation, to procure a
judgment in its favor by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture,
trust or other enterprise against expenses including amounts paid in
settlement and attorneys' fees actually and reasonably incurred by him
in connection with the defense or settlement of the action or suit, if
he acted in good faith and in a manner which he reasonably believed to
be in or not opposed to the best interests of the corporation.
Indemnification may not be made for any claim, issue or matter as to
which such a person has been adjudged by a court of competent
jurisdiction, after exhaustion of all appeals there from, to be liable
<PAGE>
to the corporation or for amounts paid in settlement to the
corporation, unless and only to the extent that the court in which the
action or suit was brought or other court of competent jurisdiction
determines upon application that in view of all the circumstances of
the case the person is fairly and reasonably entitled to indemnity for
such expenses as the court deems proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense
of any action, suit or proceeding referred to in subsections (a) and
(b) of this Article, or in defense of any claim, issue or matter
therein, he must be indemnified by the corporation against expenses,
including attorney's fees, actually and reasonably incurred by him in
connection with the defense.
(d) Any indemnification under subsections (a) and (b) unless ordered by a
court or advanced pursuant to subsection (e), must be made by the
corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee
or agent is proper in the circumstances. The determination must be
made:
(i) By the stockholders;
(ii) By the board of directors by majority vote of a quorum consisting
of directors who were not parties to the act, suit or proceeding;
(iii)If a majority vote of a quorum consisting of directors who were
not parties to the act, suit or proceeding so orders, by
independent legal counsel in a written opinion; or
(iv) If a quorum consisting of directors who were not parties to the
act, suit or proceeding cannot be obtained, by independent legal
counsel in a written opinion.
(e) Expenses of officers and directors incurred in defending a civil or
criminal action, suit or proceeding must be paid by the corporation as
they are incurred and in advance of the final disposition of the
action, suit or proceeding, upon receipt of an undertaking by or on
behalf of the director or officer to repay the amount if it is
ultimately determined by a court of competent jurisdiction that he is
not entitled to be indemnified by the corporation. The provisions of
this subsection do not affect any rights to advancement of expenses to
which corporate personnel other than directors or officers may be
entitled under any contract or otherwise by law.
<PAGE>
(f) The indemnification and advancement of expenses authorized in or
ordered by a court pursuant to this section:
(i) Does not exclude any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under
the certificate or articles of incorporation or any bylaw,
agreement, vote of stockholders or disinterested directors or
otherwise, for either an action in his official capacity or an
action in another capacity while holding his office, except that
indemnification, unless ordered by a court pursuant to subsection
(b) or for the advancement of expenses made pursuant to
subsection (e) may not be made to or on behalf of any director or
officer if a final adjudication establishes that his acts or
omissions involved intentional misconduct, fraud or a knowing
violation of the law and was material to the cause of action.
(ii) Continues for a person who has ceased to be a director, officer,
employee or agent and inures to the benefit of the heirs,
executors and administrators of such a person.
ARTICLE XI - PLACE OF MEETING; CORPORATE BOOKS: Subject to the laws of the State
of Nevada, the shareholders and the Directors shall have power to hold their
meetings, and the Directors shall have power to have an office or offices and to
maintain the books of the Corporation outside the State of Nevada, at such place
or places as may from time to time be designated in the By-Laws or by
appropriate resolution.
ARTICLE XII - AMENDMENT OF ARTICLES: The provisions of these Articles of
Incorporation may be amended, altered or repealed from time to time to the
extent and in the manner prescribed by the laws of the State of Nevada, and
additional provisions authorized by such laws as are then in force may be added.
All rights herein conferred on the directors, officers and shareholders are
granted subject to this reservation.
ARTICLE XIII - INCORPORATOR: The name and address of the sole incorporator
signing these Articles of Incorporation is as follows:
<PAGE>
NAME POST OFFICE ADDRESS
---- -------------------
1. Max C. Tanner 2950 East Flamingo Road, Suite G
Las Vegas, Nevada 89121
IN WITNESS WHEREOF, the undersigned incorporator has executed these
Articles of Incorporation this 26th day of February, 1996.
/s/ Max C. Tanner
-----------------
Max C. Tanner
STATE OF NEVADA )
) ss:
COUNTY OF CLARK )
On February 26, 1996, personally appeared before me, a Notary Public, Max
C. Tanner, who acknowledged to me that he executed the foregoing Articles of
Incorporation for Image Perfect, Incorporated, a Nevada corporation.
/s/ Ronald L. Drake
-------------------
Notary Public
NOTARY PUBLIC
County of Clark-State of Nevada
RONALD L. DRAKE
My Appointment Expires May 5, 1999
<PAGE>
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
FOR
DYNACOM TELECOMMUNICATIONS CORPORATION
Pursuant to NRS 78.385 and 78.390, the undersigned President and Secretary
of Dynacom Telecommunications Corporation does hereby certify:
That the following amendment to the articles of incorporation was approved
by the Sole Director of said corporation by written consent in lieu of a special
meeting of the Sole Director, dated October 20,1997 and by a majority of the
outstanding shares entitled to vote, there being 5,614,000 shares authorized to
vote and 3,823,550 shares having voted in favor of the amended articles.
1. Change of Name.
Article I is hereby amended to read as follows:
The exact name of the Corporation is Goldstate Corporation.
/s/ Harold Gooding
------------------
Harold Gooding, President and Secretary
ACKNOWLEDGMENT
STATE OF WASHINGTON )
ss.
COUNTY OF WHATCOM )
On this 20th day of October, 1997, personally appeared before me, a Notary
Public, Harold Gooding, President and Secretary of the above-mentioned
Corporation, who acknowledged that he executed the Certificate of Amendment of
the Articles of Incorporation of Dynacom Telecommunications Corporation.
/s/ Stephanie M. Ebert
----------------------
Notary Public
(Notary Stamp on File)
<PAGE>
BY-LAWS OF
IMAGE PERFECT, INCORPORATED
ARTICLE I
SHAREHOLDERS
Section 1.01 Annual Meeting. The annual meeting of the shareholders shall
be held at such date and time as shall be designated by the board of directors
and stated in the notice of the meeting or in a duly-executed waiver of notice
thereof. If the corporation shall fail to provide notice of the annual meeting
of the shareholders as set forth above, the annual meeting of the shareholders
of the corporation shall be held during the month of November or December of
each year as determined by the Board of Directors, for the purpose of electing
directors of the corporation to serve during the ensuing year and for the
transaction of such other business as may properly come before the meeting. If
the election of the directors is not held on the day designated herein for any
annual meeting of the shareholders, or at any adjournment thereof, the president
shall cause the election to be held at a special meeting of the shareholders as
soon thereafter as is convenient.
Section 1.02 Special Meetings. Special meetings of the shareholders may be
called by the president or the Board of Directors and shall be called by the
president at the written request of the holders of not less than 5l% of the
issued and outstanding shares of capital stock of the corporation.
All business lawfully to be transacted by the shareholders may be
transacted at any special meeting at any adjournment thereof. However, no
business shall be acted upon at a special meeting, except that referred to in
the notice calling the meeting, unless all of the outstanding capital stock of
the corporation is represented either in person or by proxy. Where all of the
capital stock is represented, any lawful business may be transacted and the
meeting shall be valid for all purposes.
Section 1.03 Place of Meetings. Any meeting of the shareholders of the
corporation may be held at its principal office in the State of Nevada or such
other place in or out of the United States as the Board of Directors may
designate. A waiver of notice signed by the shareholders entitled to vote may
designate any place for the holding of such meeting.
<PAGE>
Section 1.04 Notice of Meetings.
(a) The secretary shall sign and deliver to all shareholders of record
written or printed notice of any meeting at least ten (10) days, but not
more than sixty (60) days, before the date of such meeting; which notice
shall state the place, date and time of the meeting, the general nature of
the business to be transacted, and, in the case of any meeting at which
directors are to be elected, the names of nominees, if any, to be presented
for election.
(b) In the case of any meeting, any proper business may be presented
for action, except that the following items shall be valid only if the
general nature of the proposal is stated in the notice or written waiver of
notice:
(1) Action with respect to any contract or transaction between
the corporation and one or more of its directors or another firm,
association, or corporation in which one or more of its directors has
a material financial interest;
(2) Adoption of amendments to the Articles of Incorporation; or
(3) Action with respect to the merger, consolidation,
reorganization, partial or complete liquidation, or dissolution of the
corporation.
(c) The notice shall be personally delivered or mailed by first class
mail to each shareholder of record at the last known address thereof, as
the same appears on the books of the corporation, and the giving of such
notice shall be deemed delivered the date the same is deposited in the
United States mail, postage prepaid. If the address of any shareholder does
not appear upon the books of the corporation, it will be sufficient to
address any notice to such shareholder at the principal office of the
corporation.
(d) The written certificate of the person calling any meeting, duly
sworn, setting forth the substance of the notice, the time and place the
notice was mailed or personally delivered to the several shareholders, and
the addresses to which the notice was mailed shall be prima facie evidence
of the manner and fact of giving such notice.
Section 1.05 Waiver of Notice. If all of the shareholders of the
corporation shall waive notice of a meeting, no notice shall be required, and,
whenever all of the shareholders shall meet in person or by proxy, such meeting
shall be valid for all purposes without call or notice, and at such meeting any
corporate action may be taken.
<PAGE>
Section 1.06 Determination of Shareholders of Record.
(a) The Board of Directors may at any time fix a future date as a
record date for the determination of the shareholders entitled to notice of
any meeting or to vote or entitled to receive payment of any dividend or
other distribution or allotment of any rights or entitled to exercise any
rights in respect of any other lawful action. The record date so fixed
shall not be more than sixty (60) days prior to the date of such meeting
nor more than sixty (60) days prior to any other action. When a record date
is so fixed, only shareholders of record on that date are entitled to
notice of and to vote at the meeting or to receive the dividend,
distribution or allotment of rights, or to exercise their rights, as the
case may be, notwithstanding any transfer of any shares on the books of the
corporation after the record date.
(b) If no record date is fixed by the Board of Directors, then (1) the
record date for determining shareholders entitled to notice of or to vote
at a meeting of shareholders shall be at the close of business on the
business day next preceding the day on which notice is given or, if notice
is waived, at the close of business on the day next preceding the day on
which the meeting is held; (2) the record date for determining shareholders
entitled to give consent to corporate action in writing without a meeting,
when no prior action by the Board of Directors is necessary, shall be the
day on which written consent is given; and (3) the record date for
determining shareholders for any other purpose shall be at the close of
business on the day on which the Board of Directors adopts the resolution
relating thereto, or the sixtieth (60th) day prior to the date of such
other action, whichever is later.
Section 1.07 Quorum: Adjourned Meetings.
(a) At any meeting of the shareholders, a majority of the issued and
outstanding shares of the corporation represented in person or by proxy,
shall constitute a quorum.
(b) If less than a majority of the issued and outstanding shares are
represented, a majority of shares so represented may adjourn from time to
time at the meeting, until holders of the amount of stock required to
constitute a quorum shall be in attendance. At any such adjourned meeting
at which a quorum shall be present, any business may be transacted which
might have been transacted as originally called. When a shareholders'
meeting is adjourned to another time or place, notice need not be given of
the adjourned meeting if the time and place thereof are announced at the
meeting at which the adjournment is taken, unless the adjournment is for
more than ten (10) days in which event notice thereof shall be given.
<PAGE>
Section 1.08 Voting.
(a) Each shareholder of record, such shareholder's duly authorized
proxy or attorney-in-fact shall be entitled to one (1) vote for each share
of stock standing registered in such shareholder's name on the books of the
corporation on the record date.
(b) Except as otherwise provided herein, all votes with respect to
shares standing in the name of an individual on the record date (included
pledged shares) shall be cast only by that individual or such individual's
duly authorized proxy or attorney-in-fact. With respect to shares held by a
representative of the estate of a deceased shareholder, guardian,
conservator, custodian or trustee, votes may be cast by such holder upon
proof of capacity, even though the shares do not stand in the name of such
holder. In the case of shares under the control of a receiver, the receiver
may cast votes carried by such shares even though the shares do not stand
in the name of the receiver provided that the order of the court of
competent jurisdiction which appoints the receiver contains the authority
to cast votes carried by such shares. If shares stand in the name of a
minor, votes may be cast only by the duly-appointed guardian of the estate
of such minor if such guardian has provided the corporation with written
notice and proof of such appointment.
(c) With respect to shares standing in the name of a corporation on
the record date, votes may be cast by such officer or agents as the by-laws
of such corporation prescribe or, in the absence of an applicable by-law
provision, by such person as may be appointed by resolution of the Board of
Directors of such corporation. In the event no person is so appointed, such
votes of the corporation may be cast by any person (including the officer
making the authorization) authorized to do so by the Chairman of the Board
of Directors, President or any Vice President of such corporation.
(d) Notwithstanding anything to the contrary herein contained, no
votes may be cast by shares owned by this corporation or its subsidiaries,
if any. If shares are held by this corporation or its subsidiaries, if any,
in a fiduciary capacity, no votes shall be cast with respect thereto on any
matter except to the extent that the beneficial owner thereof possesses and
exercises either a right to vote or to give the corporation holding the
same binding instructions on how to vote.
<PAGE>
(e) With respect to shares standing in the name of two or more
persons, whether fiduciaries, members of a partnership, joint tenants,
tenants in common, husband and wife as community property, tenants by the
entirety, voting trustees, persons entitled to vote under a shareholder
voting agreement or otherwise and shares held by two or more persons
(including proxy holders) having the same fiduciary relationship respect in
the same shares, votes may be cast in the following manner:
(1) If only one such person votes, the votes of such person binds
all.
(2) If more than one person casts votes, the act of the majority
so voting binds all.
(3) If more than one person casts votes, but the vote is evenly
split on a particular matter, the votes shall be deemed cast
proportionately as split.
(f) Any holder of shares entitled to vote on any matter may cast a
portion of the votes in favor of such matter and refrain from casting the
remaining votes or cast the same against the proposal, except in the case
of elections of directors. If such holder entitled to vote fails to specify
the number of affirmative votes, it will be conclusively presumed that the
holder is casting affirmative votes with respect to all shares held.
(g) If a quorum is present, the affirmative vote of holders of a
majority of the shares represented at the meeting and entitled to vote on
any matter shall be the act of the shareholders, unless a vote of greater
number or voting by classes is required by the laws of the State of Nevada,
the Articles of Incorporation and these By-Laws.
Section 1.09 Proxies. At any meeting of shareholders, any holder of shares
entitled to vote may authorize another person or persons to vote by proxy with
respect to the shares held by an instrument in writing and subscribed to by the
holder of such shares entitled to vote. No proxy shall be valid after the
expiration of six (6) months from the date of execution thereof, unless coupled
with an interest or unless otherwise specified in the proxy. In no event shall
the term of a proxy exceed seven (7) years from the date of its execution. Every
proxy shall continue in full force and effect until its expiration or
revocation. Revocation may be effected by filing an instrument revoking the same
or a duly-executed proxy bearing a later date with the secretary of the
corporation.
<PAGE>
Section 1.10 Order of Business. At the annual shareholders meeting, the
regular order of business shall be as follows:
(1) Determination of shareholders present and existence of
quorum;
(2) Reading and approval of the minutes of the previous meeting
or meetings;
(3) Reports of the Board of Directors, the president, treasurer
and secretary of the corporation, in the order named;
(4) Reports of committee;
(5) Election of directors;
(6) Unfinished business;
(7) New business;
(8) Adjournment.
Section 1.11 Absentees Consent to Meetings. Transactions of any meeting of
the shareholders are as valid as though had at a meeting duly-held after regular
call and notice if a quorum is present, either in person or by proxy, and if,
either before or after the meeting, each of the persons entitled to vote, not
present in person or by proxy (and those who, although present, either object at
the beginning of the meeting to the transaction of any business because the
meeting has not been lawfully called or convened or expressly object at the
meeting to the consideration of matters not included in the notice which are
legally required to be included therein), signs a written waiver of notice
and/or consent to the holding of the meeting or an approval of the minutes
thereof. All such waivers, consents, and approvals shall be filed with the
corporate records and made a part of the minutes of the meeting. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person objects at the beginning of the meeting to the transaction of
any business because the meeting is not lawfully called or convened and except
that attendance at a meeting is not a waiver of any right to object to the
consideration of matters not included in the notice if such objection is
expressly made at the beginning. Neither the business to be transacted at nor
the purpose of any regular or special meeting of shareholders need be specified
in any written waiver of notice, except as otherwise provided in Section 1.04(b)
of these By-Laws.
<PAGE>
Section 1.12 Action Without Meeting. Any action which may be taken by the
vote of the shareholders at a meeting may be taken without a meeting if
consented to by the holders of a majority of the shares entitled to vote or such
greater proportion as may be required by the laws of the State of Nevada, the
Articles of Incorporation, or these ByLaws. Whenever action is taken by written
consent, a meeting of shareholders needs not be called or noticed.
ARTICLE II
DIRECTORS
Section 2.01 Number. Tenure and Qualification. Except as otherwise provided
herein, the Board of Directors of the corporation shall consist of at least one
(1) but no more than nine (9) persons, who shall be elected at the annual
meeting of the shareholders of the corporation and who shall hold office for one
(1) year or until their successors are elected and qualify.
Section 2.02 Resignation. Any director may resign effective upon giving
written notice to the chairman of the Board of Directors, the president, or the
secretary of the corporation, unless the notice specifies a later time for
effectiveness of such resignation. If the Board of Directors accepts the
resignation of a director tendered to take effect at a future date, the Board or
the shareholders may elect a successor to take office when the resignation
becomes effective.
Section 2.03 Reduction in Number. No reduction of the number of directors
shall have the effect of removing any director prior to the expiration of his
term of office.
Section 2.04 Removal.
(a) The Board of Directors or the shareholders of the corporation, by
a majority vote, may declare vacant the office of a director who has been
declared incompetent by an order of a court of competent jurisdiction or
convicted of a felony.
<PAGE>
Section 2.05 Vacancies.
(a) A vacancy in the Board of Directors because of death, resignation,
removal, change in number of directors, or otherwise may be filled by the
shareholders at any regular or special meeting or any adjourned meeting
thereof or the remaining director(s) by the affirmative vote of a majority
thereof. A Board of Directors consisting of less than the maximum number
authorized in Section 2.01 of ARTICLE II constitutes vacancies on the Board
of Directors for purposes of this paragraph and may be filled as set forth
above including by the election of a majority of the remaining directors.
Each successor so elected shall hold office until the next annual meeting
of shareholders or until a successor shall have been duly-elected and
qualified.
(b) If, after the filling of any vacancy by the directors, the
directors then in office who have been elected by the shareholders shall
constitute less than a majority of the directors then in office, any holder
or holders of an aggregate of five percent (5%) or more of the total number
of shares entitled to vote may call a special meeting of shareholders to be
held to elect the entire Board of Directors. The term of office of any
director shall terminate upon such election of a successor.
Section 2.06 Regular Meetings. Immediately following the adjournment of,
and at the same place as, the annual meeting of the shareholders, the Board of
Directors, including directors newly elected, shall hold its annual meeting
without notice, other than this provision, to elect officers of the corporation
and to transact such further business as may be necessary or appropriate. The
Board of Directors may provide by resolution the place, date and hour for
holding additional regular meetings.
Section 2.07 Special Meetings. Special meetings of the Board of Directors
may be called by the chairman and shall be called by the chairman upon the
request of any two (2) directors or the president of the corporation.
Section 2.08 Place of Meetings. Any meeting of the directors of the
corporation may be held at its principal office in the State of Nevada, or at
such other place in or out of the United States as the Board of Directors may
designate. A waiver or notice signed by the directors may designate any place
for the holding of such meeting.
<PAGE>
Section 2.09 Notice of Meetings. Except as otherwise provided in Section
2.06, the chairman shall deliver to all directors written or printed notice of
any special meeting, at least three (3) days before the date of such meeting, by
delivery of such notice personally or mailing such notice first class mail, or
by telegram. If mailed, the notice shall be deemed delivered two (2) business
days following the date the same is deposited in the United States mail, postage
prepaid. Any director may waive notice of any meeting, and the attendance of a
director at a meeting shall constitute a waiver of notice of such meeting,
unless such attendance is for the express purpose of objecting to the
transaction of business threat because the meeting is not properly called or
convened.
Section 2.10 Quorum: Adjourned Meetings.
(a) A majority of the Board of Directors in office shall constitute a
quorum.
(b) At any meeting of the Board of Directors where a quorum is not
present, a majority of those present may adjourn, from time to time, until
a quorum is present, and no notice of such adjournment shall be required.
At any adjourned meeting where a quorum is present, any business may be
transacted which could have been transacted at the meeting originally
called.
Section 2.11 Action Without Meeting. Any action required or permitted to be
taken at any meeting of the Board of Directors or any committee thereof may be
taken without a meeting if a written consent thereto is signed by all of the
members of the Board of Directors or of such committee. Such written consent or
consents shall be filed with the minutes of the proceedings of the Board of
Directors or committee. Such action by written consent shall have the same force
and effect as the unanimous vote of the Board of Directors or committee.
Section 2.12 Telephonic Meetings. Meetings of the Board of Directors may be
held through the use of a conference telephone or similar communications
equipment so long as all members participating in such meeting can hear one
another at the time of such meeting. Participation in such a meeting constitutes
presence in person at such meeting.
Section 2.13 Board Decisions. The affirmative vote of a majority of the
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors.
<PAGE>
Section 2.14 Powers and Duties.
(a) Except as otherwise provided in the Articles of Incorporation or
the laws of the State of Nevada, the Board of Directors is invested with
the complete and unrestrained authority to manage the affairs of the
corporation, and is authorized to exercise for such purpose as the general
agent of the corporation, its entire corporate authority in such manner as
it sees fit. The Board of Directors may delegate any of its authority to
manage, control or conduct the current business of the corporation to any
standing or special committee or to any officer or agent and to appoint any
persons to be agents of the corporation with such powers, including the
power to sub-delegate, and upon such terms as may be deemed fit.
(b) The Board of Directors shall present to the shareholders at annual
meetings of the shareholders, and when called for by a majority vote of the
shareholders at a special meeting of the shareholders, a full and clear
statement of the condition of the corporation, and shall, at request,
furnish each of the shareholders with a true copy thereof.
(c) The Board of Directors, in its discretion, may submit any contract
or act for approval or ratification at any annual meeting of the
shareholders or any special meeting properly called for the purpose of
considering any such contract or act, provided a quorum is present. The
contract or act shall be valid and binding upon the corporation and upon
all the shareholders thereof, if approved and ratified by the affirmative
vote of a majority of the shareholders at such meeting.
(d) In furtherance and not in limitation of the powers conferred by
the laws of the State of Nevada, the Board of Directors is expressly
authorized and empowered to issue stock of the Corporation for money,
property, services rendered, labor performed, cash advanced, acquisitions
for other corporations or for any other assets of value in accordance with
the action of the Board of Directors without vote or consent of the
shareholders and the judgment of the Board of Directors as to the value
received and in return therefore shall be conclusive and said stock, when
issued, shall be fully-paid and non-assessable.
Section 2.15 Compensation. The directors shall be allowed and paid all
necessary expenses incurred in attending any meetings of the Board, but shall
not receive any compensation for their services as directors until such time as
the corporation is able to declare and pay dividends on its capital stock.
<PAGE>
Section 2.16 Board Officers.
(a) At its annual meeting, the Board of Directors shall elect, from
among its members, a chairman to preside at the meetings of the Board of
Directors. The Board of Directors may also elect such other board officers
and for such term as it may, from time to time, determine advisable.
(b) Any vacancy in any board office because of death, resignation,
removal or otherwise may be filled by the Board of Directors for the
unexpired portion of the term of such office.
Section 2.17 Order of Business. The order of business at any meeting of the
Board of Directors shall be as follows:
(1) Determination of members present and existence of quorum;
(2) Reading and approval of the minutes of any previous meeting
or meetings;
(3) Reports of officers and committeemen;
(4) Election of officers;
(5) Unfinished business;
(6) New business;
(7) Adjournment.
ARTICLE III
OFFICERS
Section 3.01 Election. The Board of Directors, at its first meeting
following the annual meeting of shareholders, shall elect a president, a
secretary and a treasurer to hold office for one (1) year next coming and until
their successors are elected and qualify. Any person may hold two or more
offices. The Board of Directors may, from time to time, by resolution, appoint
one or more vice presidents, assistant secretaries, assistant treasurers and
transfer agents of the corporation as it may deem advisable; prescribe their
duties; and fix their compensation.
<PAGE>
Section 3.02 Removal; Resignation. Any officer or agent elected or
appointed by the Board of Directors may be removed by it whenever, in its
judgment, the best interest of the corporation would be served thereby. Any
officer may resign at any time upon written notice to the corporation without
prejudice to the rights, if any, of the corporation under any contract to which
the resigning officer is a party.
Section 3.03 Vacancies. Any vacancy in any office because of death,
resignation, removal, or otherwise may be filled by the Board of Directors for
the unexpired portion of the term of such office.
Section 3.04 President. The president shall be the general manager and
executive officer of the corporation, subject to the supervision and control of
the Board of Directors, and shall direct the corporate affairs, with full power
to execute all resolutions and orders of the Board of Directors not especially
entrusted to some other officer of the corporation. The president shall preside
at all meetings of the shareholders and shall sign the certificates of stock
issued by the corporation, and shall perform such other duties as shall be
prescribed by the Board of Directors.
Unless otherwise ordered by the Board of Directors, the president shall
have full power and authority on behalf of the corporation to attend and to act
and to vote at any meetings of the shareholders of any corporation in which the
corporation may hold stock and, at any such meetings, shall possess and may
exercise any and all rights and powers incident to the ownership of such stock.
The Board of Directors, by resolution from time to time, may confer like powers
on any person or persons in place of the president to represent the corporation
for these purposes.
Section 3.05 Vice President. The Board of Directors may elect one or more
vice presidents who shall be vested with all the powers and perform all the
duties of the president whenever the president is absent or unable to act,
including the signing of the certificates of stock issued by the corporation,
and the vice president shall perform such other duties as shall be prescribed by
the Board of Directors.
Section 3.06 Secretary. The secretary shall keep the minutes of all
meetings of the shareholders and the Board of Directors in books provided for
that purpose. The secretary shall attend to the giving and service of all
notices of the corporation, may sign with the president in the name of the
corporation all contracts authorized by the Board of Directors or appropriate
committee, shall have the custody of the corporate seal, shall affix the
corporate seal to all certificates of stock duly issued by the corporation,
shall have charge of stock certificate books, transfer books and stock ledgers,
and such other books and papers as the Board of Directors or appropriate
committee may direct, and shall, in general perform all duties incident to the
office of the secretary. All corporate books kept by the secretary shall be open
for examination by any director at any reasonable time.
<PAGE>
Section 3.07 Assistant Secretary. The Board of Directors may appoint an
assistant secretary who shall have such powers and perform such duties as may be
prescribed for him by the secretary of the corporation or by the Board of
Directors.
Section 3.08 Treasurer. The treasurer shall be the chief financial officer
of the corporation, subject to the supervision and control of the Board of
Directors, and shall have custody of all the funds and securities of the
corporation. When necessary or proper, the treasurer shall endorse on behalf of
the corporation for collection checks, notes and other obligations, and shall
deposit all monies to the credit of the corporation in such bank or banks or
other depository as the Board of Directors may designate, and shall sign all
receipts and vouchers for payments made by the corporation. Unless otherwise
specified by the Board of Directors, the treasurer shall sign with the president
all bills of exchange and promissory notes of the corporation, shall also have
the care and custody of the stocks, bonds, certificates, vouchers, evidence of
debts, securities and such other property belonging to the corporation as the
Board of Directors shall designate, and shall sign all papers required by law,
by these By-laws or by the Board of Directors to be signed by the treasurer. The
treasurer shall enter regularly in the books of the corporation, to be kept for
that purpose, full and accurate accounts of all monies received and paid on
account of the corporation and whenever required by the Board of Directors, the
treasurer shall render a statement of any or all accounts. The treasurer shall
at all reasonable times exhibit the books of account to any directors of the
corporation and shall perform all acts incident to the position of treasurer
subject to the control of the Board of Directors. The treasurer shall, if
required by the Board of Directors, give a bond to the corporation in such sum
and with such security as shall be approved by the Board of Directors for the
faithful performance of all the duties of the treasurer and for restoration to
the corporation in the event of the treasurer's death, resignation, retirement,
or removal from office, of all books, records, papers, vouchers, money and other
property belonging to the corporation. The expense of such bond shall be borne
by the corporation.
<PAGE>
Section 3.09 Assistant Treasurer. The Board of Directors may appoint an
assistant treasurer who shall have such powers and perform such duties as may be
prescribed by the treasurer of the corporation or by the Board of Directors, and
the Board of Directors may require the assistant treasurer to give a bond to the
corporation in such sum and with such security as it may approve, for the
faithful performance of the duties of assistant treasurer, and for the
restoration to the corporation, in the event of the assistant treasurer's death,
resignation, retirement or removal from office, of all books, records, papers,
vouchers, money and other property belonging to the corporation. The expense of
such bond shall be borne by the corporation.
ARTICLE IV
CAPITAL STOCK
Section 4.01 Issuance. Shares of capital stock of the corporation shall be
issued in such manner and at such times and upon such conditions as shall be
prescribed by the Board of Directors.
Section 4.02 Certificates. Ownership in the corporation shall be evidenced
by certificates for shares of stock in such form as shall be prescribed by the
Board of Directors, shall be under the seal of the corporation and shall be
signed by the president or the vice president and also by the secretary or an
assistant secretary. Each certificate shall contain the name of the record
holder, the number, designation, if any, class or series of shares represented,
a statement of summary of any applicable rights, preferences, privileges, or
restrictions thereon, and a statement that the shares are assessable, if
applicable. All certificates shall be consecutively numbered. The name and
address of the shareholder, the number of shares, and the date of issue shall be
entered on the stock transfer books of the corporation.
Section 4.03 Surrender: Lost or Destroyed Certificates. All certificates
surrendered to the corporation, except those representing shares of treasury
stock, shall be canceled and no new certificates shall be issued until the
former certificate for a like number of shares shall have been canceled, except
that in case of a lost, stolen, destroyed or mutilated certificate, a new one
may be issued therefor. However, any shareholder applying for the issuance of a
stock certificate in lieu of one alleged to have been lost, stolen, destroyed or
mutilated shall, prior to the issuance of a replacement, provide the corporation
with his, her or its affidavit of the facts surrounding the loss, theft,
destruction or mutilation and an indemnity bond in an amount and upon such terms
as the treasurer, or the Board of Directors, shall require. In no case shall the
bond be in amount less than twice the current market value of the stock and it
shall indemnify the corporation against any loss, damage, cost or inconvenience
arising as a consequence of the issuance of a replacement certificate.
<PAGE>
Section 4.04 Replacement Certificate. When the Articles of Incorporation
are amended in any way affecting the statements contained in the certificates
for outstanding shares of capital stock of the corporation or it becomes
desirable for any reason, including, without limitation, the merger or
consolidation of the corporation with another corporation or the reorganization
of the corporation, to cancel any outstanding certificate for shares and issue a
new certificate therefor conforming to the rights of the holder, the Board of
Directors may order any holders of outstanding certificates for shares to
surrender and exchange the same for new certificates within a reasonable time to
be fixed by the Board of Directors. The order may provide that a holder of any
certificate(s) ordered to be surrendered shall not be entitled to vote, receive
dividends or exercise any other rights of shareholders until the holder has
complied with the order provided that such order operates to suspend such rights
only after notice and until compliance.
Section 4.05 Transfer of Shares. No transfer of stock shall be valid as
against the corporation except on surrender and cancellation by the certificate
therefor, accompanied by an assignment or transfer by the registered owner made
either in person or under assignment. Whenever any transfer shall be expressly
made for collateral security and not absolutely, the collateral nature of the
transfer shall be reflected in the entry of transfer on the books of the
corporation.
Section 4.06 Transfer Agent. The Board of Directors may appoint one or more
transfer agents and registrars of transfer and may require all certificates for
shares of stock to bear the signature of such transfer agent and such registrar
of transfer.
Section 4.07 Stock Transfer Books. The stock transfer books shall be closed
for a period of ten (10) days prior to all meetings of the shareholders and
shall be closed for the payment of dividends as provided in Article V hereof and
during such periods as, from time to time, may be fixed by the Board of
Directors, and, during such periods, no stock shall be transferable.
<PAGE>
Section 4.08 Miscellaneous. The Board of Directors shall have the power and
authority to make such rules and regulations not inconsistent herewith as it may
deem expedient concerning the issue, transfer and registration of certificates
for shares of the capital stock of the corporation.
ARTICLE V
DIVIDENDS
Section 5.01 Dividends may be declared, subject to the provisions of the
laws of the State of Nevada and the Articles of Incorporation, by the Board of
Directors at any regular or special meeting and may be paid in cash, property,
shares of corporate stock, or any other medium. The Board of Directors may fix
in advance a record date, as provided in Section 1.06 of these By-laws, prior to
the dividend payment for the purpose of determining shareholders entitled to
receive payment of any dividend. The Board of Directors may close the stock
transfer books for such purpose for a period of not more than ten (10) days
prior to the payment date of such dividend.
ARTICLE VI
OFFICES; RECORDS; REPORTS; SEAL AND FINANCIAL MATTERS
Section 6.01 Principal Office. The principal office of the corporation in
the State of Nevada shall be the Law Offices of Max C. Tanner, 2950 East
Flamingo Road, Suite G, Las Vegas, Nevada 89121, and the corporation may have an
office in any other state or territory as the Board of Directors may designate.
Section 6.02 Records. The stock transfer books and a certified copy of the
By-laws, Articles of Incorporation, any amendments thereto, and the minutes of
the proceedings of the shareholders, the Board of Directors, and committees of
the Board of Directors shall be kept at the principal office of the corporation
for the inspection of all who have the right to see the same and for the
transfer of stock. All other books of the corporation shall be kept at such
places as may be prescribed by the Board of Directors.
<PAGE>
Section 6.03 Financial Report on Request. Any shareholder or shareholders
holding at least five percent (5%) of the outstanding shares of any class of
stock may make a written request for an income statement of the corporation for
the three (3) month, six (6) month, or nine (9) month period of the current
fiscal year ended more than thirty (30) days prior to the date of the request
and a balance sheet of the corporation as of the end of such period. In
addition, if no annual report for the last fiscal year has been sent to
shareholders, such shareholder or shareholders may make a request for a balance
sheet as of the end of such fiscal year and an income statement and statement of
changes in financial position for such fiscal year. The statement shall be
delivered or mailed to the person making the request within thirty (30) days
thereafter. A copy of the statements shall be kept on file in the principal
office of the corporation for twelve (12) months, and such copies shall be
exhibited at all reasonable times to any shareholder demanding an examination of
them or a copy shall be mailed to each shareholder. Upon request by any
shareholder, there shall be mailed to the shareholder a copy of the last annual,
semiannual or quarterly income statement which it has prepared and. a balance
sheet as of the end of the period. The financial statements referred to in this
Section 6.03 shall be accompanied by the report thereon, if any, of any
independent accountants engaged by the corporation or the certificate of an
authorized officer of the corporation that such financial statements were
prepared without audit from the books and records of the corporation.
Section 6.04 Right of Inspection.
(a) The accounting books and records and minutes of proceedings of the
shareholders and the Board of Directors and committees of the Board of
Directors shall be open to inspection upon the written demand of any
shareholder or holder of a voting trust certificate at any reasonable time
during usual business hours for a purpose reasonably related to such
holder's interest as a shareholder or as the holder of such voting trust
certificate. This right of inspection shall extend to the records of the
subsidiaries, if any, of the corporation. Such inspection may be made in
person or by agent or attorney, and the right of inspection includes the
right to copy and make extracts.
(b) Every director shall have the absolute right at any reasonable
time to inspect and copy all books, records and documents of every kind and
to inspect the physical properties of the corporation and/or its subsidiary
corporations. Such inspection may be made in person or by agent or
attorney, and the right of inspection includes the right to copy and make
extracts.
<PAGE>
Section 6.05 Corporate Seal. The Board of Directors may, by resolution,
authorize a seal, and the seal may be used by causing it, or a facsimile, to be
impressed or affixed or reproduced or otherwise. Except when otherwise
specifically provided herein, any officer of the corporation shall have the
authority to affix the seal to any document requiring it.
Section 6.06 Fiscal Year. The fiscal year-end of the corporation shall be
the calendar year or such other term as may be fixed by resolution of the Board
of Directors.
Section 6.07 Reserves. The Board of Directors may create, by resolution,
out of the earned surplus of the corporation such reserves as the directors may,
from time to time, in their discretion, think proper to provide for
contingencies, or to equalize dividends or to repair or maintain any property of
the corporation, or for such other purpose as the Board of Directors may deem
beneficial to the corporation, and the directors may modify or abolish any such
reserves in the manner in which they were created.
ARTICLE VII
INDEMNIFICATION
Section 7.01 Indemnification. The corporation shall, unless prohibited by
Nevada Law, indemnify any person (an "Indemnitee") who is or was involved in any
manner (including, without limitation, as a party or a witness) or is threatened
to be so involved in any threatened, pending or completed action suit or
proceeding, whether civil, criminal, administrative, arbitrative or
investigative, including without limitation, any action, suit or proceeding
brought by or in the right of the corporation to procure a judgment in its favor
(collectively, a "Proceeding") by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other entity or enterprise, against all Expenses and Liabilities actually and
reasonably incurred by him in connection with such Proceeding. The right to
indemnification conferred in this Article shall be presumed to have been relied
upon by the directors, officers, employees and agents of the corporation and
shall be enforceable as a contract right and inure to the benefit of heirs,
executors and administrators of such individuals.
<PAGE>
Section 7.02 Indemnification Contracts. The Board of Directors is
authorized on behalf of the corporation, to enter into, deliver and perform
agreements or other arrangements to provide any Indemnitee with specific rights
of indemnification in addition to the rights provided hereunder to the fullest
extent permitted by Nevada Law. Such agreements or arrangements may provide (i)
that the Expenses of officers and directors incurred in defending a civil or
criminal action, suit or proceeding, must be paid by the corporation as they are
incurred and in advance of the final disposition of any such action, suit or
proceeding provided that, if required by Nevada Law at the time of such advance,
the officer or director provides an undertaking to repay such amounts if it is
ultimately determined by a court of competent jurisdiction that such individual
is not entitled to be indemnified against such expenses, (iii) that the
Indemnitee shall be presumed to be entitled to indemnification under this
Article or such agreement or arrangement and the corporation shall have the
burden of proof to overcome that presumption, (iii) for procedures to be
followed by the corporation and the Indemnitee in making any determination of
entitlement to indemnification or for appeals therefrom and (iv) for insurance
or such other Financial Arrangements described in Paragraph 7.02 of this
Article, all as may be deemed appropriate by the Board of Directors at the time
of execution of such agreement or arrangement.
Section 7.03 Insurance and Financial Arrangements. The corporation may,
unless prohibited by Nevada Law, purchase and maintain insurance or make other
financial arrangements ("Financial Arrangements") on behalf of any Indemnitee
for any liability asserted against him and liability and expenses incurred by
him in his capacity as a director, officer, employee or agent, or arising out of
his status as such, whether or not the corporation has the authority to
indemnify him against such liability and expenses. Such other Financial
Arrangements may include (i) the creation of a trust fund, (ii) the
establishment of a program of self-insurance, (iii) the securing of the
corporation's obligation of indemnification by granting a security interest or
other lien on any assets of the corporation, or (iv) the establishment of a
letter of credit, guaranty or surety.
Section 7.04 Definitions. For purposes of this Article:
Expenses. The word "Expenses" shall be broadly construed and, without
limitation, means (i) all direct and indirect costs incurred, paid or
accrued, (ii) all attorneys' fees, retainers, court costs, transcripts,
fees of experts, witness fees, travel expenses, food and lodging expenses
while traveling, duplicating costs, printing and binding costs, telephone
charges, postage, delivery service, freight or other transportation fees
and expenses, (iii) all other disbursements and out-of-pocket expenses,
<PAGE>
(iv) amounts paid in settlement, to the extent permitted by Nevada Law, and
(v) reasonable compensation for time spent by the Indemnitee for which he
is otherwise not compensated by the corporation or any third party,
actually and reasonably incurred in connection with either the appearance
at or investigation, defense, settlement or appeal of a Proceeding or
establishing or enforcing a right to indemnification under any agreement or
arrangement, this Article, the Nevada Law or otherwise; provided, however,
that "Expenses" shall not include any judgments or fines or excise taxes or
penalties imposed under the Employee Retirement Income Security Act of
1974, as amended ("ERISA") or other excise taxes or penalties.
Liabilities. "Liabilities" means liabilities of any type whatsoever,
including, but not limited to, judgments or fines, ERISA or other excise
taxes and penalties, and amounts paid in settlement.
Nevada Law. "Nevada Law" means Chapter 78 of the Nevada Revised
Statutes as amended and in effect from time to time or any successor or
other statutes of Nevada having similar import and effect.
This Article. "This Article" means Paragraphs 7.01 through 7.04 of
these bylaws or any portion of them.
Power of Stockholders. Paragraphs 7.01 through 7.04, including this
Paragraph, of these Bylaws may be amended by the stockholders only by vote
of the holders of sixty-six and two-thirds percent (66 2/3%) of the entire
number of shares of each class, voting separately, of the outstanding
capital stock of the corporation (even though the right of any class to
vote is otherwise restricted or denied); provided, however, no amendment
or repeal of this Article shall adversely affect any right of any
Indemnitee existing at the time such amendment or repeal becomes effective.
Power of Directors. Paragraphs 7.01 through 7.04 and this Paragraph of
these Bylaws may be amended or repealed by the Board of Directors only by
vote of eighty percent (80%) of the total number of Directors and the
holders of sixty-six and two-thirds percent (66 2/3) of the entire number
of shares of each class, voting separately, of the outstanding capital
stock of the corporation (even though the right of any class to vote is
otherwise restricted or denied); provided, however, no amendment or repeal
of this Article shall adversely affect any right of any Indemnitee existing
at the time such amendment or repeal becomes effective.
<PAGE>
ARTICLE VIII
BY-LAWS
Section 8.01 Amendment. Amendments and changes of these By-Laws may be made
at any regular or special meeting of the Board of Directors by a vote of not
less than all of the entire Board, or may be made by a vote of, or a consent in
writing signed by the holders of a majority of the issued and outstanding
capital stock.
Section 8.02 Additional By-Laws. Additional by-laws not inconsistent
herewith may be adopted by the Board of Directors at any meeting of the Board of
Directors at which a quorum is present by an affirmative vote of a majority of
the directors present or by the unanimous consent of the Board of Directors in
accordance with Section 2.11 of these By-laws.
CERTIFICATION
I, the undersigned, being the duly elected secretary of the Corporation, do
hereby certify that the foregoing By-laws were adopted by the Board of Directors
the 28th day of February, 1996.
/s/ Marci Evans
---------------
Marci Evans, Secretary
JOINT VENTURE AGREEMENT
THIS AGREEMENT dated for reference December 10, 1997 is made
BETWEEN:
GOLDSTATE CORPORATION, a company duly incorporated under the laws of
the State of Nevada, and having its registered office at 3926 Irongate
Road, Unit D Bellingham, Washington 98226
(hereinafter called the "Purchaser)
OF THE FIRST PART
AND:
INTERGOLD CORPORATION a company duly Incorporated under the laws of
the State of Nevada and having its registered office at 5000 Birch
Street, West Tower, Suite 4000 Newport Beach, California 92660
(hereinafter called the "Vendors")
OF THE SECOND PART
AND:
INTERNATIONAL GOLD CORPORATION, a company duly incorporated under the
laws of the State of Nevada and having its registered office at 5000
Birch Street, West Tower, Suite 4000 Newport Beach, California 92660
(hereinafter called the "Vendors")
OF THE THIRD PART
WHEREAS:
A. The Vendors are the sole beneficial owners (subject to the paramount interest
of the United States) of 578 (FIVE HUNDRED, SEVENTY-EIGHT) unpatented lode
mining claims (hereinafter called "the Blackhawk Claims") located in Camas,
Lincoln, and Gooding Counties in the State of Idaho as set out in Appendix A to
this agreement. Vendors have the right to mine the said Blackhawk Claims subject
to obtaining the necessary State and Federal permits as required by law.
B. The Vendors have agreed to sell and the Purchaser has agreed to purchase 51%
of the rights to the Blackhawk Claims for 1,000,000 restricted 144 shares in the
capital of Goldstate Corporation and $100,000 (ONE HUNDRED THOUSAND DOLLARS).
Share Purchase Agreement, December 10, 1997
<PAGE>
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of 1,000,000
restricted 144 shares in the capital of Goldstate Corporation and $100,000 (ONE
HUNDRED THOUSAND DOLLARS) and other good and valuable consideration the receipt
and adequacy of which is hereby acknowledged, the parties hereto agree as
follows:
1. PURCHASE AND SALE
On the basis of the warranties and representations of the Vendors set forth in
paragraph 3 and subject to the general terms of this Agreement as set forth in
paragraph 2, the Purchaser agrees to buy from the Vendors and on the basis of
the warranties and representations of the Purchaser set forth in paragraph 4 and
subject to the general terms of this Agreement as set forth in paragraph 2, the
Vendors agree to sell to the Purchaser on the Closing Date a 51% interest in 578
(FIVE HUNDRED, SEVENTY-EIGHT) 18-20 acre unpatented lode mining claims in Camas,
Lincoln, and Gooding Counties in the State of Idaho as set out in Appendix A to
this agreement.
2. JOINT VENTURE TERMS
(a) The Purchaser further agrees to conduct a work program on the herebefore
mentioned Idaho claims in the minimum amount of $250,000.00 (TWO HUNDRED AND
FIFTY THOUSAND) dollars per year in each of the calendar years started January
1, 1998, January 1, 1999, and January 1, 2000.
(b) The Purchaser further agrees to contribute all future capital required in
the further exploration, and if required, mining operations of the said
herebefore mentioned Idaho claims as is required by annual budgeted property
exploration and development work programs.
(c) It is the understanding of both the Purchaser and the Vendors that the
Purchaser and the Vendors participate jointly in net mining profits after all
expenses are deducted according to their pro-rata ownership of the claims after
all invested capital by the Purchaser has been repatriated. It is further the
understanding of both the Purchaser and the Vendors that the Purchaser and the
Vendors agree that until all invested capital of the Purchaser is repatriated,
that the joint participation in net mining profits will be 80% to the Purchaser
and 20% to the Vendors.
(d) The Purchaser and the Vendor warrant the ownership percentages of the
Blackhawk claims by the Purchaser and the Vendor shall change where the annual
calendar year work program contributions made by the Purchaser are less than the
adopted minimum budget totals mutually agreed upon between parties to this
agreement. If the Purchaser defaults in making an agreed contribution required
Share Purchase Agreement, December 10, 1997
<PAGE>
by the approved work program outlined in this agreement, the non-defaulting
party may advance the defaulted contribution on behalf of the defaulting
participant and treat the same, together with any accrued interest, as a demand
loan bearing interest from the date of the advance at prime plus 3% per annum.
The failure by the defaulting party to repay said loan upon demand shall be
default. The Purchaser hereby grants to the Vendor a lien upon its interest in
the Blackhawk claims as a security interest. The non-defaulting party may elect
the transfer of the defaulting party's ownership interest as a remedy in direct
proportion to the magnitude of default. The defaulting party's interest of the
Blackhawk claims to be transferred shall be the defaulting party's current
interest times the following calculation: (the sum of the defaulting party's
work program contribution default to any annual budget date divided by all of
the Vendors work program contributions since the date of this agreement to the
date of the default calculation.
The Purchaser acknowledges that if and when the Purchaser's working interest is
reduced to less than 40% by its potential incapacity to fund the approved
minimum annual work programs and budgets, the Vendor may exercise its rights to
assume the operators role.
(e) The Purchaser agrees to fund beyond the third year work program budget for
succeeding years according to a minimum budget mutually agreed upon by the
parties to this agreement at the end of December 31, 2000 commensurate with the
exploration prospect results obtained from January 1, 1998 to December 31, 2000.
If the Purchaser and Vendor do not obtain mutual agreement with regard to the
annual minimum work program budget beyond the third year budget for succeeding
years, or the Purchaser is unable to provide the desired work program budget,
the Purchaser shall not be prevented from assigning this agreement and its then
ownership position in the Blackhawk claims to a third party who is able to reach
agreement with the Vendor regarding minimum work program budget funding, such
agreement is subject to agreement of the Purchaser, but may not be reasonably
withheld.
3. VENDORS REPRESENTATIONS, WARRANTIES AND COVENANTS
The Vendors represent and warrant to the Purchaser as representations and
warranties which are true and correct as of the date hereof that:
3.1 The Vendors are residents of Nevada for matters relating to jurisdiction of
taxation. Intergold Corporation is a non-reporting public company duly
incorporated under the laws of Nevada, validly existing, and is in good standing
to carry on business in its intended place(s) of business. International Gold
Corporation is a non-reporting private company duly incorporated under the laws
of Nevada, validly existing, and is in good standing to carry on business in its
intended place(s) of business. International Gold Corporation is the wholly
owned subsidiary of Intergold Corporation.
Share Purchase Agreement, December 10, 1997
<PAGE>
3.2 The performance of this agreement will not be in violation of the
Memorandums or Articles of the Vendors or of any agreement to which the Vendors
are a party and will not give any person or company any right to terminate or
cancel any agreement or any right enjoyed by the Vendors and will not result in
the creation or imposition of any lien, encumbrance or restriction of any nature
whatsoever in favor of a third party upon or against the assets of the Vendors.
3.3 The business of the Vendors now and until the Closing Date will be conducted
and maintained in the manner which is normal to that business.
3.4 The representations, warranties, covenants and agreements by the Vendors in
this agreement or any certificates or documents delivered pursuant to the
provisions hereof or in connection with the transaction contemplated hereby
shall be true at and as of the time of closing as though such representations
and warranties were made at and as of such time. Notwithstanding any
investigations or enquiries made by the Purchaser prior to the closing or the
waiver of any condition by the Purchaser, the representations, warranties,
covenants and agreements of the Vendors shall survive the closing date and
notwithstanding the closing of the purchase and sale herein provided for, shall
continue in full force and effect.
3.5 There is no basis for and there are no actions, suits, judgments,
investigations or proceedings outstanding or pending or to the knowledge of the
Vendors threatened against or affecting the Vendors at law or in equity or
before or by any federal; provincial, state, municipal or other governmental
department, commission, board, bureau or agency.
3.6 The Vendors have filed all known necessary Federal and State tax returns
including, without limitation, Corporation Capital Tax returns.
4. PURCHASER REPRESENTATIONS, WARRANTIES AND COVENANTS
The Purchaser represents and warrants to the Vendors as representations and
warranties which are true and correct as of the date hereof that:
4.1 The Purchaser is a resident of Nevada for matters relating to jurisdiction
of taxation. The Purchaser is a non-reporting public company duly incorporated
under the laws of Nevada, validly existing, and is in good standing to carry on
business in its intended place(s) of business.
4.2 There is no basis for and there are no actions, suits, judgments,
investigations or proceedings outstanding or pending or to the knowledge of the
Purchaser threatened against or affecting the Purchaser at law or in equity or
before or by any federal, provincial, state, municipal or other governmental
department, commission, board, bureau or agency.
Share Purchase Agreement, December 10, 1997
<PAGE>
4.3 The Purchaser holds all permits, licenses, and consents issued by any
Federal, Provincial, Regional or Municipal Government or Agency thereof which
are necessary or desirable in connection with the operations of the Company.
4.4 The performance of this agreement will not be in violation of the Memorandum
or Articles of the Purchaser or of any agreement to which the Vendors are a
party and will not give any person or company any right to terminate or cancel
any agreement or any right enjoyed by the Purchaser and will not result in the
creation or imposition of any lien, encumbrance or restriction of any nature
whatsoever in favor of a third party upon or against the assets of the
Purchaser.
4.5 The business of the Purchaser now and until the Closing Date will be
conducted and maintained in the manner which is normal for that business.
4.6 The Purchaser is not aware of any adverse claim or claims which may affect
title to or exclusive possession and use of the assets of the Purchaser.
4.7 The representations, warranties, covenants and agreements by the Purchaser
in this Agreement or any certificates or documents delivered pursuant to the
provisions hereof or in connection with the transaction contemplated hereby
shall be true at and as of the time of closing as though such representations
and warranties were made at and as of such time. Notwithstanding any
investigations or enquiries made by the Vendors prior to closing or the waiver
of any condition by the Vendors, the representations, warranties, covenants and
agreements of the Purchaser shall survive the Closing Date and notwithstanding
the closing of the purchase and sale herein provided for, shall continue in full
force and effect.
5. GENERAL PROVISIONS
5.1 Time shall be of the essence in this Agreement.
5.2 This Agreement contains the whole agreement between the Vendors and the
Purchaser in respect of the purchase and sale contemplated hereby and there are
no warranties, representations, terms and conditions or collateral agreements
expressed, implied or statutory, other than as expressly set forth in this
Agreement.
5.3 This Agreement shall enure to the benefit of and be binding upon the parties
hereto and their respective heirs, executors, administrators, successors and
assigns.
5.4 This Agreement shall be construed in accordance with the laws of the State
of Nevada. All references to sums of money shall be deemed to refer to the legal
tender of the United States.
6. CLOSING DATE
6.1 The closing of the Purchase & Sale contemplate by this Agreement will take
place in the offices of Mr. Max Tanner at 2950 East Flamingo, Suite G, Las
Vegas, Nevada 89121 on December 10, 1997.
6.2 At the closing the Vendors deliver shall deliver 1,000,000 shares of
Goldstate Corporation registered in the name of the Vendors, such share
certificate executed for free and unencumbered transfer to the Vendors by the
Purchaser as at the date of the closing, and the Purchaser shall provide
$100,000 US funds to the Vendors.
Share Purchase Agreement, December 10, 1997
<PAGE>
IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the day
and year first above written.
GOLDSTATE CORPORATION
By:
----------------------------------
Harold Gooding, President
INTERGOLD CORPORATION
By:
/s/ Michael Mehrtens
----------------------------------
Michael Mehrtens
INTERNATIONAL GOLD CORPORATION
By:
/s/ Michael Mehrtens
----------------------------------
Michael Mehrtens
Share Purchase Agreement, December 10, 1997
<PAGE>
APPENDIX A - THE BLACKHAWK CLAIMS LISTING - 578 CLAIMS - IDAHO
TECHNOLOGY SUB-LICENSE AGREEMENT
THIS AGREEMENT is made this 18th day of March, 1999
BETWEEN:
Geneva Resources, Inc., a Nevada corporation having an office at 219 Broadway,
Suite 505 Laguna Beach, CA 92651 (hereinafter "GENEVA");
and
Goldstate Corporation, a Nevada corporation having an office at 3926 Irongate
Road, Unit D, Bellingham, WA 98226 (hereinafter "Sub-Licensee" or "GDSA");
1. DEFINITIONS
"AuRIC" a limited liability company duly organized in accordance
with the laws of Utah, USA with its principal place of
business being located at 3260 West Directors Row, Salt Lake
City, Utah 84104;
"GENEVA" a corporation duly incorporated in accordance with the laws
of Nevada, USA, with its principal place of business being
located at 219 Broadway, Suite 505 Laguna Beach, CA 92651;
"Sub-Licensee"
or "GDSA" Goldstate Corporation, a corporation duly incorporated in
accordance with the laws of Nevada, USA, with its principal
place of business being located at 5000 Birch Street, Suite
4000 West Tower, Newport Beach, CA 92660
"Technology" that technology licensed by GENEVA and developed by AuRIC
which is used in the design, and operation of Precious
Metals Recovery Process and Assay Process with all
developments, modifications and improvements to it from time
to time;
"Know-how" all AuRIC's proprietary information, both technical and
otherwise, including all its know-how and specifications,
drawings, plans and designs, and documentation which in any
way relates to the design, manufacture and operation of the
Precious Metals Recovery Process and Assay Process and which
it may possess at the Effective Date, or later acquire
licensed by GENEVA;
<PAGE>
"Precious Metals
Recovery Process" the precious metals recovery process invented and developed
by AuRIC and licensed by GENEVA, and which may be applied,
using the Technology and the Know-how in the commercial
recovery of precious metals in the Territory;
"Assay Process" the fire assay process invented and developed by AuRIC and
licensed by GENEVA, and which may be applied, using the
Technology and the Know-how in the determination of precious
metals content in the mineralized rock in the Territory;
"Services" Those services provided by AuRIC to GDSA as a Sub-Licensee
of GENEVA that are additional to the Technology and Know-how
relating to the Precious Metals Recovery Process and Assay
Process in this agreement, such as repetitive assay work,
site or Sub-Licensee specific recovery modifications, or
further contracted work beyond the scope of this agreement.
"Territory" the geographical acres of unpatented lode mining claims
possessed or obtained through joint venture or assignment by
GDSA in Lincoln, Camus, and Gooding counties in the State of
Idaho in the United States of America;
"Effective Date" the date on which the parties finally sign this Agreement
and all named attachments;
"Agreement
this Agreement" the agreement recorded in this document.
2. RECORDIAL:
2.1 AuRIC shall develop and refine the Precious Metals Recovery Process and
Assay Process by applying the Technology and the Know-how to the design of
assay and metallurgical recovery systems relating to mineralized areas
located in Lincoln, Camus, and Gooding counties in the State of Idaho.
2.2 GENEVA has acquired the sole and exclusive license to use items referred to
in subsection 2.1 of this Agreement in all locations in Camas, Gooding,
Blame, and Lincoln Counties in the State of Idaho, and the right to
sub-license the Precious Metals Recovery Process and Assay Process and
relating Technology in Camas, Gooding, Blame, and Lincoln Counties in the
State of Idaho.
<PAGE>
2.3 GDSA wishes to:
2.3.1 acquire a sub-license to utilize the Precious Metals Recovery Process
and Assay Process and relating Technology and Know-how from GENEVA;
2.3.2 acquire a non-exclusive sub-license to use it in the Territory;
2.4 GENEVA is prepared to grant GDSA a non-exclusive sub-license to use the
Precious Metals Recovery Process and Assay Process and relating Technology
in the Territory.
2.5 GDSA agrees to maintain strict technology usage guidelines and protocols
outlined by the Sub-License Agreement and issued by AuRIC or GENEVA from
time to time pursuant to this Agreement to ensure proper application and
following of standards set for the Precious Metals Recovery Process and
Assay Process and technology developed according to directives and
documentation provided.
2.6 GDSA does not obtain the right to sub-license the Precious Metals Recovery
Process and Assay Process and relating Technology and Know-how in the
Territory or any other location.
2.7 The parties now wish to record their agreement in the above regards, as is
set out below.
3. GRANT OF SUB-LICENCE
3.1 In consideration for the payment of 1,500,000 common voting restricted
shares in the capital of Goldstate Corporation to be issued in
denominations of 500,000 shares to GENEVA and 1,000,000 shares to AuRIC or
its designate, plus Promissory Notes payable to AuRIC and GENEVA in the
amount of $250,000 each, copies of which are attached, and
All shares of Goldstate Corporation pursuant to this agreement are to be
issued at the Effective Date of this Agreement. The Promissory Note will be
due and payable at the date that the Technology and Know-how are to be
transferred from GENEVA to GDSA, after the date that the development and
refinement of the Precious Metals Recovery Process and Assay Process
according to BLACKHAWK ORE EXTRACTION PROCEDURES DEVELOPMENT (Level 2), and
Further, other good and valuable consideration the receipt and adequacy of
which is hereby acknowledged, and the mutual covenants and conditions set
out in this Agreement, GENEVA hereby grants GDSA the:
<PAGE>
3.2 non-exclusive sub-license to use the Precious Metals Recovery Process and
Assay Process in the Territory.
4. TERM I TERMINATION
4.1 This Agreement shall commence on the Effective Date and subject to earlier
termination in accordance with any of its provisions, shall continue for an
initial fixed period of forty (40) years. Thereafter, it shall remain in
effect as long as GDSA continues to operate under the sub-licenses granted
to it in section 3 by actively engaging in the use of the Precious Metals
Recovery Process and, or Assay Process in the Territory.
4.2 Should either party believe the other has engaged in a material breach of
this Agreement, it may notify the other party accordingly in writing,
setting out this nature and extent of the breach. The party asserted to be
in breach shall then have a period of ninety (90) days after receiving a
notification of breach to cure the breach. Should the party asserted to be
in breach fail to cure the breach within the ninety (90) day period, the
other party shall, subject to the provisions of sub-section 4.3, have the
right to terminated this Agreement forthwith.
4.3 Should the party asserted to be in breach in terms of sub-section 4.2 be
GDSA, and should GDSA fail to cure any asserted breach timeously, GENEVA
shall not be entitled to cancel this agreement without first giving any
third party to whom GDSA may be involved with due to joint venture or
assignment pursuant to this Agreement an opportunity to cure the breach
concerned within a further period of thirty (30) days. Should any such
third party elect to cure the breach. GDSA shall then be deemed to have
agreed to assign its rights under this Agreement to such third party should
such third party wish to accept such assignment, and GENEVA shall be deemed
to have consented to such assignment and to have accepted such third party
as a party to this Agreement in place of GDSA.
4.4 The termination of this Agreement shall not affect any in process activity
or orders which may have been placed with GDSA to process materials using
the Precious Metals Recovery Process and, or, Assay Process, and which may
be outstanding as at such termination date. GDSA shall be entitled to
complete these orders using the Precious Metals Recovery Process and Assay
Process.
4.5 Upon termination of the Agreement, or upon a deemed assignment of GDSA's
rights under this Agreement to a third party, GDSA shall, save to the
extent necessary to give effect to the provisions of sub-section 4.4,
return to GENEVA all documents, drawings, materials, specifications and the
like in any way concerned with the Technology, the Precious Metals Recovery
Process and Assay Process and the Know-how which may then be in its
possession or under its control.
4.6 Upon termination of this Agreement, or upon a deemed assignment of GDSA's
rights under this Agreement to a third party, all rights and sub-licenses
granted to GDSA shall cease, save to the extent necessary to give effect to
the provisions of sub-section 4.4, but all GDSA's obligations to GENEVA or
AuRIC, including payment and confidentiality obligations, shall remain in
force.
<PAGE>
5. PROVISION OF KNOW HOW, AND TECHNICAL ASSISTANCE
5.1 Within sixty (60) days of the Effective Date, AuRIC shall make the Know-how
existing as at the Effective Date available to GENEVA on a confidential
basis and for use solely in connection with the rights and sub-licenses
granted by previous agreement. Should AuRIC acquire any additional Know-how
after the Effective Date, it shall make it available to GENEVA as soon as
possible after receiving it. If the additional Know-how is applicable to
the sub-license granted to GDSA, GENEVA shall make it available to GDSA as
soon as possible thereafter.
GENEVA or its designate shall also furnish GDSA, upon reasonable request,
with its recommendations and advice to the operation of the Precious Metals
Recovery Process and Assay Process and its application in the Precious
Metals Recovery Process and Assay Process.
5.2 In fulfillment of its obligations set out in sub-section 5.1, GENEVA or its
designate shall instruct a reasonable number of employees of GDSA or their
designate according to sub-section 5.3 in the application and use of the
Precious Metals Recovery Process and Assay Process. GDSA shall pay for the
costs of such instruction, if any. Such instruction shall be given as many
times as GDSA may reasonably require, at such times and for periods and at
such locations as may be mutually agreed upon.
5.3 Custodian of Technology. Prior to the completion of all tasks in all phases
in the development of the Precious Metals Recovery Process and Assay
Process of this Agreement, all information developed by AuRIC during each
task in each phase including any and all detail relating to the Precious
Metals Recovery Process and Assay Process shall be transferred in trust to
Dames and Moore as subcontractor to AuRIC for the purposes of retaining a
detailed backup record of developed technologies by AuRIC. The transfer of
information from AuRIC to Dames and Moore shall be complete in detail and
all aspects of each task in each phase, and AuRIC shall ensure that Dames
and Moore fully understand all elements and aspects of any proprietary
information, techniques, the Technology and the Know-how, and any other
aspects required for complete understanding.
5.4 Any information made available by GENEVA to GDSA or the designate of GDSA
in terms of this section 5 shall be maintained in confidence by GDSA in
accordance with the provisions of the non-disclosure agreement to be
executed by the parties in the form of the draft attached as "Exhibit A"
simultaneously with their signature of this agreement and as a condition
precedent to this Agreement.
<PAGE>
In exercising its right to sub-license the use of the Precious Metals
Recovery Process and Assay Process in the Territory, GENEVA shall be
entitled to make all information furnished it in terms of this section 5
available to any sub-licenses but provided that in doing so, it shall
procure a written undertaking of confidentiality from such sub-licensee in
the form of the draft attached as "A".
6. IMPROVEMENTS
6.1 GENEVA or its designate undertakes to keep GDSA informed of all
developments, modifications and/or improvements which it may develop or
become possessed of during the currency of this Agreement, and which relate
to the Technology, the Know-how and, or, the Precious Metals Recovery
Process and Assay Process. Any such developments, modifications and/or
improvements shall fall under the sub-licenses and rights granted in terms
of this Agreement.
6.2 GDSA undertakes to notify GENEVA of any developments, modifications and/or
improvements which it may make or discover during the currency of this
Agreement with regard to the Technology, the Know-how and /or the Precious
Metals Recovery Process and Assay Process. Any such development,
modification and/or improvement shall be and remain GDSA's exclusive
property and as a result, GDSA shall have the right to use any such
development, modifications and/or improvement free of any royalty as its
owner.
6.3 Should a joint invention be made by the employees of both GDSA and GENEVA
or its designate, the invention and the rights to it and any patents on it
shall be owned by GENEVA or its designate, but GDSA shall have an
irrevocable, royalty-free and non-exclusive license to use the invention,
including the right to sub-license in the Territory.
7. INFRINGEMENT OF TECHNOLOGY
7.1 Each party undertakes to notify the other in writing as soon as possible
after becoming aware of the occurrence thereof, of:
7.1.1 any infringement or threatened infringement of, or challenge to the
validity of any of the intellectual property rights sub-licensed or granted
in terms of this Agreement;
7.1.2 any alleged infringement, by reason of the use of the Technology, the
Know-how and, or, the Precious Metals Recovery Process and Assay Process,
or common law right or alleged common law right of any other person.
<PAGE>
7.2 Upon any such notice being given, GENEVA shall, at its own cost, take all
such proceedings as are in law available to it to procure the termination
of such infringement or challenge. Should GENEVA fail to do so within a
period reasonable in the circumstances, or should AuRIC and GENEVA mutually
agree otherwise, GDSA shall be entitled to take appropriate steps, as its
cost, to procure the termination of such infringement or challenge, and
GENEVA agrees to assist GDSA in doing so to the best of its ability,
including to make available to GDSA all relevant records, papers,
information specimens and the like.
8. WARRANTIES
8.1 GENEVA warrants to GDSA that as at the Effective Date:
8.1.1 it is the owner of the rights to the Technology, the Know-how and the
Precious Metals Recovery Process and Assay Process, that it has executed
proper License agreements with AuRIC and confidentiality agreements with
its employees, agents and contractors and these rights and agreements are
in good standing.
8.1.2 the Technology and the Know-how are proprietary to it via license
agreement, and it therefore has the right to grant the sub-licenses and
rights set out in this Agreement to GDSA;
8.1.3 it has not granted, nor will it during the currency of this Agreement
grant to any other person, directly or indirectly, any right or option to
use the Technology, the Know-how and/or the Precious Metals Recovery
Process and Assay Process in the GDSA Territory.
8.1.4 GENEVA hereby warrants to GDSA that there are currently no liens or
encumbrances of any nature outstanding against, filed or perfected in
respect of, or secured through the Technology or the Know-how, and GENEVA
covenants to keep the Technology and the Know-how free from any such liens
or encumbrances during the currency of this Agreement.
9. REFERRAL OF ENQUIRIES
GENEVA undertakes promptly to refer to GDSA any queries directed to it
regarding the use of the Precious Metals Recovery Process and Assay Process
in the Territory in the Metals Recovery Process.
10. PURCHASE OF SERVICES ADDITIONAL TO THE PRECIOUS METALS RECOVERY PROCESS AND
ASSAY PROCESS
In order for GDSA to properly to exploit the sub-license and rights granted
to it in terms of this Agreement, it requires Services in addition to the
Precious Metals Recovery Process and Assay Process. GDSA hereby agrees to
purchase its requirements pursuant to ongoing Services with regard to the
Precious Metals Recovery Process and Assay Process from AuRIC or per the
designate of AuRIC, which hereby agrees to supply them to GDSA, in
accordance with and subject to the following provisions:
<PAGE>
10.1 The prices and terms quoted by AuRIC to GDSA or any sub-Licensee heretofore
for Services in addition to the Technology, Know-how, and the Precious
Metals Recovery Process and Assay Process shall be negotiated specifically
between AuRIC and GDSA, or between AuRIC and any sub-Licensee.
10.2 GDSA shall place all its orders for Services in addition to Precious Metals
Recovery Process and Assay Process with AuRIC in writing. Upon receiving
any written order for Services in addition to Precious Metals Recovery
Process and Assay Process, AuRIC shall notify GDSA of the estimated time
and cost that it will take to deliver the Services forming the subject
matter of the order. In order to assist AuRIC in fulfilling GDSA's orders
for Services, GDSA shall, with effect from the Effective Date, give AuRIC
six-monthly forward estimates of its estimated Services requirements. GDSA
shall not be liable to AuRIC in damages or otherwise should any estimate be
inaccurate;
10.3 AuRIC undertakes to make every reasonable possible attempt to supply GDSA,
with effect from the Effective Date, with such quantities of Services as
GDSA may from time to time require and to have Services ordered by GDSA
delivered to GDSA as expeditiously as possible; and
10.4 Save as may specifically be approved in writing by AuRIC, GDSA shall not
mortgage, pledge, charge, hypothecate or otherwise encumber the Precious
Metals Recovery Process and Assay Process.
10.5 Sub-Licensees granted by GENEVA shall obtain competitive quotation for
Services from AuRIC or the designate of AuRIC, and AuRIC will be awarded
contract for Services subject to AuRIC providing competitive industry
pricing for such Services, and subject to AuRIC being able to provide the
same quality, value, and timeliness of service. Sub-Licensees granted by
GENEVA obtaining Services from competing providers or other companies will
not be unreasonably withheld by AuRIC.
11. DOMICILIUM
The parties hereby choose DOMICILIUM citandi et executandi for all purposes
under this agreement at the addresses set out below, and either party may
at any time change its DOMICILIUM to any other address (not being a post
office box or poste restante) on not less than ten (10) days written notice
to such effect to the other party;
<PAGE>
11.1 GENEVA
219 Broadway, Suite 505,
Laguna Beach, CA 92651
11.2 GDSA
3926 Irongate Road, Unit D,
Bellingham, WA 98226
12. NOTICES
Any notice by or to either party or to AuRIC in terms of this agreement
shall be given in writing and shall be delivered by hand to a responsible
person present at or sent by prepaid registered post or facsimile
transmission to the DOMICILIUM chosen by the addressee in terms of this
agreement and whereupon it shall be deemed to have been received when so
delivered or four (4) days after being so sent.
13. NO VARIATION
No variation of, or addition or agreed cancellation to this Agreement shall
be of any force or effect unless it is reduced to writing and signed by or
on behalf of the parties.
14. GENERAL
14.1 This Agreement, including any attachments, constitutes the entire agreement
between the parties with respect to its subject matter. No agreements,
guarantees or representations, whether verbal or in writing, have been
concluded, issued or made, upon which either party is relying in concluding
this Agreement, save to the extent set out in this Agreement.
14.2 The headings appearing in this Agreement have been used for reference
purposes only and shall not affect its interpretation.
14.3 No indulgence, leniency or extension of time which a party (the "Grantor")
may grant or show to the other, will in any way prejudice the Grantor or
preclude the Grantor from exercising any of its rights in the future.
14.4 Each party shall pay all taxes (including sales and value-added taxes)
imposed on it by the Government of any jurisdiction in which such party is
doing business in respect of the sub-licenses or rights granted under this
Agreement.
14.5 If any provision of this Agreement is held to be illegal or unenforceable
for any reason, such provision shall be deemed severable from the remaining
provisions of this Agreement and shall in no way effect or impair the
validity or enforceability of the remaining provisions of this Agreement.
If any provision of this Agreement conflicts with any other provision of
any other agreement between the parties, including any confidentiality
agreement, the provisions of this Agreement shall prevail.
<PAGE>
14.6 Nothing contained in this Agreement shall modify or effect the provisions
of the principal License Agreement between GENEVA and AuRIC. Should there
be any conflict of any term or provision between such Agreements, the
AuRIC/GENEVA Agreement shall be given primary definition and control. AuRIC
shall remain a third party beneficiary of this Agreement.
14.7 The restricted common shares in the capital of Goldstate Corporation
referred to in section 3.1 of this Agreement will be included in any share
registration process undertaken by GDSA if and when any such registration
shall occur, subject only to any regulatory authority.
14.8 This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original but all of which shall constitute one and the
same instrument.
14.9 This Agreement shall be binding upon or inure to the benefit of the heirs,
assigns, or successors in interest of each party hereto.
14.10 Each person signing this Agreement represents that he has been fully and
duly authorized to enter into this Agreement by the governing Board of each
business entity.
14.11 This Agreement shall be given reasonable interpretation and applied so far
as possible.
15. GOVERNING LAW
This Agreement and all matters arising hereunder shall be governed by, and
construed in accordance with the Laws of the State of Nevada.
16. ASSIGNMENT
GDSA may transfer or assign this Agreement with the written consent of
GENEVA and AuRIC, which consent may not be arbitrarily withheld.
<PAGE>
SIGNED by GENEVA at Bellingham, WA on the 18th day of March, 1999 in the
presence of the undersigned witnesses:
AS WITNESSES:
1. /s/ Stephanie Ebert
2. /s/ Pamela Fisleek
/s/ Signature on file - Director
--------------------------------
per:
SIGNED by GDSA at Albuquerque, NM on the 18th day of March, 1999 in the presence
of the undersigned witnesses:
AS WITNESSES:
1. /s/ Joan Quinn
2. /s/ Frank Toll
/s/ Harold Gooding
--------------------------------
per: Harold Gooding, President
THIS CONSULTING SERVICES and MANAGEMENT AGREEMENT is made effective the 1st day
of July, 1999
BETWEEN:
INVESTOR COMMUNICATIONS INTERNATIONAL, INC.
having an office located at
3926 Irongate Road, Unit D
Bellingham, Washington 98226
(hereinafter called " Investor Comm")
OF THE FIRST PART
AND:
GOLDSTATE CORPORATION
having an office located at
2950 East Flamingo, Suite G
Las Vegas, NV 89121
(hereinafter called " Goldstate")
OF THE SECOND PART
WHEREAS:
A. Goldstate is engaged in the business of precious metals exploration and
development.
B. By the consensus of the officer of Goldstate, Investor Comm was engaged to
provide a wide range of administrative, financial, marketing, international
services, and other services with respect to the ongoing and full time operation
of Goldstate as of the date of this agreement.
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the premises
and mutual covenants and agreements herein contained, and other good and
valuable consideration the receipt and adequacy of which is hereby acknowledged,
Goldstate hereby grants Investor Comm as the parties hereto covenant and agree
each with the other as follows:
ARTICLE I - Duties and Devotion of Time
(a) Investor Comm shall provide Goldstate with specific financial,
administrative, marketing, promotional, and international services.
Investor Comm shall have the obligation, and duties to conduct business
related acts on behalf of Goldstate as directed by the officer and director
of Goldstate, such services as are customarily done or deemed necessary for
the full and complete operation of Goldstate; such services shall include
but are not limited to the following:
o International Business Relations o Press Release and Public Disclosure
o International Business Strategy o Corporate Information Distribution
o Investor Relations o Corporate ID and Public Relations
1
<PAGE>
o Media Liaison o Legal Liaison
o Shareholder Liaison o Corporate Minute Book Maintenance
o Business Planning o Corporate Record Keeping
o Capital Budgeting o Corporate Secretarial
o Operating Budgeting o Secretarial Services
o Bookkeeping o Office and General Duties
o Financial Statement Generation o Printing and Production
o Financial Services - General o Internet Maintenance and Content
o Annual Report Creation and Production o Transfer Agent Liaison
o Auditor Liaison o General Administration
o Banking o Funding Services
o Record Keeping and Documentation o Private Offering Structuring
- General
o Database Records
o Travel for above items as required
(b) Investor Comm shall provide for the full and complete functioning of
business services as outlined in ARTICLE I, item (a) (hereinafter "the
Consulting Services") above relating to the business of Goldstate and its
ability to provide for its ongoing development and growth commensurate with
that required in the circumstances, such requirement to be determined by
ongoing circumstances. Investor Comm shall provide for all acts and duties
as are reasonable necessary for the efficient and proper operation and
development of Goldstate operations but, without limiting the generality of
the foregoing, shall include all matters related directly or indirectly to
the general functioning business operations of Goldstate.
(c) Goldstate agrees that Investor Comm may have or acquire business,
financial, or consulting services interests in other companies or
properties and agrees that Investor Comm may devote reasonable time to such
other outside companies and affairs so long as these duties do not affect
Investor Comm's ability to perform its duties under this Agreement in
accordance with the requirement in each area of the Consulting Services to
be provided.
ARTICLE II - Remuneration and Term
(a) Investor Comm shall provide the Consulting Services to Goldstate as set out
herein in consideration for which Goldstate shall pay Investor Comm an
amount not greater than the average of $75,000 US funds per calendar month
during the term of this Agreement. The fees charged by Investor Comm to
Goldstate shall be based on work conducted and variable levels of work
required in any month. The maximum monthly fee charged to Goldstate by
Investor Comm for the calendar year following that evidenced by the
effective date of this Agreement will be renegotiated no later than May 31,
2000.
(b) The effective date of this Agreement shall be July 1,1999 and the Agreement
shall continue for a term of 24 months from such date.
2
<PAGE>
(c) In conducting its duties under this Agreement, Investor Comm shall report
to the Goldstate Board of Directors or appointed officer or agents as
directed by Goldstate.
ARTICLE III - Reimbursement for Expenses
Goldstate shall bear all expenses where the costs incurred are for the sole and
exclusive benefit of Goldstate. Goldstate shall provide reimbursement expenses
incurred by Investor Comm where Investor Comm incurs expenses that are for the
sole and exclusive benefit of Goldstate.
ARTICLE IV - Termination of Agreement
Notwithstanding any other provision contained herein, it is understood and
agreed between the parties hereto that either party may terminate this Agreement
with or without cause and for any reason whatsoever by providing twelve (12)
months written notice to the other party.
ARTICLE V - Indemnity
Goldstate shall indemnify Investor Comm, its directors, officers and agents and
hold them harmless from any claims, expenses and damages arising out of this
Agreement.
ARTICLE VI - Entire Agreement
This Agreement represents the entire agreement between the parties and
supersedes any and all prior agreements and understandings, whether written or
oral, between the parties.
ARTICLE VII - Applicable Law
This Agreement shall be construed under and governed by the laws of the State of
Nevada.
ARTICLE VIII - Enurement
The provisions of this Agreement shall ensure to the benefit of and binding upon
the parties hereto and their respective heirs, executors, administrators,
successors and assigns.
3
<PAGE>
Agreed at Bellingham, Washington, this 1st day of July, 1999.
IN WITNESS WHEREOF the parties hereto executed this Agreement as of the day and
year first above written.
GOLDSTATE CORPORATION
Harold Gooding
--------------
Name
/s/ Harold Gooding
------------------
Signature
Secretary, Director
-------------------
Title
INVESTOR COMMUNICATIONS INTERNATIONAL, INC.
Marcus Johnson
--------------
Name
/s/ Marcus Johnson
------------------
Signature
President
---------
Title
Mr. David Coffee, CPA
3651 Lindell Road, Suite H
Las Vegas, NV 89103
- --------------------------------------------------------------------------------
July 6, 1999
Securities and Exchange Commission
450 - 5th Street NW
Washington, DC 20549
RE: GOLDSTATE CORPORATION
Dear Sirs:
I agree with the statements made in Item 3 of Goldstate Corporation's filing
10-SB as reprinted from that filing below.
"Item 3. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Since the inception of the Company (February 28, 1996) and to date,
the Company's current principal independent accountant has not resigned or
declined to stand for re-election or were dismissed. The Company's former
principal independent accountant declined to stand for re-election after
the Company's formative year as his policy for providing accounting
services did not extend to include the Company's growing scale of
transactions. Such decision to change accountants was approved by the board
of Directors. There were no disagreements with the former accountant which
were not resolved on any matter concerning accounting principles or
practices, financial statement disclosure, or auditing scope or procedure.
Moreover, neither the Company's current principal independent
accountant nor its former principal independent accountant have provided an
adverse opinion or disclaimer of opinion to the Company's financial
statements, nor modified their respective opinion as to uncertainty, audit
scope or accounting principles.
The Company's principal independent accountant from February 28, 1996
to December 31, 1996 was DAVID E. COFFEY, Certified Public Accountant of
3651 Lindell Road, Suite H, Las Vegas, NV 89103. The Company's principal
independent accountant from January 1, 1997 to the current date is Johnson,
Holscher & Company, P.C. of 5975 Greenwood Plaza Blvd., Suite 140,
Greenwood village, CO 80111."
Yours truly,
/s/ David E. Coffey C.P.A.
- --------------------------
David E. Coffey, CPA
UNITED STATES DEPARTMENT OF THE INTERIOR
Bureau of Land Management
Idaho State Office
1387 South Vinneli Way
Boise, ID 83709
Tel: (208) 373-3890
Fax: (208)373-3899
GOLDSTATE CORPORATION
---------------------
Claim Names BLM Numbers
- ----------- -----------
Blackhawk # 685 through Blackhawk # 712 IMC l8O8l9 through 180846
Blackhawk # 728 through Blackhawk # 740 IMC 180847 through 180859
Blackhawk # 750 through Blackhawk # 762 IMC 180860 through 180872
Blackhawk # 772 through Blackhawk # 837 IMC 180873 through 180938
Blackhawk # 840 through Blackhawk # 936 IMC 180939 through 181035
Blackhawk # 946 through Blackhawk # 985 IMC 181036 through 181075
Blackhawk # 990 through Blackhawk # 1008 IMC 181076 through 181094
Blackhawk # 1012 through Blackhawk # 1016 IMC 181095 through 181099
Blackhawk # 1081 through Blackhawk # 1086 IMC 181100 through 181105
Blackhawk # 1104 through Blackhawk # 1109 IMC l8ll06 through 181111
Blackhawk # 1127 through Blackhawk # 1132 IMC 181112 through 181117
Blackhawk # 1150 through Blackhawk # 1184 IMC 181118 through 181152
Blackhawk # 838 through Blackhawk # 839 IMC 181153 through 181154
Blackhawk # 607 through Blackhawk # 684 IMC 181962 through 182039
Blackhawk # 1185 through Blackhawk # 1209 IMC 182040 through 182064
